Dear Robert Reich

Here's a little note I sent to Robert Reich in my never ending attempt to find out why economists think taxes are recessionary. Apparently, Reich doesn't think they are, which is a nice surprise. So I wonder what he knows that all the other economists don't. I don't really expect a reply from Robert. I also wrote to Paul Krugman and he hasn't replied, even though we share birthdays.

This is an excellent article, Robert. But I have one question. You say, regarding the conclusion of the Bank of America Merrill Lynch report that Congress and the White House should be careful not to raise taxes on the top 10 percent, that "this logic is morally and economically indefensible". I agree that it is morally indefensible but I wonder why you say it is also economically indefensible. All economists, liberal and conservative, seem to agree that raising taxes is always recessionary. I had always assumed that this consensus was based on data. But I recently did an analysis where I looked a the relationship between annual growth rate (dGDP/dt), annual top marginal tax rate (TR) and annual unemployment rate (UR) for the years 1947 to the present and got these results:

dGDP/dt w/TR.....0.18
UR w/TR...........-0.23

These correlations go in the "wrong" direction: increasing the top marginal tax rate is associated with increased growth and _decreased_ unemployment rate. Did you know about these relationships when you said that the recommendation not to raise taxes on the top 10 percent was economically indefensible? Are you the only economist who knows this? Why are not more economists using this readily obtainable data to rebut the lie that increasing taxes on the wealthy is recessionary? Why in the world have so many economists assumed that taxes are recessionary in the first place?

Rick Marken