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Today's WSJ Editorial Page Ignorance

The Wall Street Journal editorial page is, once again, not so much with the understanding of the economics. Today's editorial begins by noting that the Affordable Care Act increases payroll taxes on high income earners, but that Obama also supports a temporary payroll tax cut now:

The economic ironies are also, well, rich. Mr. Obama is now pushing to reduce the payroll tax by two-percentage points for another year to boost the economy, but he's already built in a big increase in that same payroll tax for 2013. So if a payroll tax cut creates jobs this year, why doesn't a payroll tax increase destroy jobs after 2013?

The Journal keeps making this error. Keynesian theory says that, in a liquidity trap, the government should boost consumer demand by running deficits. One way to run deficits is to cut taxes. The tax cuts should be aimed at workers who would be most likely to spend their tax cut, which means workers who aren't rich. And the tax cut should be temporary, because after the economy improves, you need to get back to tax rates sufficient to cover the government's annual operating costs.

In the Affordable Care Act, Democrats passed a payroll tax increase that takes effect in 2013 -- hopefully when the economy has passed its emergency conditions -- and falling on the rich, who won't be forced to reduce their consumption very much. In the meantime, Obama wants a payroll tax cut on the non-rich today.

Obviously the supply-siders at the Journal disagree with that position, because they disagree with Keynesian economics and they oppose any policies that hurt the rich. But beyond mere disagreement, they actually don't understand the theory that they're arguing against. They don't understand the difference between a Keynesian tax cut and a non-Keynesian tax cut. This isn't advanced economics, either. It's fairly remarkable that the country's most prestigious financial newspaper has an editorial page whose writers don't understand very basic economic concepts.