[Toshi]

http://blogs.ft.com/martin-wolf-exchange/2010/07/25/the-political-genius-of-supply-side-economics/

My reading of contemporary Republican thinking is that there is no
chance of any attempt to arrest adverse long-term fiscal trends should
they return to power. Moreover, since the Republicans have no interest
in doing anything sensible, the Democrats will gain nothing from
trying to do much either. That is the lesson Democrats have to draw
from the Clinton era’s successful frugality, which merely gave George
W. Bush the opportunity to make massive (irresponsible and
unsustainable) tax cuts. In practice, then, nothing will be done.

Indeed, nothing may be done even if a genuine fiscal crisis were to
emerge. According to my friend, Bruce Bartlett, a highly informed, if
jaundiced, observer, some “conservatives” (in truth, extreme radicals)
think a federal default would be an effective way to bring public
spending they detest under control. It should be noted, in passing,
that a federal default would surely create the biggest financial
crisis in world economic history.

I think this author nailed it: the "charlatans" who claim (by citing
Laffer curves and waving their hands) that tax cuts will generate more
revenue seem to dominate the modern Republican party discourse. If we
follow their path then we will be led to financial ruin despite all
their righteous talk about deficits--they don't care about deficits.
They care about cutting taxes, either for ideology, to scratch the
back of their rich supporters, or because they legitimately believe
that a US Federal Govt default would be a good thing.

[sorry for the weird line breaks, I cut and pasted from Gmail--I'd sent this out to my parents]

 

[dante]

Want to watch a supply-siders head spin? Just ask him to prove the optimal tax rate for greatest revenue. Because even Laffer didn't claim to know that....

 

[Silver]

Want to watch a supply-siders head spin? Just ask him to prove the optimal tax rate for greatest revenue. Because even Laffer didn't claim to know that....

Better yet, when he throws out, "The Laffer curve proves that cutting taxes increases revenues" ask him why a tax rate of 0% doesn't generate an infinite amount of revenue.

If he's stupid enough to make the first claim, he won't understand the question at all.

 

[dante]

Better yet, when he throws out, "The Laffer curve proves that cutting taxes increases revenues" ask him why a tax rate of 0% doesn't generate an infinite amount of revenue.

If he's stupid enough to make the first claim, he won't understand the question at all.

The Laffer curve has *some* merit. If tax rates are at 0%, revenue is $0. If tax rates are at 100%, revenue is $0. If tax rates are at 1%, revenue is almost zero. If tax rates are at 99%, revenue is almost zero.

So yes, there is some validity to it, but the problem is that nobody, including the vaunted Laffer has claimed to know exactly where the optimal tax rate is. Because guess what, if that rate is higher than where taxes are today, then cutting taxes will result in less revenue, even if Laffer is 100% correct. Remember, Clinton raised taxes, and revenue went *up*. Bush lowered taxes, and revenue went *down*. That's enough evidence for me that the optimal rate for taxation is definitely above where we are now.

(Laffer and the current GOP also doesn't take into account the overall growth of the economy when trying to claim that tax cuts increase revenues. Yes, by 2005 tax revenues had *finally* reached the point where they were in 2000 before the GWB tax cut, but the economy had been chugging along at 5-6% annual nominal GDP growth, much the same as it had been for the last 100 years. More workers in the workforce plus higher productivity equals greater GDP growth.)

 

[$tinkle]

i'll see your opinion piece, and raise you a survey:
Economic Enlightenment in Relation to College-going, Ideology, and Other Variables: A Zogby Survey of Americans

which appears to emphasize 8 major economic positions:

(agree/disagree?)

1. Restrictions on housing development make housing less affordable.
2. Mandatory licensing of professional services increases the prices of those services.
3. Overall, the standard of living is higher today than it was 30 years ago.
4. Rent control leads to housing shortages.
5. A company with the largest market share is a monopoly.
6. Third-world workers working for American companies overseas are being exploited.
7. Free trade leads to unemployment.
8. Minimum wage laws raise unemployment.

you'll have to crack open the link to find the answers

 

[DaveW]

What a leading and badly worded survey!

 

[rockofullr]

Wtf?

I have no idea what all that was, but I scrolled down to the bottom and found out Zeljka Buturovic is kinda cute.

 

[Silver]

The Laffer curve has *some* merit. If tax rates are at 0%, revenue is $0. If tax rates are at 100%, revenue is $0. If tax rates are at 1%, revenue is almost zero. If tax rates are at 99%, revenue is almost zero.

Sure, but it's a back of the envelope concept, not something to base economic policy on.

Of course, for the GOP, we're always on the right side of the curve...even though we actually don't know if the Laffer curve is even a curve. The idea that we might be on the left side is verboten. Hence the proper solution is always tax cuts, no matter the situation.

 

[$tinkle]

Want to watch a supply-siders head spin? Just ask him to prove the optimal tax rate for greatest revenue. Because even Laffer didn't claim to know that....

17%?

assuming that's what forbes was on about some yrs back when he wanted to have his turn to play prez

What a leading and badly worded survey!

show me

 

[$tinkle]

Sure, but it's a back of the envelope concept, not something to base economic policy on.

Of course, for the GOP, we're always on the right side of the curve...even though we actually don't know if the Laffer curve is even a curve. The idea that we might be on the left side is verboten. Hence the proper solution is always tax cuts, no matter the situation.

politically, it's "smart" for one party (in this case, dems) to increase the tax rate, forcing - sorry "encouraging" - businesses to pare down. this way, the recently laid off can say "my [gop water boi] boss laid me off, & now the other party will pay me for sitting around gaming for 99 weeks before i get my gubment j-o-b"

it's a rovian/evil genius in its simplicity

 

[4xBoy]

Wtf?

I have no idea what all that was, but I scrolled down to the bottom and found out Zeljka Buturovic is kinda cute.

Don't google image search Zeljka Buturovic

 

[Silver]

politically, it's "smart" for one party (in this case, dems) to increase the tax rate, forcing - sorry "encouraging" - businesses to pare down. this way, the recently laid off can say "my [gop water boi] boss laid me off, & now the other party will pay me for sitting around gaming for 99 weeks before i get my gubment j-o-b"

it's a rovian/evil genius in its simplicity

If tax rates are the reason you make hiring decisions at your business, you're doing it wrong.

 

[dante]

17%?

assuming that's what forbes was on about some yrs back when he wanted to have his turn to play prez

Oh, I'm sorry, I think you didn't even read my post.

Want to watch a supply-siders head spin? Just ask him to prove the optimal tax rate for greatest revenue. Because even Laffer didn't claim to know that....

Anybody can (and has) pulled numbers out of their ass. The problem is whether that number is backed by *anything* other than... well, poo, to continue with the analogy.

 

[$tinkle]

Oh, I'm sorry, I think you didn't even read my post.



Anybody can (and has) pulled numbers out of their ass. The problem is whether that number is backed by *anything* other than... well, poo, to continue with the analogy.

well, he has

teh google provides many a lecture, debate, video that provides arguments that may not meet your standard of proof, but does have strong philosophical appeal which has withstood rigorous #repudiation

i have a hard time believing that due to a flat tax roads won't get paved, schools would shut down, and fires would burn unchecked. i'm this close to thinking anything slightly left of ron paul is better than the current system.

must i trot out CA's brain drain as exhibit A?

oh, and silver: when the gov't "creates jobs" (i.e., cuts funding for civilian position & replaces them w/ gov't positions), where do you think that funding comes from? teh udders of a blue cow? chinese venture capitalists? c'mon man, thimk

 

[dante]

But that's not what we're discussing. A flat tax percentage is *not* the debate about optimal tax rates. Yes, if you charge poor people a tax when they're currently not paying any, you will take in more income. Yes, if you raise the tax rate on 90% of Americans (while giving the rich a HUGE tax cut), you'll raise revenues. That's not the issue. The question is, does cutting taxes (ie, NOT RAISING THEM) actually bring in more revenue. The GOP says yes. I think they're full of sh!t.

 

[$tinkle]

But that's not what we're discussing. A flat tax percentage is *not* the debate about optimal tax rates.

so it seems you believe the optimal tax rate can only exist in a progressive system (given the choice b/t the 2)

Yes, if you charge poor people a tax when they're currently not paying any, you will take in more income.

i had always had the assumption the poor would only pay if they weren't...well...poor, as forbes put forth an exemption for the first $33k. so this does not apply here

Yes, if you raise the tax rate on 90% of Americans (while giving the rich a HUGE tax cut), you'll raise revenues. That's not the issue.

no, it certainly isn't, as this too does not apply

The question is, does cutting taxes (ie, NOT RAISING THEM) actually bring in more revenue. The GOP says yes. I think they're full of sh!t.

well which is it? cutting, or not raising?

and since you believe they are scategorically wrong, you must then believe that increasing them is right. but i put to you this: we are a fickle & greedy people, and will find shelters, havens, etc. to avoid paying into the increased rate [where significant - who cares about a <<1% increase?]. i believe you even acknowledged this previously.

seems that we're trying to find this elusive sweet-spot to maximize revenue while not killing the golden goose, which a [citizen-funded] gov't largesse seems to be hell bent on doing

-- end gop talking pts

 

[$tinkle]

taxes for thee, but not for me

:roflhorseface:

 

[ohio]

so it seems you believe the optimal tax rate can only exist in a progressive system (given the choice b/t the 2)

Obviously there are a lot of variables at play in potential taxation. The above argument is a straw man.

For every individual and corporation there is essentially a laffer curve - a maximum at which the entity will no longer pay (either stop working, disappear, or relocate if possible). It is clear that given the increasing ease of corporate relocation and outsourcing, we are flirting with the peak of that curve for corporate taxes. Although I would argue if we didn't make it so easy to find offshore tax havens, we could move that maximum higher.

For individuals, it is unlikely that we're at that maximum, but it's much more a psychological point for individuals than an economic one. At some point, people begin to worry about "fairness" which corporations don't give a **** about and at the same point people worry about family, again, something corps don't. History has shown us a lot of things through trial and error... proponents of supply-side economics seem able to ignore all of it.

That said, while a progressive tax is a no-brainer, there is always room to tune the level of progression. Additionally, I think a partial consumption tax is a critical tool to manage savings/consumptions rates in the US and address the emotional issue of "fairness."

 

[Silver]

For every individual and corporation there is essentially a laffer curve - a maximum at which the entity will no longer pay (either stop working, disappear, or relocate if possible). It is clear that given the increasing ease of corporate relocation and outsourcing, we are flirting with the peak of that curve for corporate taxes. Although I would argue if we didn't make it so easy to find offshore tax havens, we could move that maximum higher.

That's not a tax issue, that's a labor cost issue.

Happens due to the fact that capital is free to move around and labor is not.

 

[ohio]

That's not a tax issue, that's a labor cost issue.

Happens due to the fact that capital is free to move around and labor is not.

Fair point. I was referring more to the British Virgin Islands than China and India, but yes, I agree WRT to labor outsourcing.