Bonddad lays the smack down on Kudlow's shameful tax cut lies

Right-wing Townhall.com has recently relaunched as a new and improved source of conservative misinformation and propaganda. Case in point is shameless hack Larry Kudlow's latest attempt at pulling numbers out of his ass to make Bush's tax cuts look like a fantastic success at boosting the economy, all the while praying no one would take the time to "look behind the numbers". Fortunately, the truth has a stalwart defender by the name of Hale Stewart, a tax attorney and former bond trader better-known to the blogging world as "bonddad". And in a thoroughly-researched blog post he has swiftly and decisively torn Kudlow's "piece" into ribbons. Even conservative pundits like law professor Glen Reynolds (AKA "Instapundit") were left embarrassed by their uncritical acceptance of Kudlow's outrageous claims--claims they accepted simply because they wanted to believe his argument--after Stewart devastatingly proved how disingenuous the article was.

I don't have a Ph.D in economics, but as soon as I read Kudlow's pathetic column, I knew he was having some fun and games with economic figures. According to Kudlow:

Did you know that just over the past 11 quarters, dating back to the June 2003 Bush tax cuts, America has increased the size of its entire economy by 20 percent? In less than three years, the U.S. economic pie has expanded by $2.2 trillion, an output add-on that is roughly the same size as the total Chinese economy, and much larger than the total economic size of nations like India, Mexico, Ireland, and Belgium.

But there's something important Kudlow, who received a graduate degree from Princeton's Woodrow Wilson School of Policy and International Affairs in economics, "forgot" to include in this paragraph, however. That thing he neglected was to adjust for inflation. As Stewart notes, Kudlow is using a nominal number - one that isn't adjusted for inflation. After adjusting for inflation, in fact, GDP growth was about 11%, a similiar growth rate experienced in the 1990s (while Clinton managed to create a budget surplus).

Similarly, Kudlow breathlessly brags that "average hourly compensation has risen to 3.9 percent over the past year, while average weekly earnings have grown to 4.5 percent," apparantly more evidence to the supply-sider that the tax cuts have put money in the average American workers' wallet. But adjusting for inflation of 4.16% (for the same time period), workers' purchasing power actually decreased.

Kudlow also somehow "forgot" to mention that the Fed's slashing interest rates in response to the 2000-2001 recession may have had something to do with the economic expansion, and played a much larger role than tax cuts. Oh, and he forgot to mention that the benefits from the tax cuts went exclusively to the superrich: 40% of those benefits went to the top .1% (point 1 percent) of income according to non-partisan Tax Policy Center.

Taking their cue from Kudlow's piece of fiction, supply-side supporters like the idiots over at Powerline try to argue that the tax cuts are "paying for themselves" through increased revenues stemming from the economic growth they supposedly generated--classic supply-side nonsense. But citing the New York Times, Stewart notes:

Despite almost five years of economic growth, individual income taxes -- the biggest component of federal tax revenues -- have yet to reach the levels of 2000. Even with surging payments for investment profits and business income, individual tax payments in 2005 were only $972 billion -- below the $1 trillion reached in 2000, even without adjusting for inflation.

Kudlow pulls some more bullshit out of his ass, which Stewart quickly takes him to task for, such as using household employment number instead of the establishment employment number that is favored by the Fed--for the transparent reason that the former figure makes the employment data look more favorable.

Read the whole post, it goes into much more detail about just how misleading Kudlow's attempt at economic analysis really is. Hilariously, Kudlow has left some right-wing bloggers like Reynolds to twist in the wind, forcing him to ask his readers to explain to him the inconsistencies in the original piece, and demonstrating that Reynolds obviously did not understand Kudlow's article but linked to it anyway because it made Bush and the tax cuts look good.

The bottom line is that Kudlow is not economically illiterate, he is just a liar and hack who has no credibility when writing about economic policy. And his columns are certainly not buttressing the arguments of those economists and politicians who desperately want to continue offering the wealthiest Americans with fiscally irresponsible tax cuts.

For a thorough takedown on the canard that tax cuts increase revenue to the extent that they can somehow "pay for themselves", see this report from the Center on Budget and Policy Priorities, and this report from the Center for American Progress.