Monday, March 16, 2009

Debunking Shlaes

I'll admit: historians have it hard. If they want to hit the big time, they've got to come up with a new angle on old material ("He's the Founding Father you've never heard of!"). This has led to a lot of questionable scholarship in search of a dissertation or New York Times bestseller, but Amity Shlaes has taken it to a whole new level: she just makes stuff up. Like: FDR caused the Great Depression, years before he took office. This stuff shows up on Fox News, and the next thing you know, I have to deliver a half hour lecture on basic macroeconomics, political science and mid-20th century history to people who send me emails pasted from a Drudge column. The hits just keep rolling, too.

Here's Devilstower on the Daily Kos, taking apart her latest effort:
Shlaes' book on the economy during the 1930s has been roundly debunked on every point by multiple economists, including Paul Krugman. However, Shlaes refuses to admit error. Instead, whenever she is caught weaving conservative fantasies, she takes a page from the "Intelligent Design" movement and challenges the latest person to tear through her disinformation to "a debate over the New Deal." Shlaes is smart enough to know that her book can't stand up to detailed review, but that a publicized show down would only boost her sales. In other words, she knows she's lying, but she's profiting from the lies, so why stop?

After all, her alternate history novel for conservatives has gotten her writing gigs from the Wall Street Journal, the Washington Post, and praise from such luminaries as Glenn Beck. No doubt Amity Shlaes is surrounding us. And just this past week, the public radio program Marketplace invited Ms. Shlaes to give the commentary. In it, she raised the stakes on the wing nut rebellion to a whole new level.

Taxation without representation, that's what our nation's founders rebelled against. ... The course of US history can be seen as progress by those who are taxed to get representation.... Along the way we began to pay out money to people who paid no income tax at all. There's Medicare of course for senior citizens, even if they never worked, welfare for the poor and struggling, at least through the 90s, and more recently there's the earned income tax credit -- a break for low income workers. The credit was designed to make people want to work, and to offset their heavy pension payments for Social Security. The result of expanding it, however, is that many people who work don't pay income tax, instead they get money back. Do we want to help weaker citizens, especially in a downturn? Totally. ... But a tipping point does come, when too many are paying out, and too few are paying in. Maybe that tipping point is now. Today households in the bottom half of earners pays less than 4% of income taxes. One tiny group, the top one percent, pays close to 40%. This can slow the economic recovery we're waiting for. Top earners won't want to keep producing if their burden gets much heavier. ... The mood of the skeptics today is just the reverse of the mood at the Boston Tea Party. Then we said no taxation without representation. Try reversing that line. No representation without taxation.
In this little commentary, Shlaes naturally applies the standard conservative idiocy test. Yes, the top one percent pay thirty-some percent of the income tax. That's because the top one percent have thirty-some percent of the wealth. (It's worth noting that the top 1% is provided enough tax loopholes and kickbacks that the amount they pay is almost exactly what they would be paying if we had a flat tax evenly applied at all levels.) It's also not difficult to understand how the bottom half of the population on an income basis pays a small percentage of the total income tax -- the bottom 80% of the income distribution controls only 16% of the wealth. In short, Shlaes' numbers here are no better than her numbers anywhere else.

Then there's the "Going Galt" threat, the part where she says "Top earners won't want to keep producing if their burden gets much heavier." You mean I only get to keep $9.7m when I would have taken home $10m? Why, it's hardly worth getting up in the morning. Point one: the Laffer Curve is less believable than unicorns. Point two: the horrible burden now looming for the top earners is exactly the same tax rate that they faced back in the fast-growing economy of the 1990s.

Then there's the outrage that some elderly people get Medicaid even if they didn't work! Horrors. And the oh so heavy burden of Social Security. But that, all of that, is only standard right wing manure. Even Twinkies can't be eaten when they're that stale.

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