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Larry Summers on Stupidest Man Alive Emeritus Donald Luskin

Yes, it is unfortunately time to lay down another marker on the internet to the effect that Stupidest Man Alive Emeritus Donald Luskin holds his post for good reason.

Let's outsource this one to Larry Summers: Out of Cite, Out of Mind: Donald Luskin's recent op-ed ("Cap-Gains Logic," Aug. 10) seeks to leave the impression that I support his conclusion that capital gains taxes should be eliminated. He and those with responsibility for editing his piece should know better. As I repeatedly made clear in academic writings in the late-'80s and congressional testimony as a senior Treasury official during the '90s, I have long been opposed to widening the capital gains differential on grounds of tax fairness, efficiency in the allocation of capital and revenue cost. Widening the capital gains differential is especially bad policy today as the income distribution has become more unequal and financial innovation has done so much to elide the distinction between capital gains and other forms of income.

The highly selective and out-of-context quotation of mine used by Mr. Luskin to bolster his argument comes from a 1981 technical paper on the very different and completely theoretical question of a total shift from income to consumption taxation. The paper makes clear that its conclusions depend wholly on a particular model of saving behavior -- one that I went on to challenge in a variety of subsequent academic studies.

Larry Summers
Cambridge, Mass.