The Paul O’Neill Hour
The allure of ad hominem arguments is as ever irresistible.

February 9, 2001 9:45 a.m.

aul O'Neill, our treasury secretary, breathes clean air and has clean thoughts, and the response to them is Orwellian.

Printer-Friendly

We have not seen what Jay Leno and Mr. Letterman et al. will be doing to him in the days ahead, but he will be made to sound like the Neanderthal Man, arriving on the scene in his Lexus, having escaped from all socially liberating thought since the Industrial Revolution. What Mr. O'Neill said was that he thought it quite wrong to conduct economic policy in a "robber baron" rhetorical context in which attention is given to who gets what after tax reform. "I think it is really corrosive to have this argument…. It's not worthy of where we are."

The allure of ad hominem arguments is as ever irresistible. The news accounts tell us that Paul O'Neill made $59 million in salary and stock options last year, from which we are supposed to deduce that he is especially inclined to favor rich taxpayers. To be sure a few will reflect that the experience of a man who brought about the reformation of an entire industry (aluminum) is worth much more to the United States prospectively than the $59 million paid to its chairman. But on one matter, attention needs to be paid. It is: Should heavy emphasis be given to the incidence of reform taxation? Or merely to the economic impact of it?

Robert Greenstein of the Center on Budget and Policy Priorities was shaken by what he saw as the implied consequences of Mr. O'Neill's criticism. "You have to allow a conversation about who would get the benefits of various tax-cut proposals without being accused of waging class warfare." Yes, but the mode in which such discussion is conducted is readily seen as such when the effort isn't to analyze disinterestedly, but to curry resentment. And the same day that we heard from Mr. Greenstein, we heard from Senate minority leader Daschle just the kind of thing Mr. O'Neill is getting at: Mr. Daschle said the rich are getting richer, the poor poorer. But that has nothing at all to do with the question whether the proposed tax reform is desirable.

It isn't as though Mr. Bush proposes to tax the poor more

“Adam Smith and Milton Friedman prescribe policies aimed at increasing wealth and freedom. Paul O'Neill is a disciple.”

heavily. The taxation of the poor is already heavy, but it is done not through income taxes but payroll taxes, and neither Al Gore nor Ralph Nader proposed reducing those, given the shortfall in sight 25 years from now on Social Security payments.

No, Mr. Bush proposes to cut from 15 percent to 10 percent on the first $6,000 in taxable income for singles and to double the child tax credit and reduce the marriage penalty. The tax rate on low-income families would be reduced by 40 percent; a family of four making $35,000 would get a 100 percent tax cut.

And so on. But Mr. O'Neill is calling attention to large trajectories, which have to do, of course, with growth. It was splendid to hear him say what he did about the corporate income tax, which some of us in the past have identified as a tax purely demagogic in character, done mostly for the purposes of relative ease of collection. Mr. O'Neill said he thought it "goofy" — in the language of the Washington Post's Steven Pearlstein and Paul Blustein — to tax corporations that "simply pass the tax on to consumers in the form of higher prices." That happens — obviously: Corporations don't pay taxes, their clients do; corporations don't make a gift of 7.65 percent of your salary in Social Security tax; the money would be yours in higher wages if the corporation weren't sequestering it as a fake contribution to the employee. And O'Neill said that of course that tax led "to the creation of a small but well-paid army of lobbyists and tax accountants whose unceasing efforts to create and exploit loopholes distorts corporate decision-making and serves as a drag on economic growth and efficiency."

But the high moment was yet to come. He closed by saying, "It's just annoying to me that people have all these damned excuses" — for putting off transparently beneficial tax reform. He said that in the corporate world, something like this would be taken care of in a matter of weeks.

A month or so ago, an Internet poll gave off the names of the "Top 10 Economists on the Net": No. 1. Karl Marx. 2. Adam Smith. 6. John Kenneth Galbraith. 9. Milton Friedman. A second poll: "The Top Ten Living Economists on the Net": 1. John Kenneth Galbraith. 2. Milton Friedman.

This really tells it all. Karl Marx was not an economist; he was a social revolutionary. J. K. Galbraith is correctly deemed tops in influence, but his influence is that of a social-policy advocate and philosopher. Mr. O'Neill has highlighted these differences. Adam Smith and Milton Friedman prescribe policies aimed at increasing wealth and freedom. Paul O'Neill is a disciple.