Sunday, October 29, 2017

Looking at John Taylor's stuff

I found a link in my URL dropdown to John Taylor's Take Off the Muzzle and the Economy Will Roar. Great title! It's a little creepy to read, what with references to "Lucy and Susan" and The Lion, the Witch and the Wardrobe. But Taylor can write a powerful sentence, and he makes good graphs. So.

Take off the Muzzle links to Taylor's Slow economic growth as a phase in a policy performance cycle (PDF, 7 pages, here referenced as Policy). Another great title. There is a little sleight-of-hand, too: In a list of economists offering "evidence that the poor performance of the economy during the past decade—the Great Recession and the Not-So-Great Recovery—is largely due to poor economic policies", Taylor lists himself twice! He gets away with it because of that wonderful "Great Recession and Not-So-Great Recovery" line, and because he's not listing economists but rather references to their works. Still, in the writing, Taylor says:

While debate over the question is raging among economists, many, including [list] have offered evidence ...

His sentence calls for a list of economists. He provides a list of references.

When someone has the ability to write really well, you have to look askance at the writing. You have to overlook the good writing and concentrate on the discussion of economic forces. I've said that before, about Krugman. It applies to John Taylor as well.

Muzzle also links to Can We Restart the Recovery All Over Again? (PDF, 4 pages, here called Restart). This one I looked at before. That accounts for Muzzle showing up on my URL dropdown list.

"Economics and history," Taylor says, "tell us that changes in economic policy lead to changes in economic performance." Ayep. The trick is reading the tea leaves. Taylor's own read of those leaves is not in doubt. In Muzzle, for example, he says

To turn the economy around we need to take the muzzle off, and that means regulatory reform, tax reform, budget reform, and monetary reform.

John Taylor calls for reform, reform, reform, and reform. It's a complete list that tells us nothing. Reminds me of a glug I heard on MSNBC the other day: Trump has been telling his people to "talk about tax cuts, not tax reform." Whatever. Taylor offers a more informative version of his list of reforms in Restart, where he says

In my view, economics and history also tell us which policies produce good performance: tax reform to lower tax rates on people and businesses and thus reduce disincentives to work and invest; regulatory reforms to scale back and prevent regulations that fail cost-benefit tests; free trade agreements to open markets, entitlement reforms to prevent a debt explosion and improve incentives, and monetary reform to restore predictability and create output stability along with price stability.

Now that is a complete list! But of course when John Taylor writes of "preventing a debt explosion" he is talking about government debt, not private debt. Private debt didn't make his list. It's almost like there was no financial crisis.

And whyingodsname do people insist on thinking that the only way to "reform" taxes is by lowering the tax rate? I've said over and over that we need to create incentives to pay off private debt faster, as a way to reduce the imbalance created by existing incentives that encourage the use of credit. My plan has nothing to do with raising or lowering tax rates. You could use reduced rates as an incentive to pay off debt; that would be a good way to do it. But the important thing is to reverse the existing incentives that encourage the accumulation of private debt.

What affects people personally is tax rates. I get that. But what damages the economy as a whole is having policy that encourages credit use, without also having policy that encourages repayment of debt. We need to prevent the excessive accumulation of debt that occurs when the use of credit increases.

Good grief! There is so much more to consider than just tax rates.

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