Outside the Beltway

ECONOMIC MYTHS

James Joyner · Friday, May 16, 2003 · 2 comments

Michael Kinsley has an amusing piece on the economic illogic that passes for conventional wisdom:

Bush was in New Mexico on Monday with a new answer to critics who complain that his tax cut proposal favors the rich. In two words: small business. “Most new jobs in America are created by small businesses.†Therefore tax cuts “must focus on the entrepreneur.†And thence to more familiar bromides: It’s not “the government’s money,†it’s “your moneyâ€; “our greatest strength†is “our individual citizensâ€; criticism is “just typical Washington, D.C., political rhetoric, is what it is.â€

The myth of small business is one of the more ridiculous bipartisan superstitions that influence government policy. Small businesses, by their nature, come and go. They create more jobs than big businesses and wipe out more jobs, too. Any small-business owner burdened by high taxes is, by definition, more affluent than the typical big-business owner, who is an ordinary working American with an interest in a retirement fund. Small businesses are swell. But special favors for small business make no sense in terms of either fairness or prosperity.

While I support lowering taxes almost reflexively, I agree with Kinsley that targetted tax cuts favoring some sectors of the economy over others are probably unwarranted. We can add “the family farmer” to this list, too. Kinsley continues:

“We’re standing in the midst of what we call the American dream,†he said. MCT is privately owned by the family of Ted Martinez, who founded it on a shoestring in 1973 and is now a wealthy VIP who hangs around with politicians. “The Martinez family is living that dream,†Bush said.

Before we even get to the fantasy element, there is a logical problem here, isn’t there? A successful “small†business makes an odd poster child for the proposition that the government is getting in the way of small-business success. How did the Martinez family manage to achieve the American dream during a period when high taxes were supposedly thwarting that dream? If MCT Industries is so successful under current arrangements, why does it need a tax cut?

Heh. The rest of the article goes on to demonstrate that, in MCT’s case, the company actually got all sorts of government help along the way. This is one of Kinsley’s better pieces in some time.