The Economic Far Right & the G.O.P.

Depending on what varibles one holds constant in one’s model, supply-side has its place, but given the overwhelming supply of liquidity injected by the FED, and global markets, a tax-cut actually takes away from revenue. In other words: put too much grease on the chain and the chain slips/skips on the sproket. How could anyone argue otherwise?

Supply siders are big government, big borrow and big spenders. Quite vital for fattening the Military Industrial complex and nation building.

This is one of the Big Lies. Even the lifelong Republican Greenspan testified before Congress, sometime in ’04 or ’05, that the Bush tax cuts reduced revenue on balance. But if you repeat a lie enough times, people believe it.

Trendline economic growth is basically the same now as it was when top tax rates were nearly confiscatory. If anything, trendline growth was higher when top rates were nearly confiscatory. The purpose and effect of the rate reductions appear to have been merely to aggrandize the wealthy.

Indeed, wealthy people I know do not need more wealth to acquire things they want. So they do not spend any tax-cut benefit. Rather, they they invest it. A principal consequence of high-bracket tax cuts would therefore seem to be goosing asset prices and promoting asset bubbles.

Incidentally, the childishly simple concept known as the Laffer curve might counsel raising rates rather than lowering rates. Nobody ever bothers to demonstrate which side of the curve we’re on — the upward-sloping side where higher rates would increase revenue, or the downward-sloping side where higher rates would decrease revenue. I fail to see why government should be in the business of maximizing revenue in the first place, but the money-hungry econocons always assume we’re on the right-hand side of the curve. ‘Taint necessarily so.

Today’s WSJ gives some proof (yes, proof not ‘tenured economists’ analysis) that non-supply-siders like those at the CBO who provide static analysis have been under-predicting federal tax receipts over the last five years.

At the begining of each fiscal year they make their predictions. Starting in 2003 and on to 2007 tax receipts came in higher than their predictions by: 0.7%, 3.0%, 4.4%, 5.7% and in 2007, 6.1%.

If the ivory tower economists would have been correct then at least over this time the CBO would have been wrong as much as they were right and it all would have evened out. But they underpredicted the benefits of the tax RATE cuts on the economy and thus on tax receipts. They were wrong every single year and to show their stubbornness the percentage that they were off has expanded from only 0.7% to a whopping 6.1%.

Read it and weep people of the Left. Real world not theory prevails. QED.QED. QED.

~~~

BR: Norm, I don’t know what you are proving, but its not supply side economics.

The increase in tax reciepts did not take place after the 2001 tax cuts — but they did take place after the huge Fed rate cuts.

Why do you assume that the tax cuts — and not 46 year lows in interst rates — were responsible ?

Is supply side a credible economic theory, or, in other words, is it a guide to economic policy? Absolutely not. The Laffer Curve will only kick in in a significant way with extremely high rates of taxation and only with individuals who have the ability to opt out of doing work. It is a warning about overtaxation productive labor given the state’s reliance on capital? Yes. But it should only be regarded as a warning or ceiling, not a theory of econimic policy-making.

Peter-

See the SPY daily chart right before the “release”…that was supposedly just out at that time. Can you say front run??!!

That’s where it came from……

Ciao
MS

Supply Side is about as legit as the “Death tax.

Only the patsies believe the arguments made in favor of Supply-side (or the repeal of the Estate Tax); it’s more Political FUD than legitimate policy discussion.

The real policy is that taxes are for the little guys and not for multi-millionnaires families that earned their money the hard-way (by waiting until the family patriarch finally keeled over), and they buy Republican politicians to do their bidding.

So, not surprisingly, Supply-Side FUDonomics has become an article of faith for any Republican politician that wants to stay bought-off.

I’m certainly not an economist and forgive me if someone already said this but logic would have it that tax cuts are justified and would have greater potential for positive economic impact when the economy and financial markets are already strong. Tax increases, following the same logic, would have the greatest potential for economic impact if imposed during times of economic weakness…

The recent tax cuts were quite the opposite: occurring at economic weakness and in the face of enormous military spending…

As a result of economic weakness (2000 to 2003) lower interest rates contributed to the subsequent weakness in the dollar and global growth, which, taken together created the vast majority of economic strength from 2004 to today…

My response to Barry’s question would be that “supply side” theory can be beneficial if used properly. That’s not a political statement. Just common sense…

I wish our op-ed author would have provided some sources so we could check all of his “tenured economists.”

I’m surprised Barry that you didn’t provide any links to economists who promote the supply side.

Also, I’m wondering what a “tenured economist” is? Is it a teaching prof at a university? Someone with a Ph.d in Economics?

If so, why do I NOT find it at all strange that “tenured economists” holed up in the bastions of liberal dogma do not believe the Bush tax cuts helped?

Its fascinating to read the comments on how lowering tax rates have screwed the “little guy” in light of the fact that:

Top 1% Pay More Income Tax Than Bottom 90%

The new data shows that the top-earning 25% of taxpayers (AGI over $62,068) earned 67.5% of the nation’s income, but they paid more than four out of every five dollars collected by the federal income tax (86%). The top 1% of taxpayers (AGI over $364,657) earned approximately 21.2% of the nation’s income (as defined by AGI), yet paid 39.4% of all federal income taxes. That means the top 1% of tax returns paid about the same amount of federal individual income taxes as the bottom 95% of tax returns.

http://www.taxfoundation.org/files/ff104.pdf

Many top earners have methods at their disposal to reduce or delay recognizing income. Make rates confiscatory and all you’ll do is drive new efforts (if not new scams) into hiding or “changing” reportable income. Trust me, in the 80s I saw so many feeble tax shelter schemes/scams come across my desk it seemed that no one was in business to do anything OTHER THAN avoid taxes.

Besides, multiple, very large sample surveys have been taken to assess what people deem “fair” tax rates. Consistently, across generations, race, gender, you name it, people believe the maximum federal tax should be 25%.

What does that public consensus mean? I think it means the “rich” feel exactly like everyone else; the farther away from 25% rates rise, the more the rich spend on avoiding paying taxes.

Don’t give “the rich” the incentive to go back and hide income because all it will lead to is waste on a massive scale. They’ll win that game even if their tax schemes are massively unproductive.

Left wing CHIMP

never criticize left-wing politics

As an economist I will say there is absolutely no doubt in my mind that 2001 tax cuts cost significant revenue and probably hurt economic growth.

There is some possibility that the 2003 tax cuts increased economic growth but I am extremely doubtful that they paid for themselves.

Also, I’m wondering what a “tenured economist” is?

A trained (PhD) economist with tenure (lifetime appointment) at a university.

Every time I see this debate no-one ever mentions the fact that at the same time as taxes were cut (under Reagan too), gov’t spending was ramped up massively.

Now, the government receives back nearly 1/3 of all the money it spends (hires someone at $100k, they pay about $30-40k taxes).

So obviously a government can cut taxes and increase spending and see increased tax revenues. No-one ever seems to acknowledge that with no tax cuts, tax revenues would have soared solely due to increased spending.

As with any concept, once it is politicized to the degree that it is endorsed by Rush Limbaugh, the concept becomes worthless.

To ignore the psychological aspect of any economic idea is to court disaster. In a manufacturing-based economy, supply-side might be of some use if the tax incentives were targeted to constructive use, i.e., R&D, machinery, education, etc. – but even in an industrialized country, offering blanket corporate tax relief allows corporations and thus human nature the decisions as to where that money will be utilized – stock options and stock buybacks do little for the “trickle-down effect” of supply side.

To think supply side economics benefits a consumption-driven debt-based economy is plain silly – how are the fees for LBOs and Hedge Fund bonuses going to positively impact the broad economy?

I’d say it is a given that Goldman Sachs hasn’t invested much in infrastructure this year, and I’m still waiting for the first Lehman Brothers automobile to roll off that assembly line….

On the other hand, if you have $5 million coop for sale in NYC, supply-side may just be the deal maker.

But the real joke is that these “so-called” tax breaks are being offset by enormous government spending and U.S. debt increases – the two biggest spenders of all time have been Ronald Reagan and George (Dubya) Bush.

Remember when the tax cuts were enacted. Just before 9/11. Over the past 6 years the revenues might have been greater but the timing of the original cut at a time when the economy could have taken a different path might have made a difference. You can argue about continuance of the cuts but I think most economists agree that the timing of the cuts in the face of a uncertainty from 9/11 did help the economy in the short term.

Approx. 50% of households pay NO Federal Income tax.
So, the politicians (esp. the dem cong) tax the rest of us to buy the votes of this 50% with “free” government handouts.

And you people are worried about the effect of supply side.
You’re examining a fly and ignoring the pink elephant.

for Barry B. the truly rich are rich only because of the government. Do you think that Gates would be so wealthy if he had to personally shut down everyone copying windows?
back to the thread: my vote is a resounding no, supply side in the current situation is a fraud. Supply side works only when the private sector is able to put the capital freed up by tax cuts to better use than the government (last time was probably 1860??) For the last two decades good companies have been generating a steady flow of profits — they have unable to reinvest them into anything remotely productive. If America were advancing strongly enough to reach the future capital would be extremely expensive.

The best comment so far was that of the restauranteur who worked his butt off and created nearly 40 jobs.

Look, economists (tenured and non-tenured) and non-economists on here can debate this particular issue until the cows come home.

It all eventually comes down to this fundamental fact.

Who does a better job deploying money/capital in the economy? The government? Or the market?

If your answer is the market — and I am sure even some of the non-tenured economists believe — then government should tax as little as possible. We should never concern ourselves about whether the government is getting enough revenue, because it should get as little as possible.

Simple.

There is no supply side. It’s a lie.

An economy is created from supply and demand. Creating more supply doesn’t create more demand, so the economy doesn’t grow.

Demand is created when people have money to spend. ALL people, not just the rich ones.

Republicans think they can ignore all but the rich. In the short run, perhaps. But in the long run, yes we are all dead – but so is the economy.

Every time tax rates have been cut – The 1920s, The 1960s, The 1980s and the early 2000s – revenue has increased far more than expected. Is it just possible that people taken as whole actually do respond to incentives? The incentive in this case being to keep more of what they earn. I remember Carter saying during a debate with Reagan that a tax cut would only lead to inflation – or specifically MORE inflation. Using that logic, his problem was that tax rates weren’t high enough. Does anyone seriously believe that higher tax rates were the answer to 1970s stagflation?

Dissent :The idea that you get the gov you deserve is stupid due to the idea that everyone instantly becomes a unified thing after a vote. There are aspects of democracy that are less than ideal. If I vote against a candidate or a policy and have to be force fed a result that I might oppose, like a duck being forced fed so that their liver can make a better foi grasse, does that mean I deserve the result? Consider that the loosing party in the last presidential election represented by dividing the population by % a greater population than any european country. The people who vote for something get the results they deserve the loosers just have to accept the results for better or worse.

We need a politcal do over.

Also none talks about the interest on the national debt. How much of every fed dollar of tax goes into a foreigner’s pocket? The money borrowed as a percentage of the whole which went to the wealthy who as previously mentioned do not tend to spend it but rather invest it, since foreign markets have gone up far faster than US markets what should I think of that. The Iraq war has not proven itself to have been a very good investment. If I borrow money it is either for an absolute emergency or it should be to develop something that will give me a greater return than the interest I am charged. We have not done that. If we got rid of the deficet, then a tax cut would be ok since we would have extra money or we could do like Singapore and now China does and invest it.

Brian B, I think you did a good thing and worked your ass of to it, the question I have is could you have paid someone 125k or lets say 150k to do your job and spend your time with your family? Just a concept not an insinuation. That what Barry R does he gets Kudlow and Laffler to do all the work!

Every time tax rates have been cut – The 1920s, The 1960s, The 1980s and the early 2000s – revenue has increased far more than expected.

The argument advanced by supply-siders is not that revenue would be higher than expected, but that the economic growth would increase enough that tax revenues would be higher with the cuts than without.

That isn’t what happened in the 1980s and 2000s. I’m not familiar with the tax cuts of the 1920s, but I’m not sure I’d invoke that decade if I were advocating for a policy used in that period.

Republicans start with the answer they want and then build the argument to support it. Machiavelli and the Sophists of Ancient Greece would be proud.

Except for Ron Paul, none of them have any credibility. They are genocidal maniacs who spend money like a drunken sailor in a whore house (or an airport bathroom perhaps). They make Nixon look like a communist.

The worst part is this huge IOU in lost taxes gets added to the IOUs for the Iraq War, Social Security and Medicare.

Who eventually has to pay the bills? OUR CHILDREN thats who!! Exxon and Halliburton are getting rich and our children will inherit the wind.

What is the market? A structured collection of people who vote with dollars.

What is the government? A structured collection of people who vote with ballots.

To hear supply-siders or other fundamentalists one would think one was god and the other the devil herself.

So let’s see, Europe is now growing faster than the USA so perhaps we should assume higher taxes make for better markets?

No?

Well, China is growing faster than the USA, should we assume more government control makes for better markets?

No?

Did the Katrina debacle convince anyone that perhaps there might be such a thing as too little government? Or at least that it might be worth doing government well if you are going to do it at all and that it might be worth paying the cost for the kinds of professionals and resources capable of doing a good job at that?

Personally I prefer the hidden hand of capitalism to the hidden mind of socialism but I am not aware of any pure examples of either on earth and frankly both seem to work quite well in different combinations particularly when extremes are avoided.

So here’s a bigger dose of simple: Perhaps the vain attempt to create an economic theory making the case for one system’s clear superiority over the other simply evades the real issue, that it’s about values; and taxes actually have far less to do with a country’s wealth than they have to do with its sense of where markets might fail to adequately express the national will.

Those ruminations aside, tax cuts do not pay for themselves and those who continue to maintain they do are knee deep in that wide river of failed metaphysics that includes flat earth theory and phlogiston (no need to worry about drowning, the river only gets more shallow further on). As the (conservative) economist Greg Mankiw remarks, if a politician thinks tax cuts increase revenue why advocate spending restraint, why not just pay for new spending programs with more tax cuts? The (conservative) economist Andrew Samwick adds (http://tinyurl.com/2ebxas), “The question that I would like to have answered by any policy maker who voted for the tax cuts and believes that they have increased revenues is: Why did you make them so small?”

Republican supply side tax cuts are always accompanied by the creation of a credit bubble to stimulate consumption and, unfortunately, destroy savings.

During Wrongald Rayguns time, they (Alan Greenspan’s commission} doubled Social Security withholding which was used to cover some of the huge deficit created by cutting the revenue stream. That’s exactly what Bushco neo-facsists have done. I cringe when I hear the republicans selling SS disaster. They’re just looking for a way to cover the deficit.

Raygun/Cheney/Rumsfeldt/Bush also created the S&L real estate bubble as a means to stimulate demand. Sound familiar ?

Supply side economics ranks right up there with the flat tax and repeal of the un-earned income transfer (er inheritance) tax.

Yes – asset bubbles and extraordinary corporate profits are part of the package.

Keep on pointing out that the idiot emperor king has no clothes.

“Today’s WSJ gives some proof (yes, proof not ‘tenured economists’ analysis) that non-supply-siders like those at the CBO who provide static analysis have been under-predicting federal tax receipts over the last five years.”

Norm – you’re making a logical mistake – just because the CBO is bad at predicting tax receipts doesn’t mean that supply side/laffer curve economics works – it just means that the CBO is bad at predicting the future – which, as Yogi said, is hard. We only have to look at every other government report to know that just about everyone is bad at predicting….join the crowd.

Supply-side economics gives me a run-around
Is it a sure-fire way to speed things up
When all it does is slow me down.

Demand-side economics is likes a nervous magician waiting in the wings
Of a bad play where the heroes are right
And nobody thinks or expects too much. And Hollywood’s calling for the movie rights.

“Things must be as they may”
Shakespeare

And that “economic far right” thing is based on the premise that Bush, et. al. favor a minimalist government with funding inadequate to provide basic services. Based on what I saw during six years of the Bush Administration and a Republican Congress, such a premise is patently absurd. Maybe I’m slow, but I have a hard time seeing where Sarbanes-Oxley and a prescription drug entitlement fit in with mid 19th century lassez faire policies.

I think that the percentage that is perceived as “too much” can be the tipping point between a revenue-cutting tax cut and a stimulating tax cut, as some have noted.

That percentage is really not fixed by any magic formula, but is one of psychology of the moment/year.

It is not an argument to be made by a tenured economist but one of all the factors that drive government spending.

Simple things, like waging war, fighting floods, perhaps even battling locusts…

How can we be arguing about tax rates without questioning, quite simply, the complete idiocy of cutting taxes while waging a very expensive war? However we got into Iraq, we are there. However we are going to get out, it won’t be fast or inexpensive.

The only sensible response for a populace at war is to raise taxes, as that is one of the main reasons we pay taxes: our security and stability as a nation.

Somehow due to the one-sided nature of this war’s decision-making we, as a nation, are not paying for it. The Republicans won’t raise taxes due to some mechanical defect in their collective brains, and the Democrats won’t because “it isn’t their war”.

As a nation we are racking-up the bills but are not paying for them. Tax rates need to match reality, and the reality of the Iraq war has not been factored-in AT ALL.

“Approx. 50% of households pay NO Federal Income tax. So, the politicians (esp. the dem cong) tax the rest of us to buy the votes of this 50% with “free” government handouts.”

This oft-made observation is a double-edged sword. What would become of our economy, indeed our society, if we lowered taxes on the top 50% and raised taxes on the bottom 50% enough to reach some supposed level of greater fairness? With average folks’ budgets already tight and debt-dependent, it’s hard to imagine there’s much room for shifting the burden without fomenting some sort of revolution. Be careful what you wish for. The New Deal that econocons love to hate was very much for the benefit of the wealthy, as it forestalled far more severe socialist alternatives. You can cry about how unfair it seems, but it’s a lot better than being strung up by an angry mob.

“Did the Katrina debacle convince anyone that perhaps there might be such a thing as too little government?”

NYT had an excellent article this week about an aerosol hot ub sealant that was so toxic people were ending up in the ER. HD kept it on the shelves for 18 MONTHS. Repeat slowly after me: Regulation is GOOD. Consumer safety is GOOD. Financial oversight is GOOD.

I hope the next Prez is smarter than a brick and nicer than a junkyard dog. That pretty much means a Democrat, as far as an I can see, I am not filled with enthusiasm for either Clinton or Obama, but it seems to me that the deeply flawed Guliani is the best the GOP could nominate.

Of course we supply-siders believe in the Laffer curve. However, remember one part of the Laffer curve shows that increased taxes also increase government revenue. Then at a certain point further increases in taxes reduce government revenue. Problem is nobody really knows where that point is. It appears the Reagan tax reform really created incentives for production. The Bush income tax reductions were rather small and geared to a small number of tax payers at the top end. To be honest, it is not clear how those tax cuts fit with the Laffer curve and supply-side incentives given Fed easy money and global growth.

there are only two kinds of people in this world: those that benefit from government largesse, and the rest of us. I would gladly give anyone, rich or poor, a tax cut if it meant that these congressional assholes would stop spending money. if only the federal budget would grow inversely with the rate of inflation, just imagine how the Fed might behave?

rereading the transcript of J. Stewart’s interview with Greenspan, its quite amazing what Stewart got him to actually admit.

I think the idea that tax cuts raise more revenue CAN definitely be true. It depends on what the tax rate is before and after. A small marginal tax cut probably won’t deliver. But there isn’t a magic equation where for every % dropped you get x% more revenue. The tax cut is just one way to light a fire under the economy. It is the smaller tax bite from the larger economy that pays off.

I keep seeing posts that say no such thing happened under Reagan. How are you coming to that conclusion? Revenues what? DOUBLED? So how do you reach the conclusion that they would have more than doubled with no tax cut? Are you figuring out the revenues from the GDP for those years assuming a higher tax rate? If so, that’s nonsense. We wouldn’t have had the growth in GDP without the tax cuts.

This is kind of the mirror side of the static analysis that CBO does for figure out how much tax cuts will “cost”. If don’t correctly like Kennedy and Reagan did, the DON’T “cost”.

Regarding taxes and economy, simple relation – investor discount rates go up, investment goes down. Investor discount rates = Base Real Rate of return + Tax Premium + Inflation Premium.

Cut tax rates and the tax premium goes down, lowering investor discount rates, raising the NPV of investment projects, which results in more projects being accepted.

qed

The economy is like this mechanical analogy:

A gasoline aircraft engine has a manual device used to alternately enrich or lean the fuel being supplied to the engine. This is necessary as the changes in atmospheric pressure that occur upon climbing or descending cause changes in the concentration of atmospheric oxygen. Even before the advent of computer controlled automobile engines, these devices were not used on automobile engines since they generally functioned at a relatively constant altitude and atmospheric pressure. Their fuel systems were pre-adjusted for geographical sales.

Although counterintuitive, greater power is often produced by leaning an aircraft’s engine. In other words, by reducing the amount of fuel being supplied to the engine as the ratio of fuel:air mixture fed to the intake manifold. This is because the most efficient combustion (thus most efficient cost of motive power) occurs when the fuel:air mixture is adjusted for the oxygen content of the atmosphere.

Now to the economic relativity:

For every level of economic output (GDP), in the aggregate, and for every individual person’s private economic output, there are different levels of taxes that work most efficiently to reimburse government for its necessary services to those entities, while at the same time not destroying any entity’s opportunity to rightfully control and direct private property for the purpose of economic gain. That is, to rightfully maintain i-n-c-e-n-t-i-v-e.

Economic incentive is like the air we breathe. It has oxygen in it that when provided with the fuel of a social, physical and fiscal infrastructure, produces GDP. However, the infrastructure has real costs that are tantamount to the capital expenditure of a corporation that is the basis for its ultimate productivity.

One of the problems we have in our society is that we simply are unable to recognize the great disparity between the levels of leaning needed for individuals relative to their incomes.

The great defect of Supply Side economic theory is that it tends toward a perpetual policy of maintaining a too lean mixture (taxes too low) for all economic classes in the misguided belief that the economic engines of high income individuals need it as much as those of low income individuals do. As a consequence, often the increase in overall income tax revenue is erroneously cited as a witness to higher productivity, when in fact it actually raises the capital expenditure costs of replacing the infrastructure that permitted it.

Thus the productivity cited is, in reality, merely a temporary illusion.

I do believe that income taxes should be progressively applied, but not progressively as a linear function, but exponentially progressive (Brian B. – I understand and sympathize with your frustration). Even Warren Buffett understands the principle that billionaires are rewarded with a disproportionate level of public service infrastructure for which higher taxes ought to be due.

Ultimately, Supply Side economic theory makes use of fiscal policy in a manner that is the mirror image of Classical Theory’s utilization of monetary policy. Both of them ignore the event of an economic dislocation in which the supply of money loses its capacity for linear modulation of GDP.

Supply Side economic theory’s most extreme defect is its tendency to ignore the detrimental effects of u-n-r-e-s-t-r-a-i-n-e-d free-market capitalism. Subprime abuses of the housing construction and financing businesses are yet evolving examples.

I love how someone making $250k per year thinks the GOP supply side argument applies to or benefits them. Its almost comical.

One other question for the successful restranteur. How many of the 37 employees did you provide health insurance for or did you rely on the rest of us to cover your tab?

Listen, I am not criticizing your attempt to start a business and try very hard to make it successful. In fact I applaud your efforts. But until people like you realize that you are being played for fools by the same people you have been supporting you will get nowhere.

Strengthening the middle class, investing in infrastructure, the arts, and education will give you more opportunity to succeed than your blind faith in tax cuts for the ultra rich.

You are middle class, get over yourself already and support policies that actually help you and the rest of the country.

Lower tax rates are better for the economy than higher tax rates. End of story.

I just said:

In summary, most people who write of and speak of Supply Side Economics are ignorant and know nothing about the subject.

Addendum: Most people who support Supply Side Economics know little or nothing about it. They are embracers of Faith Based Economics, who feed off of each other’s misinformation in a sort of mutual admiration society, expressing Field Of Dreams Economics.

I vote for Eclectic’s post as the best!

WTF,

Intersting comment, However, If you read my post, I didn’t end up with $250K. After all the taxes I ended up with much less. And at the time living in Los Angeles, that wasn’t much. So now I was suppossed to offer health care for my employees? You mean the ones that worked for 3 weeks then quit without giving notice? Or the ones that would suddenly need a day off no matter what kind of situation I was in? Or the ones who resented me cause they thought they saw a successful business? When they had no clue how much time, energy, money I had invested. The restaurants were only storefront Pizza restaurants and those 37 employees were a culmanation of who knows how many people I hired. Interesting how posters feel compelled to complain before they have been in that type of situation. WTF, may I ask how many business’s you have started? I don’t want this to become personal but you do not have any idea how hard it is to start a business from ground up. I did not have any fortune to start this with. I levereged my home and took out my savings and almost went bankrupt within the first 6 months. I am sorry but wasn’t I due a bit of profit? Health care, wow, sorry I had so many issues to worry about finding health care for employees that worked only 20 hours a week, just wasn’t one of them. So I ask again how much is fair? BTW, I dont resent the system the government, or my employees but that was 1 expereince that I will never repeat. It was by all accounts a successful bussiness but when all was said and done the profit I had left over wasn’t worth it.

There is no efficient market or discounting mechanism. This is a rigged game for the benefit of the elite class. BenDover Bernanke is a stooge, and so are his fellow FED officials.

Daniel Gross shrinks supply-side economics to a single false proposition, which few supply-siders have ever propounded. Politicians will say anything that sounds good. But does the Club for Growth (supply-side enforcer) enforce the proposition? Does Grover Norquist? No, they do not.

Then it must be a liberal straw man, like “trickle-down.”

Supply-side economics means that the producers matter most in an economy. It is a broad attack on demand-side economics, which worries about the consumer’s “70% of GDP.” Supply-siders know that producers are 100% of GDP and are highly responsive to incentives. Consumers, by comparison, are placid cows whom policymakers may ignore.

~~~

BR: please supply a link for his — I cannot find it on Slate or Newsweek

Supply-side economics are Stalinist in nature: “Soviet Russia produce potatoes, Soviet people eat potatoes” *cocks trigger*

at some point on the curve a reduction in taxes probably does result in more economic economic activity and more revenue, but that point is probably way up there (taxes at 90% of income?)???

the argument is rather used because people WANT to hear that you not only can get something for nothing, but in this case you get something for SOMETHING: more revenue AND lower taxes.

it is simply irresponsible – later generations are going to think we had our heads up our butts, and it is primarily the baby boomer generation who is doing this to the country. …

Class Assignment #3 (30 points, due 10/17/2007):

Explain the concept of multivariate analysis to Larry Kudlow and like-minded “analysts.” Demonstrate proof that Kudlow understands your explanation by asking him about the role of monetary policy and government spending in stimulating economic growth.

Extra credit (20 points): Accomplish this within the next 1000 years……

These explanations are all great but doesn’t it come down to this???

Cut taxes and go to war. A war that has an Ambrams battle tank guzzling more gas than a 35-foot Grady White fishing boat… Do the math there.

Also, a 3 year old can understand why these tax cuts were not the best idea. Let’s use Candy.

A 3 year old boy receives 1000 pieces of candy for his birthday. His father allows him to eat three pieces per day and promises to put 1 back so the supply last longer. The kid’s stash will eventually run out.

I’m not saying the US will run out of money but is my point understood?

In spite of a great deal of hyperbole here, no one has provided a single example of where an increase in tax rates produced higher tax revenue or greater economic activity. While pointing the complexity of the economy and a multiplicity of factors can come together to produce higher tax revenue, not one example has thus far displayed the results of a tax increase of any kind. Therefore supply side economics may deserve a caveat, but how does the alternative stack up by comparison?

“Federal agencies have published similar statements regarding the effect of tax cuts on federal receipts. From the Congressional Budget Office’s 2007 Budget Outlook: “The expiration of tax provisions as scheduled has a substantial impact on CBO’s projections, especially beyond 2010 when a number of revenue-reducing tax provisions enacted in the past several years are slated to expire,” the report says. “Almost all of the expiring provisions reduce revenues.”

The Joint Committee on Taxation estimated that the 2001 tax legislation (the Economic Growth and Tax Relief Reconciliation Act) would cause government revenues to be 107.7 billion less than they would have been in the absence of the legislation in 2004, 107.4 billion less in 2005 and 135.2 billion less in 2006. The committee’s estimates for the effect of the Jobs and Growth Tax Relief Reconciliation Act of 2003 were that it would reduce otherwise projected revenues by 148.7 billion in 2004, 82.2 billion in 2005 and 20.7 billion in 2006. The JCT makes its comparisons against the Congressional Budget Office’s receipts baselines.

The projections were not off the mark. A look at the committee’s estimates of total federal revenue including the effects of the 2003 tax legislation versus the actual federal receipts shows that the JCT’s projections were higher than actual revenues in 2003 and 2004 and slightly lower than actual receipts in 2005.

Also, Rob Portman, director of the Office of Management and Budget, and Ed Lazear, chairman of the Council of Economic Advisers, told journalists at the Washington Times last October that the tax cuts prompted economic and stock market growth. But, the paper reported, “they conceded that the tax cuts…cut deeply into government revenue.””

http://www.factcheck.org/taxes/supply-side_spin.html

I’ve noticed in a number of the comments that there is still the misconception that tax cuts lead to increased revenues with the Reagan 80’s being pushed as the example. To me that is like George Bush turning a budget surplus into a major budget deficit and then getting credit when over time the deficit shrinks from $450 billing to $200 billion– you’ve effectively lost sight of the fact that he started with a surplus.

It is no mystery that tax revenues invariably increase over time, tax cut or no tax cut and especially during periods of economic recovery, but the real measure of whether tax cuts increase revenue is whether the government brings in more money than it would have if the tax structure had remained as it was which hasn’t happened in any of the cases cited thus far.

David,

“Why are more tax revenues a good thing?”

Because massive federal budget deficits are a bad thing.

“Supply-side or whatever, smaller gov’t=better gov’t. You want to balance the budget? Cut taxes AND spending for once, and let’s start with ag subsidies and the Dept of Education. Oh, and the Surgeon General’s office”

Typical pie-in-the-sky thinking. To “Cut taxes” would merely decrease federal income tax revenue further. As to cutting spending, currently, federal government revenues only cover about 68% of expenditures, primarily because of a decline in federal income tax revenue as a result of previous tax cuts. Almost two-thirds of every dollar you pay in federal income taxes goes to pay for just the Military Industrial Complex and the INTEREST on the Reagan/Poppy Bush/Bush Jr federal debt.

You think you can “balance the budget” by cutting spending ? Please present a detailed list of cuts.

You can’t get there from here.
.

Good God! I think it a bit revisionist to suggest that the so-called “Supply-side” school of economics is grounded mostly in a “bring back the gold standard” and “producers are most important” framework, although both policy prescriptions were well known at a time in our history when major economic depressions and panics were commonplace. Then again, I’m pretty sure the economics profession doesn’t even recognize a so-called “supply-side school” of economics anymore than you can find a reputable economist who calls themselves a monetarist. However, you will find the Kemp’s, Murray’s, Wanniski’s and even Kudlow’s of the world and an entire political movement and party that for the last 30 years has prescribed tax cuts as a panacea for every social, economic and political ill that has beset the nation. Now tell me again about the people in favor of the gold standard and a return to excise taxes, etc?

Who does a better job deploying money/capital in the economy? The government? Or the market?

Posted by: SoNotintheKnow | Oct 10, 2007 3:08:43 PM

The thing is, and this was Chait’s point, when it comes to optimal taxation policy it is not a zero sum game between government and non-government.
The key being that for certain spending catagories it is more economically efficient to pay for them via taxation and for other spending categories it is better to leave it to private industry.

Case in point, the restaurant owner. It would be more damn efficient economically if every entrepreneur in America could start or buy a business knowing that the employee medical costs are off the table, covered through taxation for all employees.

In fact this is the tragedy of the zero sum Republican position – all taxes must be eliminated all the time. It prevents intellegent discussion of how to optimize the taxation system so that it is most favorable to employment creation and capital formation, whithout defunding the government so much that deficits balloon, bridges collapse and schools deteriorate.

My optimal mix is the Nordic model. Progressive personal and consumption taxes with low corporate taxes and broad welfare coverage. To my mind it’s more optimal that what exist today in America: low personal, no consumption, high corporate tax and low welfare coverage. Frankly the USA’s taxation/ spending model is busted and should be reformed but the no taxation ever people make that impossible; and so the Titantic slowly takes on water while smaller more nimble boats sail by.

Brendon,

Your two linked references:

First one, I can’t link to. Could you run your link through tinyurl.com and bring it back?

Your second link contributes much to this discussion.

Barringo… Wonder why you haven’t taken that letter and posted it entirely?…

Do it!… and we’ll have a corner to hang our hats on in this worthy debate. Or… f’it!… and ratchet on.

We’re overdue for an Apple wetdream anyway.

Barry wrote: “I am curious:…”

That’s rhetorical curiosity i’m assuming.

Of course “supply side” is nothing more than Republican boilerplate boondoggle & propaganda passed down from their Corporate paymasters in exchange for campaign $$$.

Nothing more than the fat feeding themselves w. a promise (lie) to the skinny that they can be fat & geedy too.

Taxes are a hallmark of any civilized society. Ya want a “Libertarians” paradise? Try Somalia.
They have low taxes as well.

how’s the rule of law in Somalia? oh yeah, need that just a wee bit don’t we.

lest we all forget who mr. chait is – here’s his “nonbiased” credentials – https://ssl.tnr.com/p/docsub.mhtml?i=20030929&s=chait092903

again – i don’t know if the laffer curve works, but i do know money is better spent by the people who earn it.

“Tax rate cuts have never stimulated the American economy, never increased federal income tax revenues, and never created a net increase in the American workforce. Tax rate cuts have repeatedly led to economic slow-downs or recessions, and/or massive federal deficits and debt, and/or declining Standards of Living.”

You forgot the part about converting all capitalist nations into socialist nations.

We know that brion really really hates Libertarians – so much that he/she compares them to those committing genocide. The job of refuting the opposing argument through facts is left to others. It is enlightening to know, however, that only the Republicans are supported by corporations.

We know that brion really really hates Libertarians – so much that he/she compares them to those committing genocide. The job of refuting the opposing argument through facts is left to others. It is enlightening to know, however, that only the Republicans are supported by corporations.

Supply side smacks more of soviet centralized planning than of free market. The belief seems to be “If you supply enough of something, the price will become low enough that someone will find marginal utility for it and buy it.” Carried too far, it is basically a call to reduce the risk of investment which results in misallocation of resources since the investor’s downside is reduced, they are not motivated to be careful.

justin:
the rich are represented better by Coors, Scaife, Templeton, Olin, Walton, Hilton, DeVos (& Prince of Blackwater fame)[ see: http://www.mediatransparency.org/funders.php%5D

jag:
OOOh, quote taxfoundation.org, Now there is an unbiased shill for the rich. The top 1% pay most of the taxes because they get the greater majority of the income. jeesh!

Brian B.
It’s great that you were able to be rewarded with an upper middleclass income for working so intensely. And I’d wager you sold those restaurants for a pretty penny. And I sympathize with anyone who has to deal with buracracy, but quit your whining. My household income is similar, & I don’t feel rich either. But I do feel insecure which is how the wealthy like it. Without society (& taxes) your hard work would have been hunting, chopping wood and fighting so that you could live in a hut.

The Dirty Mac,

“You forgot the part about converting all capitalist nations into socialist nations.”

You forgot the part about you licking Hitler’s boots.

(See, I can make an incongruous remark as well !)
.

Brian B,

I understand $250k was gross personal income as you stated and according to your tax figures you walked with approx $100k/yr. Not great in Cali but also not bad either. In your case you decided the hours and headaches were not worth it and I don’t fault your decision. I made a similar decision with a business I had started that imported clothing from S. America. Profitable yes, worth my time no. I totally agree starting a business is difficult. I had finance and accounting degrees and still found running the numbers difficult. I often wondered how anyone could figure it all out.

But I look back on this as a learning experience and not as an argument in favor of GOP supply side economics. The experiment emphasized to me the importance of a good idea and a good business plan.

The restaurant business is notoriously difficult. Did no one tell you this? Did California really need another Pizza business? Should California have lower tax revenue just so you could make more money and in turn provide low paying, part time, service industry jobs to Californians with no health-care, no retirement plan, etc? There is a cost to society incurred in letting you run your pizza business and you pay this cost through taxes, liquor licenses, health & safety requirements, etc. At the end of the day, it wasn’t worth it. But do I as as a fellow taxpayer want to lower tax revenue that goes to pay for roads, public education, health & fire inspectors, social safety nets, etc., so that more Pizza entrepreneurs can make more money providing low pay, service industry jobs? No.

Do I applaud your hard work? Yes. But repeating the mantra of lower taxes and blindly supporting GOP policies that do nothing for you, for real business opportunities, and for the rest of us is extremely short sighted.

wtf-saved the best for last….
Best post in thread award

Winston Munn wasn’t bad either (as usual)…..

Eclectic,

First, in regards to your earlier post referencing economic incentives, the American RightWing contends that high marginal tax rates on the wealthy are a disincentive to investment, whereas low tax rates spur investment and thereby increase economic growth. I’d say the data supports the exact opposite. That when tax rates on the wealthy are low, most are content to lazily collect relatively safe returns from stocks, bonds, and other normal investments. However, when tax rates on the wealthy are high, in order to retain their accustomed level of income, they have to seek out higher rates of return with riskier and less standard areas of investment, resulting in some losers but also some very big winners, and this is the real engine of economic growth and breakthrough advancements.

As to taxation, it depends on the mix of taxes.

The first thing I would fix is FICA. Lift the cap, apply it to all income, and lower the rate down to the low single digits. It would eliminate the regressiveness, and bring in lots more revenue for those who claim the trust fund is going broke (which it isn’t).

The second thing I would fix is the Capital Gains tax. We only have an Estate Tax because of the Capital Gains death exemption. It’s the birth canal of dynasties. Most other nations don’t have an Estate Tax because they don’t have a death exemption on Capital Gains. Additionally, capital gains should be taxed at the same level as ordinary income. There is no data to support the claim that lower rates spur investment, and they merely (once again) heavily benefit the wealthy. Or, one could eliminate both the Capital Gains tax and the Estate Tax and replace it with a Wealth Tax, which would be more difficult to game.

Then you could get around to progressive income tax rates. If the rates were relatively flat, you could have many multiple rates in small increments to avoid the angst of bracket bumping, and it could still be filled out on one side of a half a sheet of paper.
.

No one ever wants to be pinned down on exact numbers and everyone knows they don’t know what the ideal number is but it is helpful to think about our ultimate goal.

Is it right try to raise as much money as possible for the government?

It is obvious that we are going to make a mistake one way or another either the rate will be to high or to low which is preferred?

All I see here are the broken pieces of post modernism. Like the fellow who argues that pizza restaurant has costs….in roads and such. No, the real cost is if there’s no pizza restaurant.

As far as it being revisionist to suggest that supply side economics is founded around stable money and using the producer as the fundamental unit of economic analysis, that’s just cynical.

WTF,

thanks for your relpy. Remember did I ever mention anywhere that I thought lower taxes was the answer? That might be my implications but my original questions are still there, how much is fair? Is it fair to tax an owner 60%? I don’t know, but for me the answer was no. After all was said and done $100K yr for all the hours and headaches wasn’t worth it. Yes, I knew the pizza business was tough in California, and many went out of business while mine did flourish, so I must have been doing something correct. Now, I tend to differ with you a bit, who or what says all jobs need to be high paying, health care, benefit jobs? My employyes (which I did appreciate and did reward in other ways)needed only basic skills to make and deliver pizza. Basic skills, basic pay. The profit margin in restaurants in very small, so to add in health care, and other benefits would wipe out most small restaurants. In a perfect world that would be great have these benefits, but then I would need to raise my prices, and somewhere in there I have a feeling my customers wouldn’t appreciate that, even if I explained to them it was because I had a great employee package. Once again I am not writing these posts from the sidelines, I was in the game and there needs to be some type of reward for people that take that chance of time, money, energy. thanks

VJ: My comment was indeed uncalled for. Going back to the original quote, you say “never” a bunch of times. “Never” is very strong. Also, it does logically follow that if all tax cuts are bad, then some form of very highly redistributive system is preferred. Correct me if I’m wrong. As far as Hitler goes, he’s not much different than the communists except for the branding.

With respect to brion, witless or not my comment is right on the mark.

“How Supply Side Trickled Down”

See Bruce Bartlett at http://www.nytimes.com/2007/04/06/opinion/06bartlett.html?_r=1&oref=slogin

WTF,

great post!! I am done too..

The Dirty Mac,

“Going back to the original quote, you say ‘never’ a bunch of times. ‘Never’ is very strong.”

It accurately depicts reality.

“Also, it does logically follow that if all tax cuts are bad….”

Never made such a claim. “Tax cuts” can and do have their place. The reference was to tax RATE cuts (which by default heavily favor the wealthy), as purported by the American RightWing as per so-called ‘Supply-Side’ propaganda.

“then some form of very highly redistributive system is preferred.”

Don’t know where you would get such an idea. I would prefer re-redistributive. We had a redistribution of wealth and income, from the Middle-class and Working Poor UP to the wealthy and corporate in the early ’80s and again starting in 2001 (with some reversal during the middle ’90s).

“As far as Hitler goes, he’s not much different than the communists except for the branding.”

Hardly, as the fascist Nazis were RightWingers, while Communists are LeftWingers. I assume you meant to reference Totalitarianism.

“With respect to brion, witless or not my comment is right on the mark.”

Except that nothing posted had even the remotest connection to “Socialism“. Perhaps you need to check your definitions.
.

“Hardly, as the fascist Nazis were RightWingers, while Communists are LeftWingers.”

I don’t recall ever reading about the Hitler tax cuts or deregulation of industry. But lets go to the source:

“There is more that binds us to Bolshevism than separates us from it. There is, above all, genuine, revolutionary feeling, which is alive everywhere in Russia except where there are Jewish Marxists. I have always made allowance for this circumstance, and given orders that former Communists are to be admitted to the party at once. The petit bourgeois Social-Democrat and the trade-union boss will never make a National Socialist, but the Communists always will.”

VJ,

“The early 1960s under President Kennedy, and the later 1990s under President Clinton. If memory serves, it was an existing 91% top rate and an increase to 39.6%, respectively.” end quote.
—
I guess that’s why Kennedy’s tax cut has gone down in urban legend, because the high taxes you mentioned were so effective in stimulating the economy and keeping it stim’ed. That one was on your tribe’s tab…

The late 90s came from a massive tech boom that was more responsible for the economy, then, than is another member of your tribe, while that chief was staying out of Greenspan’s accommodatin’ ways. Agreed… taxes were high then too. I’ll give you that much, but those aren’t two strikes… at best, 1 and 1.

And more: “But it’s never happened. GDP has declined every time. Three strikes and yer out.” end quote.
—
Well, CBO disagrees with you, at least in part, and they’re no advocate that I can see for Sup-Side… and tax cuts (as opposed to Hoover’s tax increases in the kind and gentle 1930s) are quite likely to be accompanied with declines in GDP, because that’s what the whole happy enterprise is all about at those times, whether effective or not. Ball – high – and outside… count goes to 1:2.

I think as an umpire, you ought to shift that political mask around a bit… it’s blocking your vision.

No blood brother I… to nary a tribe, save the almost extinct Objectivologist Band of the Show-mes.

The Dirty Mac,

The fascist Nazis routinely referred to their political opponents as “Leftists”, “Socialists”, “Leftist-Socialists”, and “Communists”, even when they were none.

Sound familiar ?

“39.6% would not qualify as ‘highest’ as the top rate was lower IIRC than the entire post-war era except for the period 1986-1992.”

Never claimed it was the highest. I posted:

“…two greatest periods of economic prosperity in the past more than one hundred years when federal income tax rates were at their highest”

The first period was what you mentioned, and the greatest prosperity during that period was when the top rate was still 91% during the ’60s. The second period of greatest prosperity was with the second highest rate of 39.6% which occurred during the ’90s. Couldn’t be any simpler.

“Early Reagan the top rate was still around 50% and Kemp-Roth was phased in over three years.”

You must have forgotten that the tax rate cuts were retroactive (for the first time in history), and there was negative economic prosperity during Reagan’s terms.
.

VJ,

you are right the Democrats are fantastic!! There does that make you happy? I am a Republican, but even I can see fault with my own party. Unless I am missing something, the Democrats can do no wrong Because of the “Clinton years”. HHHMM, I dont know how he got that Republican congress to go along with him? oh well, you will have your time in the sun again, and I am afraid politics aren’t so easy anymore..

Brian,

“you are right the Democrats are fantastic!! There does that make you happy?”

Why would it ? I never advanced such an argument, not to mention that the discussion was in regards to whether or not so-called ‘Suppy-Side’ economic policy had any validity, which history plainly displays, it does not.
.

“The fascist Nazis routinely referred to their political opponents as “Leftists”, “Socialists”, “Leftist-Socialists”, and “Communists”, even when they were none.

Sound familiar ?”

That must have been when the National Socialists (obviously a name meant only to fool people) tried to push through their tax cutting and deregulation agenda.

“The second period of greatest prosperity was with the second highest rate of 39.6% which occurred during the ’90s.”

How does Clinton’s capital gains tax cut for the Billionaires fit into this?

“You must have forgotten that the tax rate cuts were retroactive (for the first time in history), and there was negative economic prosperity during Reagan’s terms.”

I certainly forgot the latter.