Memo To: Tim Russert, "Meet the Press"
From: Jude Wanniski
Re: Bob Rubin
I did appreciate you having Treasury Secretary Robert Rubin on the show Sunday, as it is interesting to see how many ways he can find to twist the truth. We are clearly reaching new depths in this Age Without Shame, when anyone can say anything, and not be held accountable. Robert Reich believes he can write a book about his experience as Labor Secretary, piling one lie upon another, and shrug it off when he is caught red-handed. More than 20 years ago, I remember Sen. Pat Moynihan saying we have reached an age where people believe they can say anything. Iíve covered all the Treasury Secretaries since Henry Fowler in the Lyndon Johnson administration, Tim, but Rubin is the first one Iíve run across who so casually twists the truth, and when he canít twist, he plain lies. I almost hope he believed the stuff he was telling you about the capital gains tax -- that he was simply repeating tutorials he has gotten from Larry Summers, his PhD deputy, who routinely goes around telling people he ďpersonally thinksĒ we should cut the capital gains tax, but who also finds it necessary to say the opposite because he is a team player.
When I first got to Washington in 1965, I really donít remember anyone in power being let off the hook for saying or reporting unsubstantiated hokum. Now, as long as you heard anything from someone else, you are allowed to repeat it as if it were fact. Investigative reporter David Brock was exactly right in his Esquire article when he made that point about journalists in particular. If we are supposed to believe the earth is warming because our team says so, we will continue to say so even though the scientific community that tracks such things tells us the earth has been cooling since 1940.
Now here is Rubin on your show, announcing that after 26 years on Wall Street, he has come to the conclusion that a cut in the capital gains tax will have little or no impact on economic growth, and maybe even it will be negative! Even your old boss, Mario Cuomo, finally decided it would be good for economic growth if there were a lower capital gains tax. But then, he was old school and would feel ashamed if he didnít tell the truth after he saw it. This is a big thing for the Treasury Secretary of the United States of America, Tim, because the whole world is looking to us for guidance, and there will now surely be cases of finance ministers in little countries where tax rates are already prohibitive saying they might as well hike the capital gains tax.
Rubin told you that there is no difference between ordinary income and capital gains income, which of course is nonsense. A capital gain only can occur if after-tax ordinary income is used to acquire a real or financial asset, which then increases in value. A tax on the gain is a tax on wealth, not income, and a tax on an inflated gain is a confiscation of capital. Larry Summers knows the intellectual history of academic economists without exception (as far as I know) hostile to taxing inflated gains. Rubin says he has a letter from the New York Bar Association that opposes indexing of gains. Why not? The more genuine capital expansion we have in the economy, the less need there is for citizens to sue each other for dwindling resources.
Rubin told you that a lower capital gains tax increases tax sheltering. Did you believe him? He knows better and so does Deputy Larry. A tax shelter is used to reduce liabilities on ordinary income, through the creation of losses. Rubin is a fraud, unless he really is simply prattling mumbo jumbo he got from Summers, which I find hard to believe. Rubin did work on Wall Street for 26 years and did accumulate more than $100 million in assets. And he has been at Treasury for four years. It strains credibility to think he doesnít know that a capital gain and a tax shelter are worlds apart. Twenty five years ago, I was the guy at The Wall Street Journal editorial page who began the campaign to cash out tax shelters by lowering marginal rates on ordinary income. No kidding! Now I find these arguments used to justify the governmentís confiscation of capital of tens of millions of little guys who have accumulated assets by investing little bits and pieces of after tax income in farms, shops, mills and mines. It is a knife aimed at the very heart of entrepreneurial capitalism, and if it goes down here, it will go down everywhere -- except perhaps in China, where no Chinese who has seen the experience of Hong Kong and Singapore would be dumb enough to tax capital gains.
I was happy to see David Broder nail Rubin on his assertion that the $27 billion in cash handouts to low-income workers that are in the budget deal are not really tax cuts, because these workers do not pay income tax. This is really bad-faith negotiations. Even Sam Donaldson saw through the transparency of this argument on ABCís "This Week," when budget director Franklin Raines tried to peddle it. And Brit Hume chewed up Juan Williams, who tried to carry the administrationís water on this, when he should know better. I love Juan Williams, but he sometimes pays too high a price for the favors he gets from his friends in the administration.