Economic Collapse 2011?

[davelj]

[quote=denverite]I find it interesting that some on the board are trotting out the old Laffer curve. It has been thoroughly discredited. [/quote]

The Laffer Curve has not been “thoroughly discredited.” The Laffer Curve merely states that there is a point on the tax rate/total revenue curve where increasing tax rates reduces total revenue (and vice versa). This is both theoretically and empirically correct. The problem is exactly WHERE on the curve the OPTIMAL tax rate/total revenue combination lies. And that is more of a political issue than an economic one. An important observation is that regardless of marginal tax rates, total income taxes paid as a percentage of GDP have remained within a pretty steady band (a couple of percentage points) over many decades. (Government spending is a different story.) This suggests that folks change their behavior as tax rates change. My issue with Laffer, the person, is that it seems like his answer to EVERY problem is to lower taxes… regardless of where tax rates are at the time or what the objective is. He’s a Johnny One-note in that regard and I find it a bit irritating. (And I’m as opposed to paying higher taxes as the next guy.)

[quote=denverite]
Here are some data points:

National Debt as % of GDP
1947 – 120%
1960 – 55%
1980 – 33%
1990 – 66%
2000 – 55%
2010 – 90%

Please note that the big tax cuts came in 1981, 1983, 2001 and 2003.

Also note that the big tax increase occurred in 1993.

If tax cuts equate to higher revenues (and tax increases result in lower revenues), as Laffer has always proposed, then the deficits would not demonstrate this historical pattern. I’m aware that some try to explain away the US deficit history as being totally influenced by exogenous events, rather than by fiscal tax policy, but for me the overriding and obvious answer is that, generally, higher taxes = higher revenue and lower taxes = lower revenue. Of course, this bit of logic breaks down at some higher tax rate, but we haven’t met that threshold in at least 70 years.

For a graph, refer to the link.
http://zfacts.com/p/318.html%5B/quote%5D

You allude to it but it bears repeating: correlation does not necessarily suggest causation. Tax receipts as a percentage of GDP haven’t changed a whole lot over the years. Government spending as a percentage of GDP, however, has. It’s generally increased… and here we are.

[CA renter]

davelj,

Likewise, Laffer has not proved his point, either, as there is no way to point to increasing or decreasing revenues at any point in time and know for a fact what is behind the changes. It could be tax policy, or something that’s going on in the credit markets or currencies, or…

From everything I’ve read and seen, there is nothing at all that factually backs up his theory.

Not disagreeing with your assertion that there is a point where revenue is maximized, but that Laffer doesn’t seem to acknowledge other events that can affect revenues or that lowering tax rates to zero (hypothetically speaking) might have some other, much more negative consequences.

BTW, I have a friend who used to work for him, and she said exactly what you did. He’s brilliant (according to her), but his beliefs about taxes are like a religion to him. He is obsessed with taxes and supply-side economics.

[CA renter]

davelj,

Likewise, Laffer has not proved his point, either, as there is no way to point to increasing or decreasing revenues at any point in time and know for a fact what is behind the changes. It could be tax policy, or something that’s going on in the credit markets or currencies, or…

From everything I’ve read and seen, there is nothing at all that factually backs up his theory.

Not disagreeing with your assertion that there is a point where revenue is maximized, but that Laffer doesn’t seem to acknowledge other events that can affect revenues or that lowering tax rates to zero (hypothetically speaking) might have some other, much more negative consequences.

BTW, I have a friend who used to work for him, and she said exactly what you did. He’s brilliant (according to her), but his beliefs about taxes are like a religion to him. He is obsessed with taxes and supply-side economics.

[CA renter]

davelj,

Likewise, Laffer has not proved his point, either, as there is no way to point to increasing or decreasing revenues at any point in time and know for a fact what is behind the changes. It could be tax policy, or something that’s going on in the credit markets or currencies, or…

From everything I’ve read and seen, there is nothing at all that factually backs up his theory.

Not disagreeing with your assertion that there is a point where revenue is maximized, but that Laffer doesn’t seem to acknowledge other events that can affect revenues or that lowering tax rates to zero (hypothetically speaking) might have some other, much more negative consequences.

BTW, I have a friend who used to work for him, and she said exactly what you did. He’s brilliant (according to her), but his beliefs about taxes are like a religion to him. He is obsessed with taxes and supply-side economics.

[CA renter]

davelj,

Likewise, Laffer has not proved his point, either, as there is no way to point to increasing or decreasing revenues at any point in time and know for a fact what is behind the changes. It could be tax policy, or something that’s going on in the credit markets or currencies, or…

From everything I’ve read and seen, there is nothing at all that factually backs up his theory.

Not disagreeing with your assertion that there is a point where revenue is maximized, but that Laffer doesn’t seem to acknowledge other events that can affect revenues or that lowering tax rates to zero (hypothetically speaking) might have some other, much more negative consequences.

BTW, I have a friend who used to work for him, and she said exactly what you did. He’s brilliant (according to her), but his beliefs about taxes are like a religion to him. He is obsessed with taxes and supply-side economics.

[CA renter]

davelj,

Likewise, Laffer has not proved his point, either, as there is no way to point to increasing or decreasing revenues at any point in time and know for a fact what is behind the changes. It could be tax policy, or something that’s going on in the credit markets or currencies, or…

From everything I’ve read and seen, there is nothing at all that factually backs up his theory.

Not disagreeing with your assertion that there is a point where revenue is maximized, but that Laffer doesn’t seem to acknowledge other events that can affect revenues or that lowering tax rates to zero (hypothetically speaking) might have some other, much more negative consequences.

BTW, I have a friend who used to work for him, and she said exactly what you did. He’s brilliant (according to her), but his beliefs about taxes are like a religion to him. He is obsessed with taxes and supply-side economics.

[Zeitgeist]

This is interesting. Maybe he is looking to get kicked out so he can retire and write a book.

“Federal Reserve Chairman Ben S. Bernanke said extending at least some of the tax cuts set to expire this year would help strengthen a U.S. economy still in need of stimulus and urged offsetting the move with increased revenue or lower spending.”

“In the short term I would believe that we ought to maintain a reasonable degree of fiscal support, stimulus for the economy,” Bernanke said yesterday under questioning from the House Financial Services Committee’s senior Republican. “There are many ways to do that. This is one way.”

http://www.bloomberg.com/news/2010-07-23/bernanke-says-extending-bush-tax-cuts-would-maintain-stimulus-to-economy.html

[Zeitgeist]

This is interesting. Maybe he is looking to get kicked out so he can retire and write a book.

“Federal Reserve Chairman Ben S. Bernanke said extending at least some of the tax cuts set to expire this year would help strengthen a U.S. economy still in need of stimulus and urged offsetting the move with increased revenue or lower spending.”

“In the short term I would believe that we ought to maintain a reasonable degree of fiscal support, stimulus for the economy,” Bernanke said yesterday under questioning from the House Financial Services Committee’s senior Republican. “There are many ways to do that. This is one way.”

http://www.bloomberg.com/news/2010-07-23/bernanke-says-extending-bush-tax-cuts-would-maintain-stimulus-to-economy.html

[Zeitgeist]

This is interesting. Maybe he is looking to get kicked out so he can retire and write a book.

“Federal Reserve Chairman Ben S. Bernanke said extending at least some of the tax cuts set to expire this year would help strengthen a U.S. economy still in need of stimulus and urged offsetting the move with increased revenue or lower spending.”

“In the short term I would believe that we ought to maintain a reasonable degree of fiscal support, stimulus for the economy,” Bernanke said yesterday under questioning from the House Financial Services Committee’s senior Republican. “There are many ways to do that. This is one way.”

http://www.bloomberg.com/news/2010-07-23/bernanke-says-extending-bush-tax-cuts-would-maintain-stimulus-to-economy.html

[Zeitgeist]

This is interesting. Maybe he is looking to get kicked out so he can retire and write a book.

“Federal Reserve Chairman Ben S. Bernanke said extending at least some of the tax cuts set to expire this year would help strengthen a U.S. economy still in need of stimulus and urged offsetting the move with increased revenue or lower spending.”

“In the short term I would believe that we ought to maintain a reasonable degree of fiscal support, stimulus for the economy,” Bernanke said yesterday under questioning from the House Financial Services Committee’s senior Republican. “There are many ways to do that. This is one way.”

http://www.bloomberg.com/news/2010-07-23/bernanke-says-extending-bush-tax-cuts-would-maintain-stimulus-to-economy.html

[Zeitgeist]

This is interesting. Maybe he is looking to get kicked out so he can retire and write a book.

“Federal Reserve Chairman Ben S. Bernanke said extending at least some of the tax cuts set to expire this year would help strengthen a U.S. economy still in need of stimulus and urged offsetting the move with increased revenue or lower spending.”

“In the short term I would believe that we ought to maintain a reasonable degree of fiscal support, stimulus for the economy,” Bernanke said yesterday under questioning from the House Financial Services Committee’s senior Republican. “There are many ways to do that. This is one way.”

http://www.bloomberg.com/news/2010-07-23/bernanke-says-extending-bush-tax-cuts-would-maintain-stimulus-to-economy.html

[stockstradr]

Arthur Laffer

The worst economist. Ever.

Widely viewed with derision, which he worked hard at earning (by being an idiot)

I see a post with some words of wisdom:

The Laffer Curve has not been “thoroughly discredited.”

Exactly.

The Laffer Curve is, well, laughable.

[stockstradr]

Arthur Laffer

The worst economist. Ever.

Widely viewed with derision, which he worked hard at earning (by being an idiot)

I see a post with some words of wisdom:

The Laffer Curve has not been “thoroughly discredited.”

Exactly.

The Laffer Curve is, well, laughable.

[stockstradr]

Arthur Laffer

The worst economist. Ever.

Widely viewed with derision, which he worked hard at earning (by being an idiot)

I see a post with some words of wisdom:

The Laffer Curve has not been “thoroughly discredited.”

Exactly.

The Laffer Curve is, well, laughable.

[stockstradr]

Arthur Laffer

The worst economist. Ever.

Widely viewed with derision, which he worked hard at earning (by being an idiot)

I see a post with some words of wisdom:

The Laffer Curve has not been “thoroughly discredited.”

Exactly.

The Laffer Curve is, well, laughable.

[Author]

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