Mar 9, 2009 - In Defense of Obamanomics (Laura Tyson)

http://online.wsj.com/article/SB123655553728965955.html#mod=todays_us_opinion

This piece by Obama (and former Clinton ) economic advisor Tyson is flawed on so many levels, I hardly know where to start, but I will try with two points.

First, this is just an amazingly shallow "puff piece" by another Obama cheerleader. She tells us over and over how lucky we are to have "the one" leading us right now. You can almost see her getting weak-kneed (Chris Matthews-like) at the thought of Obama.

Second, her main argument is that Obama's proposed tax rates are similar to those in the Reagan or early Bush years, so what's the big deal? Ignoring the accuracy of this (given bracket creep and nominal income levels), she is referring to absolute rates and completely ignores the direction of the change. Common sense tells us (and research has shown) that direction matters - an increase in the marginal rate to 36% from a lower rate will reduce incentives to work, invest and take risks, while a decrease to 36% from a higher rate will increase the incentives. As a highly educated and accomplished economist, Tyson knows this, but she instead tries to confuse us with lots of numbers that miss the point.

For some government (SBA)-sponsored research on the effects of tax rate changes on entreneurship, see http://www.smallbusinessnotes.com/aboutsb/rs252.html