Monday, July 18, 2011

OPEN LETTER TO THE DIANE REHM SHOW

I love your show, and you and Charlie Rose are the two best interviewers around. But the guests on your show today got away with myths and factual errors. Had it not been for the Cleveland caller disputing the Republican guest's version of Christina Romer's position on tax cuts, he'd have gotten away with another one of a litany of his distortions. Which is why he's on your show, isn't it. As it has been said, he's entitled to his opinions, but not his own facts.

It may not be thrilling or sexy, or even compelling for listeners to wade into the weeds on taxes, business growth, and economics, but if a program is just going for the sizzle, the sound bite, and segment, it should offer a repeat of Anna Nicole Smith instead. If you could get the guests to be just a little more specific, the value of the show would increase dramatically. Your guests were two-dimensional, at best. Our economy is like a Rubik's cube. Look around to the other side! For example:

Economic growth can come from consumer spending, business investment, and/or government spending and investment. The relationship between tax cuts and economic growth is actually simple. A"demand side" tax cut is directed to consumers; they will generate consumer spending, which, at some point, will lead to job growth. The "supply side" tax cut is directed at business interests, and they record it as profit. Profits may be distributed to shareholders/owners (dividends), executives (bonuses), or investment in new products, markets, opportunities. It is questionable as to just how much of the supply side tax cut "trickles down" to spending/job growth.

The economic gain during the Bush years ... was it due to tax cuts or was the housing bubble driving consumer spending? R's point to those tax cuts to justify a long term TAX CUT strategy. To get the answer, analyze the GNP contribution in the Bush years from the housing and construction industries ... building materials, furniture, appliances, etc . Equity loans ... remodeled bathrooms, kitchens , patios,pools, SUV's., vacations, educations etc. Compare the amount of money from the Bush tax cuts that went to consumers (demand side) to the amount of money that went into the economy before the housing bubble burst, and you'll find out why the Bush Administration pushed housing sales. If the guest can't bring the facts, get another guest.

EJ Dionne also made a questionable statement about economic gains during the Clinton years ... how much actually was actually attributable to the tech/dot com bubble that drove the stock markets to unrealistic levels? Greenspan called it "irrational exuberance". Lostsa people got lotsa cash. Lotsa spending. Lotsa IPO's. Instant billionaires. (Al Gore too?) The NASDAQ fell from 5500 to 1200, a 78% plunge. A real stock market "crash"! False growth? Revenue (tax) surplus? Come on!

Small business taxes. Have guests define small business ... sole proprietors (make up a huge percentage of "small businesses") vs. those having a small number of direct employees vs. hundreds of employees (11,000 companies). Very small business owners make "gross revenues" and deduct business expenses, and transfer the profit from Schedule C to their 1040 returns as income. Assume 20% profit. Someone would need to have $1.25 million in revenue to have $250K in profit. Use 5th grade math. Assume a small businessman makes $350K in profit ($1,750,000 in revenue. A 4% increase in the top rate on the $100K above $250K is a $4,000 increase in taxes. Is that really enough to impact hiring or the overall economy? If a small business owner or a corporate executive is left with $346K, is the small business owner poor, while the corporate executive is rich?

Finally, there's the same Republican guest referring to the Kennedy tax cut (actually signed by Johnson)as evidence that tax cuts stimulate economic growth. But he conveniently forgot to mention that it was a demand side growth cut. And neither of the other guests challenged his assertion.

I mean no disrespect, and I doubt you'll read this, but you should. Consequently, I'm posting this open letter on The Voice of Moderation, www.tvom.bologspot.com. I know you do 10 shows a week and the prep is daunting. But some subjects have important consequences, and your 10 AM show had no there there. If you have a staff doing the prep, they let you and me and all of your listeners down.