Posting Towards Gomorrah

[Sidd Finch]

Originally posted by Tyrone Slothrop
As Burger said, it went to revenues, not to spending. The Republicans of the 1980s had economic snake oil to justify cutting taxes, but they didn't think about the possibility that you might cut taxes without also cutting spending. It's going to take an economic snake oil for the new millenium to also explain how you can cut taxes, spend more, and watch deficits disappear.

Oh, please. Don't give me that "spending matters" bullshit. Next you'll say that we'll have to pay the debt back.

[Spanky]

Originally posted by Mmmm, Burger (C.J.)
That's not saying much, because supply siders always say taxes should be cut.

That is because, according to the Laffer curve, we are taxing way above the optimal point right now.

Originally posted by Mmmm, Burger (C.J.) BTW, if supplier siders made their argument only when taxes were above t* on the Laffer curve, they would never be making their argument.

?????. Don't you mean below?

Originally posted by Mmmm, Burger (C.J.)
Let me distill my point this way, because it would likely save us both some time:

You are making a political argument for lower taxes that has proven convincing to a sufficiently large percentage of US voters to keep republicans substantially in power for the last 25 years. That argument may or may not be based on mainstream economics arguments, which are the ones I am presenting in rebuttal, but that does not really matter, because americans don't vote on mainstream economics arguments but rather on pie-in-the-sky plans sold to them by both democrats and republicans.

I was arguing that only this:

1) The fact that we do not have as much revenue now as we did before the Bush tax cuts does not disprove Supplie Sider theory. In addition, the number we are looking out is gross revenue and not a percentage of GNP.

2) If you agree that the Bush tax cuts increased growth (and thereby pulled us out of the recession) then you are agreeing that they were a good move from an economic perspective.

Originally posted by Mmmm, Burger (C.J.)
You can keep up with the political salesmanship, and it will probably win some votes outside of this board. But it's not going to win a serious argument with anyone who has a decent understanding of actual economics, fiscal policy, and monetary policy.

I am not making political salesmenship. I was refuting poitical salesemenship that was in that article. Can you take a direct quote of anything I have said and show my why it is political hyperbole. Everything I have said is based on basic economic theory. That article made ridiculous claims, was blindly partisan, and was written in ignorance of basic economic theory. Do you disagree with that?

[Tyrone Slothrop]

Originally posted by Spanky
I was arguing that only this:

1) The fact that we do not have as much revenue now as we did before the Bush tax cuts does not disprove Supplie Sider theory. In addition, the number we are looking out is gross revenue and not a percentage of GNP.

I gather you acknowledge that so far, the Bush tax cuts have been a net loss for government revenues. What needs to happen to disprove what you call the Supply Side theory? If it not after a few years, how many years do you need to wait before you can be sure that foregone taxes have not been made up for by the additional revenues due to increased growth?

2) If you agree that the Bush tax cuts increased growth (and thereby pulled us out of the recession) then you are agreeing that they were a good move from an economic perspective.

Do you see any cost to the Bush tax cuts? Is it possible in your mind that they increased growth and yet were not a good move from an economic perspective?

[Spanky]

Originally posted by Mmmm, Burger (C.J.)
No. I explained this last week. Laffer's curve hypothesized that there is a tax rate, t*, at which revenue is maximized. If the current tax rate is greater than t*, reducing the tax rate will increase revenue, through increased production/earning.

It is applicable regardless of whether there is a deficit--it goes only to revenue, and not to spending.

The key statement you make that refutes your whole point is "regardless of whether or not there is a deficit". Stating that the deficit does not factor in is making a very strong statement on the deficit. Most economists argue that the deficit should have a strong influence on the equation where Laffer says it does not. In other words, he strongly discounts the effect of crowding out, which is where most economists have a strong disagreement with him.

Originally posted by Mmmm, Burger (C.J.) You are ascribing far more to Laffer than he himself claimed. "Growing out of the deficit" is a handy mantra that invokes principles of supply-side economics and the laffer curve, but is not, strictly speaking, necessarily supported by either of those approaches.

Wrong. Laffer proposed this idea to Reagans people. At the time the country was running huge deficits. Laffer argued that we were above the t* and therefore cutting taxes would increase revenue. Other economists argued that the deficit was already crowding out growth and that a tax cut would further increase the deficit, crowding out even more investment, and therefor would not produce the growth needed to balance the budget. The other economists argued that by balancing the budget with tax increases, we would reduce the crowding out caused by the deficit and thereby increase growth. Laffer said that the crowding out was not that big of a deal and would not effect his curve.

His tax cut would cause growth that would increase revenue and therefore would eventually balance the budget which would eventually reduce the deficit. Thereby we would grow our way out of the deficit. That was the basis of his argument.

[Mmmm, Burger (C.J.)]

Originally posted by Spanky
That is because, according to the Laffer curve, we are taxing way above the optimal point right now.



?????. Don't you mean below?

No, we are below t* and have been at least since Reagan's tax cuts

I was arguing that only this:

1) The fact that we do not have as much revenue now as we did before the Bush tax cuts does not disprove Supplie Sider theory. In addition, the number we are looking out is gross revenue and not a percentage of GNP.

nor does it prove it. all it proves is that when spending exceeds revenue we will have deficits.

2) If you agree that the Bush tax cuts increased growth (and thereby pulled us out of the recession) then you are agreeing that they were a good move from an economic perspective.

no, that's not necessarily true. Monetary theory, which has been shown to be valid at least in teh short run, posits that by increasing teh money supply, the economy will enjoy a short-term boost, but in the long run inflation results. Indeed, it may be as accurate to say that the Greenspan loose money policies of the early 2000s had more effect on growth than the bush tax cuts. but now it's time to pay the piper, with higher interest rates.



I am not making political salesmenship. I was refuting poitical salesemenship that was in that article. Can you take a direct quote of anything I have said and show my why it is political hyperbole. Everything I have said is based on basic economic theory. That article made ridiculous claims, was blindly partisan, and was written in ignorance of basic economic theory. Do you disagree with that?

I do disagree with it being based on basic economic theory, because it's not. Unless by "based" you mean "can arguably find limited and qualified support for limited aspects of the policies in economic theory."

[Shape Shifter]

Originally posted by Spanky
The simplistic statment that growth is good and is what you are looking for is not wrong. If you cut the taxes there is no way that the effects will probably kick in the first year. So it will take a while for you to increase to the 5%. In addition, the point you are leaving out is the deficit or spending. If you cut spending, and you cut spending on transportation and education (or law enforcement), then you will decrease growth. If you don't cut spending, but increase the deficit then there will be crowding out. The government will borrow a lot of money to pay the deficit, and that money won't be available to investors for buying factorys and such. That will also decrease growth.

Some tax cuts don't encourage growth. If you cut the capital gains tax, that won't stimulate the economy (in my opinion). So the key is to cut taxes in such a way to stimulate growth, but at the same time not hamper government programs that help growth and not increase the deficit to the extent that it will hurt growth (or that it will hamper growth more than the tax cut growth brings in).

But in the end if you can cut taxes and sustain five percent growth for a long period of time it will be worth it. Growth means everyone will be wealthier, you will have more revenue for schools and infrastructure and you can have lower tax rates.

So over the long run you do whatever you can to maximise growth. You avoid deficits not to be fiscally prudent, but because deficits hamper growth. Everything is done to maximise growth.

What does any of this have to do with the Bush tax cuts?

[Mmmm, Burger (C.J.)]

Originally posted by Spanky

Wrong. Laffer proposed this idea to Reagans people. At the time the country was running huge deficits. .

Oh, the irony!

[Sidd Finch]

Originally posted by Spanky
Wrong. Laffer proposed this idea to Reagans people. At the time the country was running huge deficits. Laffer argued that we were above the t* and therefore cutting taxes would increase revenue. Other economists argued that the deficit was already crowding out growth and that a tax cut would further increase the deficit, crowding out even more investment, and therefor would not produce the growth needed to balance the budget. The other economists argued that by balancing the budget with tax increases, we would reduce the crowding out caused by the deficit and thereby increase growth. Laffer said that the crowding out was not that big of a deal and would not effect his curve.

His tax cut would cause growth that would increase revenue and therefore would eventually balance the budget which would eventually reduce the deficit. Thereby we would grow our way out of the deficit. That was the basis of his argument.

And we went from "huge" deficits of $74BB in 1980 to deficits of $208BB in 1983.*


*I chose that year because it is just before Reagan started raising Social Security taxes to mask, somewhat, how obscene his policies were making the deficit.

Of course, there was lots of growth. The 1980 deficits were 2.7% of GDP, while the 1983 deficits were 6.0%.

[Spanky]

Originally posted by Tyrone Slothrop
As Burger said, it went to revenues, not to spending. The Republicans of the 1980s had economic snake oil to justify cutting taxes, but they didn't think about the possibility that you might cut taxes without also cutting spending. It's going to take an economic snake oil for the new millenium to also explain how you can cut taxes, spend more, and watch deficits disappear.

Yes and electricity seemed like magic to a ignorant pygmy tribesman. There is no question that Supplier Sider theory will work in certain circumstances, whether we have had those circumstances and it has worked is open to debate. But if you don't understand how cutting taxes in certain situations even with increase spending will lead to increase revenue, you are simply not very bright.

[Sidd Finch]

Originally posted by Shape Shifter
What does any of this have to do with the Bush tax cuts?

It helps Spanky discuss something other than the ever-growing disaster in Iraq.

[Sidd Finch]

Originally posted by Spanky
Yes and electricity seemed like magic to a ignorant pygmy tribesman. There is no question that Supplier Sider theory will work in certain circumstances, whether we have had those circumstances and it has worked is open to debate. But if you don't understand how cutting taxes in certain situations even with increase spending will lead to increase revenue, you are simply not very bright.

There is also no question that socialism, exercised properly and under correct conditions, will work to create a dynamic, happy society. Whether we've seen the proper exercise or the correct conditions, or ever will, is open to debate.

[Spanky]

Originally posted by Greedy,Greedy,Greedy
Yes, you are wrong. Also, through the 19th century, much of the government's income was also from land sales.

If you want to understand the 19th century's economic history better, besides a quick read through of some material on Alexander Hamilton and on the debt from the Revolutionary War, you may want to look up "American System" and "National Bank", since much of the debate in the first half of the century focused on these terms.

Anyone who said this when I said we have run deficits for most of our countries history:

"Cite please.

Burger has it exactly right. And it has been true for most of our nation's history - from the Continental Congress on.

Do we have to give you a lesson in economic history, too?"

Should not be lecturing people on history. What you said was moronic and I was polite. I knew about our consistent surpluses uptil Wilson in junior high school. Now I will be stop being polite. Your statement was idiotic and showed a complete ignorance of American economic history. I was not wrong. We did run high tariffs and they did contribute greatly to our revenue. So did land sales. And we had surpluses.

What I said was a 100% accurate and what you said was a 100% wrong, and you have the audacity to lecture me on nineteenth century economic history?

I will match my knowledge of economic history of the nineteenth century against yours any day.

[Greedy,Greedy,Greedy]

Originally posted by Sidd Finch
And we went from "huge" deficits of $74BB in 1980 to deficits of $208BB in 1983.*


*I chose that year because it is just before Reagan started raising Social Security taxes to mask, somewhat, how obscene his policies were making the deficit.

Of course, there was lots of growth. The 1980 deficits were 2.7% of GDP, while the 1983 deficits were 6.0%.

Ignore the facts - don't you agree that something called supply sider economics by some, but not all, people can, occassionally, with the right assumptions, and given the right conditions, in the abstract, result in growth (measured in a particular way)?

Or are you ignorant?

[Sidd Finch]

Originally posted by Spanky
I will match my knowledge of economic history of the nineteenth century against yours any day.

ooooh, smack. Did pipe dreams work any better then?

(And since cocktail napkins weren't invented yet, how did the dreamers document them?)

[Tyrone Slothrop]

Originally posted by Greedy,Greedy,Greedy
Or are you ignorant?

Speaking of which, empty your d***ed PM box.