I see that the pope has decided to weigh in on economic issues:
“Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world,” Francis wrote in the papal statement. “This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system.”
A few reactions:
First, throughout history, free-market capitalism has been a great driver of economic growth, and as my colleague Ben Friedman has written, economic growth has been a great driver of a more moral society.
Second, “trickle-down” is not a theory but a pejorative used by those on the left to describe a viewpoint they oppose. It is equivalent to those on the right referring to the “soak-the-rich” theories of the left. It is sad to see the pope using a pejorative, rather than encouraging an open-minded discussion of opposing perspectives.
Third, as far as I know, the pope did not address the tax-exempt status of the church. I would be eager to hear his views on that issue. Maybe he thinks the tax benefits the church receives do some good when they trickle down.
From Mr. Mankiw’s blog.
Mr. Mankiw is horribly wrong.
First, Mr. Mankiw is wrong on his first assumption. There is no free-market capitalism, never has been. And by going off such a tangent doesn’t really get to the point that the Pope was trying to make. Equal economic growth, however has been a great driver of a moral society. What he considers to be free-market capitalism, certainly what the hell is going on today if he thinks the US has it today, certainly is not equal economic growth.
Second, “trickle down” may be a pejorative for Mr. Mankiw, so call it by its original name as “supply side” economics, but the fact remains, whatever the label, it’s been shown not to work as advertized. As designed, it may very well be a different thing, especially if that design was to make the rich even richer. There is news for Mr. Mankiw. The rich are always going to pay more in taxes (or at least they should) because they have more money. Flatten the rate, reduce deductions to nothing, and the rich are still going to overwhelmingly pay more taxes. Especially if there are no way to manipulate the rate with deductions.
Third, the talk about tax-exempt is again, a point that Mr. Mankiw I think does not want to go where the big issues are. Should we address the tax exempt status of Crossroads GPS as well? The tax exempt status of Goodwill, Red Cross, the Salvation Army? All of the churches? Other foundations?