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Washington Diarist: Foe Pas

bete noire

Moore's perfidy so agitated me that I wrote about it in these pages. It was a highly therapeutic act--one that, I hoped, might even cure me of my macabre fixation with supply-siders. Instead, it has entangled my career, perhaps inextricably, with Moore's. I have become known, within a very, very tiny circle of policy wonks, as the anti-Moore. It is a modest niche, and an undemanding one. Others can wage colossal debates with the giants of academe. I choose to make my name by periodically knocking down a straw man who happens to be a real person.

Happily, Moore continues to oblige. In response to my 1997 article, he wrote a letter to The New Republic challenging me to a bet. Clinton and Congress had just agreed to lower the top tax rate on capital gains from 28 percent to 20 percent, and Moore proposed that "over the next five years, capital gains tax receipts will be higher (adjusted for inflation) than they have been in the previous five years... I have $2,000 that says a 40 sic percent rate cut will produce more revenue to the Treasury in that period. Let us see whether The New Republic's smug writers are willing to put their money where their mouth is." Moore has been taunting me about this bet ever since. The following year he wrote in National Review that capital gains revenues were indeed rising and crowed, "I challenged Chait in print to a $1, 000 sic bet that the capital gains tax cut would cause capital gains revenue to rise. Chait declined." And again, writing in the latest NR, Moore glories once more in my cowardice. "For all their apparent selfconfidence, liberals don't like putting their money where their mouth is," he gloats.

What moore consistently fails to mention is that I didn't take his bet because I agreed that capital gains revenues would probably rise. But I also argued that this didn't vindicate his theory. Just because a cut in the capital gains tax precedes a rise in capital gains revenues doesn't mean the tax cut caused the gain in revenues. Serious conservative economists, who have more sophisticated arguments for capital gains tax cuts, would never make Moore's ludicrous claim; there are too many other factors at work. First of all, the long bull market, which began before the tax cut, would have made capital gains revenues rise regardless--in fact, they might have grown even faster if not for the tax cut. Second, much of the increase in capital gains revenues simply reflects paper-shuffling. If you lower the tax rate on capital gains without lowering the tax rate on ordinary income, you encourage people to express their income through capital gains. Many tax shelters are designed to do exactly this. So capital gains tax revenues may rise in part because people are shifting their income from a high-tax category into a low- tax one--resulting in a net revenue loss for the government. Acknowledging this argument, Moore replied in last week's NR that people could not be shifting money from normal kinds of income because "individual income tax revenues have risen by $100 billion a year." Well, duh. They, too, were rising before 1997, and they would have kept rising in any case.

The reason moore can't comprehend this point is that he is gripped by a monocausal explanation of the world. His brain lacks the capacity to process any economic theory that takes into account factors other than tax rates. Within the narrow confines of Moore's logic, if you don't think a capital gains tax cut will cause an economic boom, then you must think it will destroy the economy. That's why monocausalists can make such confident predictions. Say you believe the economy hinges on the price of zucchini. There will be times when a rise in zucchini prices is followed by an economic boom, and then you can claim vindication and taunt the enemies who said you were mad. If zucchini plummets and the economy booms anyway, then you can argue that we're still benefiting from the big zucchini run-up of 1981.

My only concern about moore is that he'll take up with some more attractive foe. In his latest article, Moore devotes almost as much space to assaulting Slate editor Michael Kinsley as he does to me. Worse, Kinsley is the recipient of Moore's most obviously wrong barb. (Quoting Kinsley as describing the GOP's 1994 Contract with America as an "impossible combination of tax cuts and spending increases and balanced-budget promises" that "can't be done," Moore retorts with a sneering "Oops." Oops? When the GOP tried to make the spending cuts needed to fulfill all their promises, they found that, well, it couldn't be done.) It's reassuring to find that Moore is as dense as ever. But his infidelity is alarming. Why is he lavishing his best material on Kinsley? He doesn't need you, Steve. I do.

Jonathan Chait is a senior editor of The New Republic.