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Tilting at Windmills

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February 7, 2006
By: Kevin Drum

TAXES AND GROWTH....Captain Ed thinks E.J. Dionne slipped up today when he claimed that George Bush's 1990 tax increase helped to "set off a decade of fiscal responsibility and exceptional economic growth":

Dionne leaves out two important points. The first fact omitted is that the tax increase in 1990 resulted in a sudden recession....In fact, the increased rates flattened tax receipts; it did not result in any significant increase to the Treasury.

That's a remarkable thing, isn't it? A tax increase signed in November was apparently the cause of a recession that had started four months earlier. Somebody tell Einstein.

In fact, Dionne is correct. Bush Sr's tax increase came after the 1990 recession had already started, and it was the recession that pushed down tax receipts. When the recession ended, Bush's tax increase helped drive up revenue. Bill Clinton's subsequent 1993 tax increase drove up revenue even further, and that, combined with a good economy and some fiscal discipline, finally resulted in a balanced budget five years later.

Tax increases make tax receipts go up and tax cuts make them go down relative to where receipts would be if no action had been taken, of course. The effect isn't obvious if you increase taxes during a recession or cut them during an expansion, but it's true nonetheless. Remember: we didn't grow our way out of the Reagan tax cut of 1981. We taxed our way out of it.

Kevin Drum 1:45 PM Permalink | Trackbacks | Comments (197)

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Comments

Umm, Kevin, "Captain" Ed is a fucking moron. I thought everybody already knew that.

Posted by: Vladi G on February 7, 2006 at 1:48 PM | PERMALINK

The recession was the Reagan administration's shitty economic policies coming home to roost. The same thing will happen again soon and, if we are lucky, it will be before Shrub leaves office.

Posted by: Jeff II on February 7, 2006 at 1:50 PM | PERMALINK

Vladi: But I don't think I've ever linked to him before. I figured it was time to correct that.

Posted by: Kevin Drum on February 7, 2006 at 1:53 PM | PERMALINK
Tax increases make tax receipts go up and tax cuts make them go down relative to where receipts would be if no action had been taken, of course.

Well, then, if that's true, let's just increase our taxes to 100%. That will solve the national debt and budget deficit problems at one shot!

(I expect that at least one regular will now chime in to accuse me of all sorts of horrible crimes, and Kevin will say nothing-like the time I asked, in comments, how he could possibly support one of his claims based on the chart he was referencing.)

Posted by: Nemo Ignotus on February 7, 2006 at 1:57 PM | PERMALINK

No, No, NO! Deficits don't matter. Reagan proved that.

Posted by: cq on February 7, 2006 at 1:57 PM | PERMALINK

"and that, combined with a good economy and some fiscal discipline, finally resulted in a balanced budget five years later."

uh-huh. And a ~30% cut in defence spending had nothing to do with it?

Posted by: am on February 7, 2006 at 1:57 PM | PERMALINK

Kevin, it is OUR MONEY!
Except when we send hundreds of billions to Iraq, via Halliburton, so they can have less electricity, less running water, and more car bombs. Then it is Support the Troops!

We don't need no fiscal solvency! The rapture will save us from selling hundreds of billions in bonds to the Chinese.

Posted by: Gore/Obama '08 on February 7, 2006 at 1:58 PM | PERMALINK

Oh yeah, and Cheney verified that deficits don't matter.

Posted by: cq on February 7, 2006 at 1:58 PM | PERMALINK

I love the way am and his cronies occasionally slip up with stuff like "defence"...sort of a verbal GPS. Wasn't it Cranky Observer who asserted that some of our most amusing trolls are from the UK?

Posted by: shortstop on February 7, 2006 at 2:01 PM | PERMALINK

The key distinction is: tax cuts are always good, even if the effects are bad. But tax increases are always bad, even if the results are good.

Posted by: knights who say "nee" on February 7, 2006 at 2:02 PM | PERMALINK

One of my problems with Bush is that he refuses to cut spending at all. Indeed, he increases it.

The most laughable line Bush has uttered to date (yes, there is stiff competition for that title) was in this year's State of the Union, when he stated that he'd reduced discretionary spending.

This is a lie. Bush has increased discretionary spending more than any President since Johnson. Indeed, he's increased it more than Johnson did.

I imagine he'll deal with this by increasing inflation, all the while bragging that he's cut taxes.

In that, he will resemble Johnson even more.

Posted by: Nemo Ignotus on February 7, 2006 at 2:03 PM | PERMALINK

Nice troll comment, am. Where do you get your numbers? I'm pretty sure they are either pure bullshit, or refer to a 30% cut in the rate of growth of defense spending.

That doesn't even address the argument that we had just defeated the most powerful enemy we had ever known, and maybe reducing defense spending made sense. But, of course, you trolls think that defense spending should never be reduced, regardless of whether we are facing a nuclear armada or a few Arabs with box cutters.

Posted by: brewmn on February 7, 2006 at 2:04 PM | PERMALINK

Nemo Ignoramus is outraged -- OUTRAGED -- that someone points out his ignorance, and Kevin doesn't defend him! Yes, just cut taxes, ignore the consequences of Reagan's and W's policies, ignore the consequences of H.W.'s and Clinton's policies.

Ignoramus -- "I'll say anything for a few bucks more!"

Posted by: Gore/Obama '08 on February 7, 2006 at 2:04 PM | PERMALINK

Nemo: Don't be an idiot. Federal tax receipts are at about 20% of GDP. Any increase in that range will increase revenues. You have to get up to around the 60% range before increases might start to hurt revenues. We're nowhere near that and never will be.

Posted by: Kevin Drum on February 7, 2006 at 2:08 PM | PERMALINK

Well, then, if that's true, let's just increase our taxes to 100%. That will solve the national debt and budget deficit problems at one shot!

Well, then, if that's not true, let's just decrease our taxes to 0.00%. That will solve the national debt and budget deficit problems at one shot!

Posted by: Nomo on February 7, 2006 at 2:09 PM | PERMALINK

AM, don't worry, the USA can still protect you even with the military we have....I think.

Posted by: cq on February 7, 2006 at 2:09 PM | PERMALINK

In general, if you increase taxes you will slow the economy and increase tax receipts. However, in specific cases there is no clear relation between the timing of tax cuts/increases, the strength of the economy and tax receipts. There are too many other factors to consider. Bush the first also had to deal with a tight monetary policy.

Posted by: NeilS on February 7, 2006 at 2:09 PM | PERMALINK

In that, he will resemble Johnson even more. Posted by: Nemo Ignotus

Perhaps only in Johnson's pig-headedness about Vietnam. Otherwise, the Johnson era increase in discretionary spending was to fight poverty and racial discrimination, and to promote education. All the discretionary spending in Shrub and the Rethugs' budgets have been to grease the palms of corporate America.

In fact, Johnson spent most of his time in office fighting rapacious assholes like Bush, DeLay, Frist and the rest. Johnson had a lot of personal faults. But he was a New Deal crusader in the best sense.

Posted by: Jeff II on February 7, 2006 at 2:09 PM | PERMALINK

brewmn: your aggressiveness is exceeded only by your ignorance. Go look up "peace dividend", or look here http://www.truthandpolitics.org/military-relative-size.php, or at the OMB data from which it was obtained.

Posted by: am on February 7, 2006 at 2:12 PM | PERMALINK

If only Clinton had funded Star Wars, George W. Bush wouldn't have been forced to ignore the "bin Laden determined to strike inside the U.S." pdb!

Posted by: Gore/Obama '08 on February 7, 2006 at 2:13 PM | PERMALINK

Kevin Drum,

Why not a post on the current account deficit? That really distinguishes the reality based community from the fantasy based one. Try the latest Business Week. You'll have wingnuts rolling in here talking about "dark matter" and nebulous intangibles. It'll be fun!

Posted by: alex on February 7, 2006 at 2:16 PM | PERMALINK

Deficits don't matter:
To professional investors and white collar criminals who shelter hundreds of billions in offshore accounts in the Caymans, yet enjoy all the benefits of being US citizens, like having the US Military protect their investments in third-world sweatshops.

Posted by: Osama_Been_Forgotten on February 7, 2006 at 2:16 PM | PERMALINK

"captain" Ed was named that from his girlfriend in the 1970's (probably his only one), because of his infatuation with star trek.

Yes, his nickname came from captain Kirk.

Posted by: james on February 7, 2006 at 2:30 PM | PERMALINK

I once dug into a cato institute report which claimed a big list of tax increases and tax cuts causing growth spurts and recessions in the economy over the century.

The first thing I noticed was how vague they were with thier dates. Tax cuts in "the 1920's" caused the boom then. Tax increases in the 1930's caused the depression. So I spent a couple hours on google. The big tax cut they were talking about in the 1920's happened in 1928. The tax increases in 1932 or later. When was the big boom of the 20's? Basically from a few years after WWI (1920 or so) to 1929. Now when did that depression start? The stock market bubble popped in 29 and the economy fell apart over the next two years. So the tax cuts came at the tail end of a boom, and the tax increases came when unemployment was passing 25% going in the wrong direction.

They had other examples from the late 60's and early 80's (interestingly they omitted the 1940-60 without explination, probably what happened there so stongly against thier thesis they could not even fudge it the other way) which I lined up with GDP growth numbers to see that thier claims were simply false. Overall I think every tax cut except the reagan (and now bush2) one occured during a boom, and every tax increase occurred during a bust. The economy appeared to wobble about completely independant of these changes.

The obvious conclusion is that the government cuts taxes when it is getting lots of revenue, and increases them when it isn't. At least until the "Reagan era" where republican presidents cut taxes and run massive deficits all the time.

Posted by: jefff on February 7, 2006 at 2:32 PM | PERMALINK

"Tax increases make tax receipts go up and tax cuts make them go down relative to where receipts would be if no action had been taken, of course."

Well within a certain range this is certainly true. However, despite those who misunderstand the Laffer Curve (which actually is a well-understood economic concept dating to at least the 14th century), its not disputed among economists that if tax rates are too high they will be counterproductive and actually decrease revenues. It is finding that exact point of revenue maximization that is the problem.

Personally, I'm actually amenable to the idea that personal income tax rates could be higher...there is, however, some evidence that our corporate tax rates (ours are among the highest in the world) are in fact high enough to be counterproductive. in other words, Bush cut the wrong taxes (and doing away with the estate tax is just asinine.)

Posted by: Nathan on February 7, 2006 at 2:33 PM | PERMALINK

Perhaps it should be required of the pundits and posters in the blogosphere to take at least Economics 101. This will prevent them from making absurd claims that are equivalent to the claims of perpetual motion machines inasmuch as they violate the first principle of macroeconomic theory on taxation, to wit, the Laffer curve. The shape of the curve may not be known, and the number of peaks that it has may also be subject to dispute, but the curve is, by golly, real. Once you understand the Laffer curve, you can rationally and logically deduce the affect of changes in the rate of taxation. At least you will not have to contend with all this verbal effluvia here.

Posted by: tbrosz on February 7, 2006 at 2:33 PM | PERMALINK

Sure, sure, the way to prosperity is to tax everyone more. That way they have less money to spend, so businesses take in less, and pay less to employees, so they can spend less...

Ya, makes perfect sense to me. After all, everyone knows that government is the most efficient user of revenue, that's why the phrase "government waste" isn't even in the lexicon.

Posted by: conspiracy nut on February 7, 2006 at 2:35 PM | PERMALINK

am,
Your link proves brewmn's point. It shows military spending relative to GDP. Why do we need more or less military spending based on the size of the GDP?

Here are the numbers for 1990 - 2000 (in billions):

299,273,298,291,281,272,265,270,268,274


Posted by: DR on February 7, 2006 at 2:36 PM | PERMALINK

Once you understand the Laffer curve, . . . Posted by: tbrosz

Fake T-Bone or not, bringing the Laugher curve is worth a smile.

Posted by: Jeff II on February 7, 2006 at 2:40 PM | PERMALINK

DR: the topic being discussed is the macroeconomic impact of defense/defence outlays, is it not?

In 1989: 5.6% of GDP.
In 2000: 3.0% of GDP.

That's a large slice of the overall economy, let alone of Federal revenues.

As for brewmn's "point": he made two. The first was completely wrong and the second was some sort of attack on myself, also completely wrong.

Posted by: am on February 7, 2006 at 2:44 PM | PERMALINK

shortstop: I love the way am and his cronies occasionally slip up with stuff like "defence"

It's almost as funny as someone posing as a "life-long liberal" railing about "the Democrat Party" (or similar rushism).

Posted by: Gregory on February 7, 2006 at 2:44 PM | PERMALINK

What Tbroz is trying to say is you can't borrow and spend with no limits or grow your way ouy of this habbit,somewhere you have to raise taxes to meet the Laffer curve intersection and not go beyond it.

Posted by: a poor Iraqi on February 7, 2006 at 2:45 PM | PERMALINK

Jeff II:

actually, the validity of the Laffer Curve is undisputed in economics (dating to Ibn Khaldun and espoused by Keynes among others). for example, tax rates of either 0% or 100% will both collect no revenue.

the debate is where the peak of the curve lies. the Pecorino study puts it at 65% for a modern economy...others put it as high as 80% for personal income taxes.

Posted by: Nathan on February 7, 2006 at 2:45 PM | PERMALINK

just some perspective for the discussion...

In dollar terms, federal receipts from personal income taxes, at $802 billion in 2004, are still lower than they were in 1998 ($826 billion) and much lower than in 2001 ($994 billion)...

SOURCE: "Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates." - Congressional Budget Office 12/10/05


.....Clinton had "all time highs" in Federal tax revenues 8-years in a row, before and after Republican congresses, before and after tax increases.

.....Federal tax revenues FELL in 2001, AGAIN in 2002, and DOWN even more in 2003. That hasn't happened since the GREAT DEPRESSION.

....the Republican congress and Republican president are hitting "all-time highs" on borrowing and spending.

finally.....

As a percentage of gross domestic product, government spending has climbed sharply, from 18.5 percent in 2001 to nearly 20 percent for each of the past three years.

Posted by: thisspaceavailable on February 7, 2006 at 2:47 PM | PERMALINK

am,
Are you saying the cut in defense funding contributed to the recession or contributed to the recession ending? I'm not sure how the numbers as quoted support either argument.

Posted by: DR on February 7, 2006 at 2:49 PM | PERMALINK

You know, even your lefty hero Keynes recognized the Laffer curve

Nor should the argument seem strange that taxation may be so high as to defeat its object, and that, given sufficient time to gather the fruits, a reduction of taxation will run a better chance than an increase of balancing the budget.
Of course, since following comrade Keynes gave us stagflation, maybe we shouldn't pay much attention to this.

Posted by: conspiracy nut on February 7, 2006 at 2:52 PM | PERMALINK

So people like CN would rather have a bill handed to him for the costs of,The roads he drives on,The sewage system he uses,Flying oh add the cost of Flight controllers,The biggy is give Cn a bill for the War.I would rather have the U.S. as a whole pay for these.But dumb asses like CN would rather pay for these at cost to him.

Posted by: a poor Iraqi on February 7, 2006 at 2:56 PM | PERMALINK


I do hope this blog is influential however if Alito is any guide it isn't. Nothing would be better for GOP fortunes than to have Democrats run on tax increases. It would be nice to see another Mondale repeat in 2008.

Posted by: rdw on February 7, 2006 at 2:58 PM | PERMALINK

Now that's funny: I was going to make the obvious debunking of c.n.'s straw man argument, when lo and behold c.n. him/her/itself goes and beats me to it.

As a bonus, c.n.'s amusing obsession with Communism rears its comical head! Comedy gold!

Posted by: Gregory on February 7, 2006 at 2:59 PM | PERMALINK

Nathan - I'm fairly sure that you are wrong about our corporate tax rates being higher than other countries. I think that you should check that out. I don't have a specific reference but I will try to find one.

Posted by: NeilS on February 7, 2006 at 2:59 PM | PERMALINK

But dumb asses like CN would rather pay for these at cost to him.
Well, I'm just happy that I'm not dumb enough to think that I'm not already paying for that stuff. Here's your clue: the government has no money. Everything they get, they take from people that work for a living.

That bill gets handed to me every April 15th.

Posted by: conspiracy nut on February 7, 2006 at 3:01 PM | PERMALINK

Arg. Boinked the HTML. Take two:

Now that's funny: I was going to make the obvious debunking of c.n.'s straw man argument, when lo and behold c.n. him/her/itself goes and beats me to it.

Posted by: Gregory on February 7, 2006 at 3:01 PM | PERMALINK

Damn Grgory, you're not just having trouble with your HTML, you're having trouble following along.

It's alright, though, I'm used to it.

Posted by: conspiracy nut on February 7, 2006 at 3:03 PM | PERMALINK

You know, even your lefty hero Keynes recognized the Laffer curve Posted by: conspiracy nut

No he didn't, you fucking moron. Keynes had been dead for over twenty years. You can't put words in his mouth. Conservatives trying to link him with it doesn't make it so.

Posted by: Jeff II on February 7, 2006 at 3:03 PM | PERMALINK

This link has a good run down of federal budgets and deficits and other fun numbers.

http://www.cbo.gov/budget/historical.pdf

One number from this to consider is that we hit a high of spending during the Reagan years (around 23% of GDP), and a low during the Clinton years (around 18%). And now Bush has been raising that up again from 18, so we're now close to 21%. Republicans are bigger spenders than Democrats. The problem is that they also tax less - we're now at around 17% of GDP, after Bush's tax cuts, and we're going further.

Posted by: BRussell on February 7, 2006 at 3:05 PM | PERMALINK

the government has no money. Everything they get, they take from people that work for a living.

Aw, c.n. forgot to add "at gunpoint" for the true loony libertarian/anti-tax crank triple axel. Too bad.

Here's a clue for you, c.n.: Taxation has been accepted as a legitimate function of government since way before Hobbes....even Jesus Christ condoned it.

Posted by: Gregory on February 7, 2006 at 3:05 PM | PERMALINK

Nathan: the debate [about the Laffer curve] is where the peak of the curve lies. the Pecorino study puts it at 65% for a modern economy...others put it as high as 80% for personal income taxes.

In other words, so far beyond US tax rates that it's utterly irrelevant. The 0% and 100% points are trivial observations. Hence the term "Laughable" curve.

Posted by: alex on February 7, 2006 at 3:06 PM | PERMALINK

I do hope this blog is influential however if Alito is any guide it isn't. Nothing would be better for GOP fortunes than to have Democrats run on tax increases. It would be nice to see another Mondale repeat in 2008.
Posted by: rdw on February 7, 2006 at 2:58 PM | PERMALINK

Which would prove once again, that Republicans can't handle the truth, and would rather daddy President lie to them "in their own best ineterest".

Posted by: Osama_Been_Forgotten on February 7, 2006 at 3:06 PM | PERMALINK

Have you had enough of the Republican outrage?

Join the revolution http://www.boycott-republicans.com

Posted by: mighty maximus on February 7, 2006 at 3:07 PM | PERMALINK

Morons. Despite what you hear.
It is obvious that Republican
control means big deficits
and less real paying jobs.
Then Democrates come along and
have to fight tooth and nail
to fix the mess. By then the
short term memory clan votes
the tax happy Dems out before
the real long term plan can be
set in stone. They elect more
Republicans then boom were right
back in the hole. You want to see
real progress vote Dem across the
board then let them stay long
enough to fix it and then let
them stay and finish the work.
But then you can't remember what
the original story was. So I am
sure your short term memory will
not retain this advice a half hour
from now.

Math is suppost to add up.

Posted by: Honey P on February 7, 2006 at 3:07 PM | PERMALINK

the debate is where the peak of the curve lies. the Pecorino study puts it at 65% for a modern economy...others put it as high as 80% for personal income taxes. Posted by: Nathan

Actually, there is no debate at all because serious economists think the Laffer Curve is crap. Keynes did not describe or ascribe to it, regardless of what conservatives think.

Posted by: Jeff II on February 7, 2006 at 3:07 PM | PERMALINK

Gregory
Taxation has been accepted as a legitimate function of government since way before Hobbes....even Jesus Christ condoned it.
Do tell.

And if you don't think taxes are taken at gunpoint, try not paying yours and see what happens.

Posted by: conspiracy nut on February 7, 2006 at 3:09 PM | PERMALINK

CN But a much smaller bill then if you tried to pay for it yourself,Did you know it costs about 5 million dollars for a one mile stretch of road.How much have you paid for?

Posted by: a poor Iraqi on February 7, 2006 at 3:10 PM | PERMALINK

Here's a clue for you, c.n.: Taxation has been accepted as a legitimate function of government since way before Hobbes....even Jesus Christ condoned it.
Posted by: Gregory on February 7, 2006 at 3:05 PM | PERMALINK

There's a difference, though.

The Romans extracted tax through threat of the spearpoint.

Americans extract tax voluntarily, because they are participants in a representative government. Except for the few whack-jobs who believe that government should be a few rich elites ruling the mob with propaganda, and lies, the mob paying taxes, the elite; not so much.

Posted by: Osama_Been_Forgotten on February 7, 2006 at 3:11 PM | PERMALINK

Hypothetical Here:

Tax Base $100
Tax 10%
Revenue: $10

Tax cut of 10%
Revenue $9.

The base must grow by 11.11% to return the same amount of revenue.

If you don't cut spending, until the base grows to the necessary point, you've got to borrow the difference. That forestalls the day when the "tax cut pays for itself". Reagan's debt, for example, is still with us.

This isn't rocket science. It's just proportions. 8th grade math.

Posted by: Jeffrey Davis on February 7, 2006 at 3:12 PM | PERMALINK

Jeff II: you're pretty ignorant.

the Laffer Curve was postulated at least 600 years ago (hint: it wasn't called the Laffer Curve)...and as a theoretical matter, its validity is undisputed by any economist of any stripe (see my 0% and 100% comment). could it be that maybe you're attacking a straw man?

Alex: you are correct that tax rates in the U.S. (with the possible exception of corporate rates) are nowhere near the point where increased tax rates would result in decreased revenue.

Posted by: Nathan on February 7, 2006 at 3:12 PM | PERMALINK

No he didn't, you fucking moron.
Oh, since he didn't use the word "Laffer" he can't describe a Laffer curve (like he did). Gosh, I'm glad you cleared that up.

"What's in a name? That which we call a rose
By any other word would smell as sweet."
William Shakespeare

From Romeo and Juliet (II, ii, 1-2)

Posted by: conspiracy nut on February 7, 2006 at 3:13 PM | PERMALINK

And just to add one more point We Dems wanted the Iraqis to pay for reconstruction,saving the U.S. tax payers 200-300 billion dollars.But no the righties wanted to take on this burden all buy there self.

Posted by: a poor Iraqi on February 7, 2006 at 3:15 PM | PERMALINK

The common "proof" offered of the Laffer Curve is the two data points: 0% and 100%. In other contexts, that's called The Shell Game. A 0% rate obviously produces no money A 100% rate would produce lots of money.

The British lived with tax rates > 100% for a long time (a 98% bracket + the VAT). It wasn't a healthy situation for accumulating wealth, but it didn't produce the $0 so fabled in song and story.

Posted by: Jeffrey Davis on February 7, 2006 at 3:18 PM | PERMALINK

Nathan et al., Re: corporate taxes. Just looking around the web it appears that US corporate taxes are relatively high: fourth highest in the OECD. On the other hand, corporations are paying only about 8% of federal revenues compared to about 24% in the 60s. I wonder if there is a difference between the stated tax rate and the effective tax rate.

Posted by: NeilS on February 7, 2006 at 3:18 PM | PERMALINK

The GOP's pathological hatred/fear/disdain of taxes will be the undoing of the Republic. A complex society, such as ours, cannot exist for long, when there is a self-interested constituency that wants lots of government services (read - a strong military), but they aren't willing to pay for it. This has been the trajectory of all the world's great empires.

Salute as we go under.....

Posted by: Stephen Kriz on February 7, 2006 at 3:19 PM | PERMALINK

That bill gets handed to me every April 15th.

Didn't you mean, "handed to my mommy"?

Posted by: knights who say "nee" on February 7, 2006 at 3:20 PM | PERMALINK

Imaginary theoretical constructs aside:
The US economy is 2/3 driven by consumer spending. Nobody disputes this. It's a fact. It is an ideology-neutral fact.

If you cut taxes disproportionately for the rich, in hopes that they're going to invest in expansion of industrial capacity, you've got no guarantee that they're going to do so IN THIS COUNTRY.

If you increase taxes disproportionately for the rich, in hopes of relieving middle-class consumers of the burden of financing the government, then the rich STILL CONSUME JUST AS MUCH, and the middle and lower classes consume more. The consumer-spending-driven economy will thrive. IN THIS COUNTRY.

Which option is more PATRIOTIC?

Posted by: Osama_Been_Forgotten on February 7, 2006 at 3:21 PM | PERMALINK

"Tax increases make tax receipts go up"

I think we have good evidence that government spending also decreases with tax increases. You get a two fer one.

Posted by: Matt on February 7, 2006 at 3:21 PM | PERMALINK

And if you had listened to us dems we wouldn't have wasted billions of dollars on a war we didn't have to fight.CN most of your tax dollars now go to pay intrest on the U.S. debt run up by Republicans.

Posted by: a poor Iraqi on February 7, 2006 at 3:23 PM | PERMALINK

conspiracy nut: And if you don't think taxes are taken at gunpoint, try not paying yours and see what happens.

You're right. So many people fail to see through the propaganda that we feed them from childhood. George Washington was Evil! We're talking about the man who suppressed the Whiskey Rebellion, using some flimsy excuse about the people now having representation.

Let's face it nut, the only answer to the evil of taxes is anarchy!

conspiracy nut is an anarchist!, which is why he so hates the commies. Once upon a time the great threat to America was anarchists (in 1912 my grandfather's immigration papers required him to swear that he wasn't one). Then the commies stole their thunder. Nobody likes to be upstaged.

Posted by: alex on February 7, 2006 at 3:24 PM | PERMALINK

Jeff II: you're pretty ignorant. Posted by: Nathan

Nathan, I've forgotten more about economics than you'll ever understand. Furthermore, I don't get my economic talking points from the Cato Institute or the Heritage Foundation, which, along with the WSJ editorial page, are the only proponents of supply-side economics, which was underpinned by Laffer's perversions.

Posted by: Jeff II on February 7, 2006 at 3:24 PM | PERMALINK

Um, the point is to stimulate the economy by stimulating investment.

the Republicans believe that if you give money to rich people they will turn around and invest it, building factories and such, thus creating jobs and supply. In fact this is a good approach in an inflationary situation when you have too many dollars chasing too few products: in that case you need more supply.

But that's not the case Bush faced.

Bush faced a deflationary recession. There was too many products chasing too little demand.

Under those conditions, giving money to rich is stupid, because nobody is going to build a widget factory if there is no demand (or soft demand) for widgets.

As a result, Bush giving money to the rich was similar to taking money out of the economy, except for the purchase of porsches and mink coats and diamond studded cock rings.

Rubin's genious was that tax cuts weren't the oppoerative act for stimulating investment, but stability and ability to predict, and get, a return on an investment. That's why the economy both boomed and tax revenues went up.

But the structural problem is in the weakness in demand. That simply is a function of a lack of bargaining power for wages. Republican's have turned a blind eye towards 'insourceing technology labor', outsourcing and rampart immigration, all of which is putting downward pressure on wages. Walmart's of the world doesn't help either.

What saved Bush's bacon, was the fed driving down interest rates and China's willingness to lend us money at below fair value interest rates. This help to put spending power in holders of mortgages thus spuring demand.

In the long term, the collapse of demand, the lack of bargaining power, all point towards an eventual 1929 type of adjustment. Not very tasteful and rather unsightly. The business of trickle down is nothing more than political smack. It doesn't occur, People don't get rich by letting money trickle down, they get rich by squeezing it up. So giving Rich people money is nearly the same as taking it out of the economy in the face of shrinking demand.

Out side of all this, is the effect on innovation. Even during the 1930s when there was no demand, innovation continued and can bring increases in productivity and demand.

I recommend everyone read Nobel Lauriette Douglas North's "Structure and Change in Economic History." The Roman Empire collapsed because demand collapsed (perhaps as a result of Constantine's inseption on the Latifunda system) wrecking the commercial economy. The rich got richer, the poor got poorer, and the rich and powerful used their influence to avoid paying taxes. Meanwhile the tactical edge of the Roman Legion had thinned, meaning Rome needed to spend more on the Army not less. This growing tax burden was pushed down to the weakest elements of society, many who would have to choose between eating and paying taxes, and who had no interest in who prevailed in any military outcome. The outcome is now history. Furthermore its a common pattern in history, it happen in medieval Japan, and in Ancient Egypt and arguably ended Hapsburg Spain, Bourbon France and Romanov Russia, not to mention triggering the Great Depression which launched Hitler into power and subsequently delivered WWII and the Holocost. You cut taxes to the rich at your risk.

Now look at us: We have increasing concentration of rich and powerful, we have immigrants poring over our borders, and like Rome, we don't have the political will to fund and fight our enemies.

Its an Epic event inching its way to catastrophy.

Posted by: Bubbles on February 7, 2006 at 3:25 PM | PERMALINK

Did you know it costs about 5 million dollars for a one mile stretch of road
Well, highways are plenty expensive, but you're on the order of about 6 times too high there. linky

Let's rough some stuff out. There are about 800,000 miles of highway in the US. Lifespan of say 10 years, that's about 80,000 miles per year built. There are 128 million tax returns. Let's see, that's miles of road times cost of road divided by number of returns, carry the one... $531 dollars. Naturally this is largely covered by the tax on gasoline, and further spread between Federal and State taxes.

But wait, I'm sorry, what was your point about my mile of road? Am I the only one that gets to drive on it?

Posted by: conspiracy nut on February 7, 2006 at 3:28 PM | PERMALINK
It is finding that exact point of revenue maximization that is the problem.

No, Nathan, it is emphatically not the problem, since we are nowhere near it!

Good grief.

Posted by: obscure on February 7, 2006 at 3:29 PM | PERMALINK

Everyone knows that withdrawing Americans from the middle East is what causes extended increases in GDP growth:

Lebanon 1958
Hostages out of Iran 1981
Marines out of Lebanon 1983
Army out of Iraq 1991

Bush is just planning on jump starting the economy with rocket fuel.

Posted by: dgf on February 7, 2006 at 3:31 PM | PERMALINK

One addition:

If you cut taxes disproprotionately for the rich, in hopes that they're going to invest in expansion of industrial capacity, you've got no guarantee that they're going to do so in this country:

And you've got a virtual guarantee that they will do so in another country, given that the US Military (that they're not paying for; the middle and lower classes are paying for it, disproportionately, and with their sons and daughters) will be busy making sure that there will be no costly regulatory impediments in that other country.

And while the US Military is over in that third world shithole making the world safe for sweatshops, they're not at home making America more safe and secure.

So how is this policy stronger on Security?

Posted by: Osama_Been_Forgotten on February 7, 2006 at 3:31 PM | PERMALINK

Jeffrey Davis says:
"A 100% rate would produce lots of money.
The British lived with tax rates > 100% for a long time (a 98% bracket + the VAT). It wasn't a healthy situation for accumulating wealth, but it didn't produce the $0 so fabled in song and story."

Apparently you're unfamiliar with the tax evasion and shelters prevalent during that period. the effective tax rate was much lower. I lived in Norway during the late 1970's when they had a similar tax rate...the amount of tax evasion was breathtaking.

"Just looking around the web it appears that US corporate taxes are relatively high: fourth highest in the OECD. On the other hand, corporations are paying only about 8% of federal revenues compared to about 24% in the 60s. I wonder if there is a difference between the stated tax rate and the effective tax rate."

you realize that the contrast between corporate tax rate and revenues is what underlies the suggestion that perhaps the current corporate tax rate is counterproductive? I'm open to other explanations -- which is why I noted that is only a possibility at this point.

Jeff II: really? mind telling me where you received your degree...which economics courses you took and who the professors and textbooks were?
your dismissal of Keyne's statement of the Laffer Curve says everything.

Posted by: Nathan on February 7, 2006 at 3:32 PM | PERMALINK

Jeffrey Davis says:
"A 100% rate would produce lots of money.
The British lived with tax rates > 100% for a long time (a 98% bracket + the VAT). It wasn't a healthy situation for accumulating wealth, but it didn't produce the $0 so fabled in song and story."

Apparently you're unfamiliar with the tax evasion and shelters prevalent during that period. the effective tax rate was much lower. I lived in Norway during the late 1970's when they had a similar tax rate...the amount of tax evasion was breathtaking.

"Just looking around the web it appears that US corporate taxes are relatively high: fourth highest in the OECD. On the other hand, corporations are paying only about 8% of federal revenues compared to about 24% in the 60s. I wonder if there is a difference between the stated tax rate and the effective tax rate."

you realize that the contrast between corporate tax rate and revenues is what underlies the suggestion that perhaps the current corporate tax rate is counterproductive? I'm open to other explanations -- which is why I noted that is only a possibility at this point.

Jeff II: really? mind telling me where you received your degree...which economics courses you took and who the professors and textbooks were?
your dismissal of Keynes' statement of the Laffer Curve says everything.

Posted by: Nathan on February 7, 2006 at 3:34 PM | PERMALINK

OK wonderful you pay 531 dollars for just roads,Now lets tally up war costs please.

Posted by: a poor Iraqi on February 7, 2006 at 3:35 PM | PERMALINK

There are about 800,000 miles of highway in the US. Lifespan of say 10 years, that's about 80,000 miles per year built. Posted by: conspiracy nut

That, like everything else you post, is nonsense. The freeways in and around the major metropolitan areas in the U.S. are in an almost constant state of repair. Just as one X mile section is resurfaced, another needs attention. About the only place you might find a highway lasting ten years is one in a temperate area with no traffic. Either that or Montana or Idaho because they don't pay any taxes. They're all resigned to shitty roads because it's unAmerican to pay for good ones.

Posted by: Jeff II on February 7, 2006 at 3:35 PM | PERMALINK

obscure:

if you actually read my comments you'd notice that I said we were nowhere near it on personal income taxes.

(besides, what I meant was that as a theoretical matter, determining the peak point of the Laffer Curve matters a great deal)

Posted by: Nathan on February 7, 2006 at 3:36 PM | PERMALINK

CN most of your tax dollars now go to pay intrest on the U.S. debt run up by Republicans.
I know you guys just make this shit up because it sounds good, and I know that actual facts aren't useful because you'll be making this same shit up tommorrow, but check out Figure 1 (while you're there, notice that as a percent of budget, defense is shrinking, transfer payments are growing)

You're right.
I know.

Posted by: conspiracy nut on February 7, 2006 at 3:36 PM | PERMALINK

Paraphrasing the great I.F. Stone:

"The strategy of the rich is to raise such a terrific hue & cry at any and every attempt to raise taxes as to create the illusion that there is actually a revolution in progress."

Or, take the words, again paraphrased, of former Senate Majority Leader George Mitchell:

"When workers organize to try and squeeze a few extra nickels out of their employers that is called 'class warfare.' When employers organize to squeeze a few extra nickels out of their employees, that is called 'business as usual.'"

Take these nuggets together with the ridiculous irrelevance of the Laffer curve and bake your own batch of right-wing folly.

Posted by: obscure on February 7, 2006 at 3:37 PM | PERMALINK

Now lets tally up war costs please.
Not until you tell me more about my mile of road.

The freeways in and around the major metropolitan areas in the U.S. are in an almost constant state of repair.
No shit. You guys are too brilliant for me. But let me ask one question about these roads, where every fucking bit of it is always under re-contruction. How do you get to work, fly?

Try not to be quite so stupid.

Posted by: conspiracy nut on February 7, 2006 at 3:39 PM | PERMALINK

Jeff II,

Do you think that you would collect much revenue at a taxation level of 100% of income? If not, then you believe in the Laffer curve, and Nathan is correct. However, Kevin is also correct in that we are not at the peak of the curve.

DR,

2.6% of GDP, the difference in defense spending as a fraction of the economy between 1990 and 2000 amounts to a difference of about $260 billion dollars in year 2000. Thus the peace dividend contributed a significant fraction to the deficit reduction of the 1990s.

To all,

One not only must examine the the effect on total revenues when determining the optimal tax rate, but the tax structure, and one must examine the effect on the economy of both as a function of time. For example, a tax structure that takes 65% of a $10 trillion dollar economy will bring in more revenues than a 30% take of a $20 trillion economy.

Posted by: Yancey Ward on February 7, 2006 at 3:40 PM | PERMALINK

And if you don't think taxes are taken at gunpoint, try not paying yours and see what happens.

Yes! He nails it! The triple axel!

For an encore, c.n., how about telling us again how the G8 are all Marxist?

Posted by: Gregory on February 7, 2006 at 3:40 PM | PERMALINK

"uh-huh. And a ~30% cut in defence spending had nothing to do with it?"

Huh? Defense spending was 299 billion in 1990
and fell as low as 269 billion in 1998.

http://www.census.gov/prod/2002pubs/01statab/fedgov.pdfTable 458

a) That is nowhere near a 30% drop
b) That difference of $30 billion was less than 10% of the difference between the $221b 1990 deficit and the $69b 1998 surplus.

Posted by: chaboard on February 7, 2006 at 3:40 PM | PERMALINK
(besides, what I meant was that as a theoretical matter, determining the peak point of the Laffer Curve matters a great deal)

I apologize for any undue sarcasm, Nathan. But I did read your comments and it appeared that you were relatively comfortable with the estimates in the 60-80% range.

So, yes, that would render the Laffer curve and 'finding the peak' rather irrelevant.

Posted by: obscure on February 7, 2006 at 3:42 PM | PERMALINK
Nemo: Don't be an idiot. Federal tax receipts are at about 20% of GDP. Any increase in that range will increase revenues. You have to get up to around the 60% range before increases might start to hurt revenues. We're nowhere near that and never will be.

Kevin,

I'm not the idiot who made such an open-ended statement which I clearly don't actually believe.

You know, you could have said "Oops, that wasn't what I meant" and made a minor correction to the original post, instead of clarifying in the comments and making an insulting comment in the process.

This would be especially important since your clarification leads to some interesting grounds for further discussion. It appears that the highest the US federal tax burden/GDP ratio has ever gotten is 20.9%, but there are other countries who are over the 60% range. (Finland comes to mind.)

Based on what you've said, allow me to amend my original statement:

We should jack our taxes up to about, say, 60% of GDP, which will solve our problems with debt and the deficit!

Nomo-you seem to have hit on the Bush administration's economic plan, except you've left out "adopt inflationary policies that are a de facto tax increase."

Posted by: Nemo Ignotus on February 7, 2006 at 3:43 PM | PERMALINK

OK, You left out bridges.

Posted by: a poor Iraqi on February 7, 2006 at 3:44 PM | PERMALINK

Here is something from the Wikipedia.


In 2005, the Congressional Budget Office released a paper called "Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates" [2] that casts doubt on the idea that tax cuts ultimately improve the government's fiscal situation. Unlike earlier research, the CBO paper examines the budgetary impact of any possible macroeconomic effects of tax policies, i.e., it attempts to account for how tax cuts affect the overall size of the economy, and therefore influence future government tax revenues; and ultimately, deficits or surpluses. The paper's author forecasts the effects using various assumptions (e.g., people's foresight, the mobility of capital and the ways in which the federal government might make up for the lost revenue). Even in the paper's most generous scenario, only 28% of lost tax revenue is recouped over a 10-year period after a 10% tax-rate cut. The paper points out that these shortfalls in revenue would have to be made up by federal borrowing: the paper estimates that the federal government would pay an extra $200 billion in interest over the decade covered by his analysis. The 10% tax cut would result in a 1% increase in gross national product. The paper appears to focus on Federal government revenue only and does not look at the total public sector revenue (i.e., it does not include increases in local and state government revenue).

Posted by: lib on February 7, 2006 at 3:44 PM | PERMALINK

conspiracy nut: what was your point about my mile of road? Am I the only one that gets to drive on it?

That's the way it ought to be, because anything else is Communism!

Posted by: alex on February 7, 2006 at 3:45 PM | PERMALINK

I made a mistake in my first comment in this thread: the link I meant to point to was here.

Kevin has not, to date, even attempted to answer me.

Posted by: Nemo Ignotus on February 7, 2006 at 3:47 PM | PERMALINK

In 2005, the Congressional Budget Office released a paper called "Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates"
Imagine that, a bunch of Democratic government employees, living off the taxes of others, don't support a decrease in taxes.

Who'd have thunk it?

Posted by: conspiracy nut on February 7, 2006 at 3:47 PM | PERMALINK

Hey 'guys"--CN, Nathan, and anyone else. Take your Laughable Curve crap over to Angry Bear and talk to some real economists. They'll Laffer you right off the site with your sorry butts in a sling.

Posted by: klaus on February 7, 2006 at 3:48 PM | PERMALINK

*sigh* I was too hasty with the "post" button.

Replace the last sentence in my last comment with

"Kevin has not, to date, even attempted to answer me on that post."

Posted by: Nemo Ignotus on February 7, 2006 at 3:48 PM | PERMALINK

That's the way it ought to be, because anything else is Communism! Naw, roads are a public good.

Posted by: conspiracy nut on February 7, 2006 at 3:48 PM | PERMALINK

"Once you understand the Laffer curve, you can rationally and logically deduce the affect of changes in the rate of taxation."

??? Laffer's postulate that tax revenues are 0 at 0% taxation and 0 at 100% taxation tells one nothing about which side of the maximum you're on. If you look at the trend in tax revenues post-1981 tax cuts (remmebering to correct for inflation, which many intellectually-dishonest supply-sider fail to do), you reach the conclusion that in fact we were and are on the left side of the maximum. Further, the contention of the supply-siders that there would be an increase in investment in the economy failed to appear. By the supply-siders contention, there should have been a permanent increase in investment as a %age of GDP. And there was, for about 2-3 years; then a steady fall to below the %age in the 1970s, to a trough in 1992, recovering under Clinton.

No supply-side free lunch during the 1980s; instead a consumption boom from debt leverage, and Reagan getting lucky from the fall in oil prices in the 1980s.

Posted by: Urinated State of America on February 7, 2006 at 3:51 PM | PERMALINK

"I apologize for any undue sarcasm, Nathan. But I did read your comments and it appeared that you were relatively comfortable with the estimates in the 60-80% range.

So, yes, that would render the Laffer curve and 'finding the peak' rather irrelevant."

obscure, fair enough...if you go back to my initial post you'll see that my point was only that there is a point (which we are not near) where the LC dictates that tax increases will be counterproductive and that this concept is undisputed among economists. we have apparently reached that point with the highest American tax brackets in the past (but we are certainly nowhere near it now).

Posted by: Nathan on February 7, 2006 at 3:51 PM | PERMALINK

Hey klaus, I was just going by the lefty hero Keynes.

Posted by: conspiracy nut on February 7, 2006 at 3:52 PM | PERMALINK

CN your linky seems to reflect wages only there is nothing in there about type of roadway just wages per mile,If we are paying these guys I hope there putting down product.By the way I worked many years in the road Ind. so I know what it costs.

Posted by: a poor Iraqi on February 7, 2006 at 3:53 PM | PERMALINK

klaus: I would suggest that you actually read my comments instead of performing a Jeff II-style reflex.

I have expressly stated that we could comfortably increase tax rates since we are indeed on the left side of the Laffer/Khaldun/Keynes curve.

Posted by: Nathan on February 7, 2006 at 3:54 PM | PERMALINK

The labor was $160K per mile. The total was $850K per mile. Oh great roadway worker.

Posted by: conspiracy nut on February 7, 2006 at 3:55 PM | PERMALINK

Arghhh!

Posted by: tbrosz on February 7, 2006 at 3:55 PM | PERMALINK

Arghhh!
According to Howard Dean, that is Yeeeeaaaarrgghhh!

Posted by: conspiracy nut on February 7, 2006 at 3:57 PM | PERMALINK

Jeff II-

I'd definitely compare the two in pig-headedness, although I suspect Bush doesn't feel the mental anguish Johnson did.

But as for their obsessions..they certainly share one on education, and both have spent gobs of money on it.

With regard to Johnson's faults, personal corruption comes to mind, as does the whole question of whether the award of his Silver Star was for heroism he never actually displayed.

The two are very similar in their need to humiliate subordinates.

Bush does not appear to have Johnson's rapacious sexual appetite, but it might be that his underlings have done a good job of covering it up.

I have a list of things that make me not want to vote for someone for President. I foolishly voted for Bush in 2000, but since then, I've added "from Texas" to the list of things which make me not want to vote for someone. We've had two Texan Presidents, and they've both been disasters. It's a bit of an irrational prejudice, but it's taken hold of me.

Posted by: Nemo Ignotus on February 7, 2006 at 3:57 PM | PERMALINK

Well we have the Reagan Model,We all know how that worked out.We have the Bush Model and we can see where that is going.The Clinton Model seems to have reached more people better economy,Better lifestyle,And SURPULSES hmmmm.

Posted by: a poor Iraqi on February 7, 2006 at 3:58 PM | PERMALINK

But let me ask one question about these roads, where every fucking bit of it is always under re-contruction. How do you get to work, fly? Posted by: conspiracy nut

No. Only Republican pigs can fly. If you live in a modern country, you quit enabling people with more highway and instead you take the train.

Posted by: Jeff II on February 7, 2006 at 3:59 PM | PERMALINK

Bubbles: What saved Bush's bacon, was the fed driving down interest rates and China's willingness to lend us money at below fair value interest rates.

Reminds me of a line from http://maxspeak.org/mt/archives/001939.html

Referring to our Chinese creditors, and to the fact that there has been a net loss of private sector jobs in the Bush years (all job gains coming from the public sector):

The upshot is that the triumph of Republican-conservatarian economic policy consists of an expansion of government jobs financed by loans from the Communist Peoples Republic of China.

Posted by: alex on February 7, 2006 at 4:00 PM | PERMALINK

Laffer, as near as I can tell, was and is a moron. There is nothing predictive in the Laffer curve. (If he has a real technical paper on it, please give me a reference)

If taxes are 0% then you still have extremist libertarian volunteer government. If taxes are 100% then you have theoretical communism with a huge black market.

Posted by: Matt on February 7, 2006 at 4:05 PM | PERMALINK

If taxes are 0% then you still have extremist libertarian volunteer government.

. . . essentially indistinguishible from warlordism.

Posted by: Osama_Been_Forgotten on February 7, 2006 at 4:09 PM | PERMALINK

"Of course, since following comrade Keynes gave us stagflation, maybe we shouldn't pay much attention to this."

No, following comrade Keynes* gave us (FDR followed a Keynesian plan, even if he didn't know it), and a post-war boom that lasted, with intermittent slowdowns, thirty years. His insights also has given us a much more stable economy.

By contrast, stagflation was the consequence of the supply-side shock of oil price rises and trying to defer the recessionary effect of such a price rise. Now, eventually someone like Volcker had to hit the brakes and say the slowdown had to happen now. But Reagan stepping on the accelerator pedal at the same time made Volcker's task much harder and easier to overshoot. Result; output equivalent to ~20% of GDP lost. Was it worth it to fight inflation? You tell me. What's certain is that most of the intended boost from Reagan's earlier tax cuts got exported. It's moronic to set fiscal policy that's completely out of whack from what the Fed is trying to do; but that's what Reagan did. Result: all supply-siders trying to boost Reagan use 1983 as the starting point for their statistics, airbrushing out the early 1980s recession.

Monetarism, by contrast, on its first empirical test in the US and UK in the early 1980s, found to its surprise that the velocity of money was very fucking far from being constant.

The proof of this can be seen that the Fed ditched monetary targets long ago, targeting interest rates instead. The only significant central bank that still uses money targets is the European central bank (at the insistence of the Germans); that's been a large part of the problem with the Euro-area.

*Just a note to RW trolls: Keynes wasn't a socialist. He was fairly antipathetic to the UK Labour Party (he was a Liberal), and particularly Atlee's enthusiasm for central planning and nationalisation. If he'd lived more than a year into the Atlee government, we might have seen him put out a similar scalding polemic as he did against Churchill diastrous reign as Chancellor of the Exchequer in "The Economic Consequences of Mr. Churchill".

Posted by: Urinated State of America on February 7, 2006 at 4:13 PM | PERMALINK

Personally, I don't see why any righties even bother with the "trickle down" or "Laffer curve" nonsense. They know it's all bullshit, and the reality of it is that they consider paying taxes to support any social program that benefits people who are poor is "immoral" because deep down inside, poor people deserve their lot in life. Either they didn't work hard enough, or they're sinful, and God has cursed them, or they're genetically inferior due to mixture of blood with mongrel races.

Face it - rightwing politics is all a one-sided ethical framework based on Kantian "rights-based" logic, without regard to the consequences of policy.

So what if cutting taxes on the rich will destroy the economy and the country? It's only right to let the rich benefit more from their richness, because they earned it, and they deserve it, it's their right.

That's really what this is all about. The rest is just bullshit to try to sleaze their way into getting what they want.

Posted by: Osama_Been_Forgotten on February 7, 2006 at 4:17 PM | PERMALINK

Wrong CN but you live in a dream world anyway.

Posted by: a poor Iraqi on February 7, 2006 at 4:19 PM | PERMALINK

"Republicans are bigger spenders than Democrats. The problem is that they also tax less - we're now at around 17% of GDP, after Bush's tax cuts, and we're going further."

BRussel, you are on to something. Reagan and Bush cut taxes and spending went way up. Clinton raised taxes and spending went down. There may be something here, look further into it.

"Bush doesn't feel the mental anguish Johnson did."

Well Johnson slaughtered some 1.2 million innocent people, Bush is still around 70,000, with only two years to go.

Anyway, for a clue, each American family, on average, will give up $27,000 to the federal government, about 1/4 of the family paycheck. They will give up almost another 1/4 for state and local. The cause is not too much revenue, but too much government. We are not over taxed, we are over-governmented.

Or, think of it this way. For each of your families, there is almost on other shadow family your support. Your adopted family earns money from government spending and mandates.


Posted by: Matt on February 7, 2006 at 4:23 PM | PERMALINK

Correcting an omission:

"No, following comrade Keynes* gave us (FDR followed a Keynesian plan, even if he didn't know it),"

should read:

No, following comrade Keynes* gave us recovery from a Republican recession, with a spectacular Real GDP growth that averaged 8%/year from 1933 to 1941 (FDR followed a Keynesian plan, even if he didn't know it). Only one year that St. Ronnie ran the country, 1984, even comes close to what FDR achieved *on average before the output boost from WW2*.

Keynes, and Keynesian policies, have made a greater contribution to human welfare than the invention of antibiotics. Yup.

Posted by: Urinated State of America on February 7, 2006 at 4:26 PM | PERMALINK

"If taxes are 0% then you still have extremist libertarian volunteer government.

. . . essentially indistinguishible from warlordism."

Well, Osama, a Rose by any other name....

Posted by: Matt on February 7, 2006 at 4:29 PM | PERMALINK

I've been looking into the purported ability to sustain tax rates around 60%, and who to look at besides Sweden

During the 1870s Sweden was an impoverished nation, occasionally plagued by starvation. All this changed as capitalism was introduced in the country. Free markets, property rights and the rule of law created an environment where the Swedish people could achieve a long period of rapid economic development. Between 1870 and 1970 Sweden had the second highest economic growth in the world, second only to Japan.
[...]
During the 1960s the social democrats radicalised. They abandoned their traditional pragmatic policies and started a large-scale expansion of the welfare state. Between 1970 and 1990 taxes increased by almost one percent point each year. Income taxes doubled between 1960 and 1990, rising from approximately 30 to 60 percent. During the 1970's the political left viewed Swedish policies as a success. The massive expansion of the public sector reduced unemployment in the short run. Few questioned if this expansion was a sustainable policy.
"The Swedish system is in serious trouble. The Swedish economy is no longer creating jobs private sector employment has been shrinking for decades, and the public sector can no longer absorb more workers Many Swedes are pessimistic about the future, in large measure because they cannot imagine how their system can survive, yet cannot overcome the political obstacles to changing it."
[...]
Recently Jan Edling, an economist from Swedens largest labour union, LO, wrote a report where he explained that it was the welfare system that caused people to go on sick leave or early retirement. According to Edling, Sweden had a de facto unemployment rate of 2025 percent. As LO refused to print the report Edling resigned after 18 years of service.
Telling the truth might not be popular, but I wish that Edling's report would be translated and sent to all fans of the welfare state around the world. It shows that the Swedish welfare state has systematically destroyed personal responsibility and work ethics. [source]
So, under capitalism they thrived, and under a welfare state and 60% tax rate they're going downhill. You are naturally aware that Sweden's growth is now below average for the OECD.

Posted by: conspiracy nut on February 7, 2006 at 4:29 PM | PERMALINK

Bubbles on February 7, 2006 at 3:25 PM | PERMALINK


Excellent post, Bubbles. Very thought provoking.

And speaking of provoking thought, hey CN, did you read it? A lot of words I know, and since you clearly know everything and seem extraordinarily close minded, I find it hard to believe you could grasp it. But maybe, just maybe, you are wrong about something, anything. Give it a whirl.

Posted by: E. Henry Thripshaw on February 7, 2006 at 4:31 PM | PERMALINK

Wrong CN but you live in a dream world anyway.
You keep spouting any old shit that you want to be true, and I point you to links with like facts and figures. And I'm living in a dream world?

Posted by: conspiracy nut on February 7, 2006 at 4:34 PM | PERMALINK

If you cut taxes disproportionately for the rich, in hopes that they're going to invest in expansion of industrial capacity, you've got no guarantee that they're going to do so IN THIS COUNTRY.

Furthermore, even the rich (except for the nouveau riche, usually takes them a generation or so to settle down) can't be counted on to simply consume more. The economy is better off if the middle class is able to trade in the Pinto on a new Lumina because there are 10s of millions in the middle class, as opposed to mere millions of seriously rich. Under the same scenerio, the wealthy really only need so many 60' boats (power or sailing) and only so many second homes. In short, for all economies you want to boost mass consumption of "normal" goods. Boosting the consumption of high end goods will never do much to bouy the economy.

No matter how much you cut taxes, pay attention here idiot conservatives (yes that's you Nathan and CN), you can't make everyone rich or even comfortable.

If you increase taxes disproportionately for the rich, in hopes of relieving middle-class consumers of the burden of financing the government, then the rich STILL CONSUME JUST AS MUCH, and the middle and lower classes consume more. The consumer-spending-driven economy will thrive. IN THIS COUNTRY. Posted by: Osama_Been_Forgotten

Exactly!

The same applies to the nonsense about "freeing up capital for investment" by cutting capital gains and other transaction costs. If you are wealthy enough that your individual investment in a particular industry or even company is significant enough to spur production (innovation, expansion, etc.), you are so wealthy that tax rates of even 50% wouldn't affect your standard of living. However, since most investment is either institutional or weighted toward the invidividual small holder in the aggregate, this glorious anti-tax theory of boosting the economy is utter bullshit as well. Most people hold so few shares of stock in individual companies that cutting capital gains taxes has only a negligible affect on their finances. Again, the only people who benefitted from this recent change were the wealthy.

Same is true of the crusade against the inheritance tax, which affects less than 5% of all Americans. Though to hear the lying SOBs in the Reublican party, you'd think that it was sucking the American economy dry.

Individual investors do not drive production, etc. The managers of firms make these decision based on demand. The point was made above that tax cuts for the wealthy in times of slack demand (and rising unemployment within the middle and lower classes) does not goose the economy in the least. In fact all it does is drive up the national debt.

Posted by: Jeff II on February 7, 2006 at 4:36 PM | PERMALINK

"Anyway, for a clue, each American family, on average, will give up $27,000 to the federal government, about 1/4 of the family paycheck. They will give up almost another 1/4 for state and local. "

This average here being *mean*, not median. The median American family income in 2004 was ~$44K. The percentages of pre-tax income can be found here. Plus, you're failing to include the benefits that Americans get from their gubmint: policing, schools, income stability during unemployment and old age, medical coverage if old or destitute, roads, regulation of industry, security, etc., etc. Seems to me you're being disingenuous here.

Posted by: Urinated State of America on February 7, 2006 at 4:36 PM | PERMALINK

E. Henry
It was said better by another: linky

Posted by: conspiracy nut on February 7, 2006 at 4:37 PM | PERMALINK

"Here's your clue: the government has no money. Everything they get, they take from people that work for a living."

A lot of lefties don't actually have to work for a living. That's how they have plenty of time to take up professions in activism and protesting.

Posted by: Freedom Fighter on February 7, 2006 at 4:41 PM | PERMALINK

" if you increase taxes you will slow the economy and increase tax receipts

I would hope that increasing taxes would increase tax receipts. But I don't see why it will necessarily slow the economy. And there seems to be lots of evidence that in many cases it doesn't.

It has been a long time since I had economics, but my memory is that the problem with taxes is not tax revenues, per se, but that governments typically choose to spend tax revenues on goods and services--bombs or social security payments, for example--that do not generate as much wealth as could be generated if the same amount were used for capital investments. In addition, governments can be ponderous, calcified and crowd out opportunities for growth and change.

But none of this is a problem of taxation. These are problems of investment, competent management, will and organizational vision.

But it seems to me a dollar invested wisely is a dollar invested wisely, regardless of its source. A billion dollars will stimulate the economy whether it is the government buying windmills to generate electricity or, say, Enron-ette buying windmills to generate electricity.

All the evidence refutes the Republican obsession with cutting taxes. Their "economic philosophy" isn't really about the economy: They just have flawed characters.

Posted by: PTate in MN on February 7, 2006 at 4:42 PM | PERMALINK

Listening to liberals talking about economics is like listening to Moslems talk about freedom.

Posted by: Freedom Fighter on February 7, 2006 at 4:43 PM | PERMALINK

Jeffrey Davis says:
"A 100% rate would produce lots of money.
The British lived with tax rates > 100% for a long time (a 98% bracket + the VAT). It wasn't a healthy situation for accumulating wealth, but it didn't produce the $0 so fabled in song and story."

Apparently you're unfamiliar with the tax evasion and shelters prevalent during that period. the effective tax rate was much lower. I lived in Norway during the late 1970's when they had a similar tax rate...the amount of tax evasion was breathtaking.

I was pointing out that the "proof" of the Laffer curve by selecting the two extreme data points was ridiculous. The general maxim of the Laffer curve was that there would be 2 points at which tax revenue would be identical -- it's supposed to be like a bell shaped curve or something. Well, that's bollocks. The two extremes obviously DON'T produce the same revenue. Even over two years.

Furthermore prior to that there's the extremely dubious assumption that economic activity can be easily predicted from tax rates. The rational behavior of a government is to spend the money it believes necessary and then to raise the money through the taxes that can rationally be believed to produce it.

The Republican tax policy since Reagan has been beyond merely insane, beyond simply criminal, and has progressed, I think, into the treasonous. They're destroying the country because of their obsessions and the intellectual vanity of ijuts.

Posted by: Jeffrey Davis on February 7, 2006 at 4:44 PM | PERMALINK

CN: That's it? That's your reaction to a post that is a brief and thoughtful analysis of factors influencing the current economic situation? To link to the communist manifesto?

I doubt you read it. But it certainly in no way is advocating communism. I hope those black helicopters get you soon.

Don't feed the trolls is relative advice. Reading your posts makes me long for tbrosz. Ouch.

Posted by: E. Henry Thripshaw on February 7, 2006 at 4:46 PM | PERMALINK

All the evidence refutes the Republican obsession with cutting taxes.
Except Sweden.

Posted by: conspiracy nut on February 7, 2006 at 4:48 PM | PERMALINK

The Republicans think they can justify any hare-brained idea that comes into their heads. Yessir, if we lower taxes, we'll raise more money. "Double speak" was coined to describe these guys.

Let's say a Republican decides to kill his girlfriend. How can he convince everyone it is a sterling idea? Well, if he makes the murder really brutal, it'll cause one of those media sensations. Then sales of all media will go up, which will be good for the economy. And it will be good for the national psyche because it will get people's minds off their own troubles. It will help elect Republicans because they can run as tough on crime. He will probably ask for an earmark to help him purchase the murder weapon.

Posted by: James of DC on February 7, 2006 at 4:49 PM | PERMALINK

E. Henry
CN: That's it?
That's all that's needed, as long as you think taxes, or a lack thereof, is the problem, or the answer. And it's especially all that's needed when the automatic answer to all problems is "tax the rich".

And funny how that seems to be the answer to all problems.

Posted by: conspiracy nut on February 7, 2006 at 4:51 PM | PERMALINK

So is Kevin saying increasing taxes results in growth or results in larger tax revenue for the government?

Posted by: Freedom Fighter on February 7, 2006 at 4:51 PM | PERMALINK

"Plus, you're failing to include the benefits that Americans get from their gubmint: policing, schools, income stability during unemployment and old age, medical coverage if old or destitute, roads, regulation of industry, security, etc., etc. Seems to me you're being disingenuous here. "

Urinated. I was not trying to impose a judgement, just give an (bad) estimate of the cost of doing labor in the U.S. Obviously everyone assumes we have some amount of government.


Posted by: Matt on February 7, 2006 at 4:52 PM | PERMALINK

"Let's say a Republican decides to kill his girlfriend."

Teddy Kennedy is a Republican?

Posted by: Freedom Fighter on February 7, 2006 at 4:53 PM | PERMALINK

that's really what this is all about. The rest is just bullshit to try to sleaze their way into getting what they want.
Posted by: Osama_Been_Forgotten on February 7, 2006 at 4:17 PM

I believe this pretty much sums it up. Taxes, growth, prosperity, bla bla bla - it's all bullshit designed to hide greed and feelings of superiority.

If you think taxes are evil, feel free to move to Somalia. If you don't want to do that, then all we are talking about is how much tax for how much service.

Posted by: craigie on February 7, 2006 at 4:57 PM | PERMALINK

Teddy Kennedy is a Republican?
You know, if you further consider this:

It will help elect Republicans because they can run as tough on crime
It helped elect Teddy as being strong on women's rights, so maybe he is a Republican!

Posted by: conspiracy nut on February 7, 2006 at 4:57 PM | PERMALINK

If the Democrats really agree with you, then they should keep hammering at it.

Posted by: contentious on February 7, 2006 at 5:07 PM | PERMALINK

Would it have been better to remove Saddam in 1991, or 2003? See an analysis of each scenario here :

http://futurist.typepad.com

Posted by: Tester on February 7, 2006 at 5:11 PM | PERMALINK

"It helped elect Teddy as being strong on women's rights, so maybe he is a Republican!"

He was a Rove mole all along! I knew it!

Posted by: Freedom Fighter on February 7, 2006 at 5:11 PM | PERMALINK

Listening to liberals talking about economics is like listening to Moslems talk about freedom.
Posted by: Freedom Fighter on February 7, 2006 at 4:43 PM | PERMALINK

Listening to righties talking about freedom is like listening to Moslems talk about freedom. Listening to righties talk about economics is like listening to scientologists talking about psychology.

Posted by: Osama_Been_Forgotten on February 7, 2006 at 5:11 PM | PERMALINK

Freedom Fighter,

Okay, let's say a Republican decides to kill her boyfriend:

http://www.freerepublic.com/forum/a3910b26e685a.htm

"Laura Bush: 1963, ran stop sign and killed boyfriend"

Posted by: DR on February 7, 2006 at 5:12 PM | PERMALINK

Just to add to the quotes someone posted above:


The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.

John Galbraith

Posted by: lib on February 7, 2006 at 5:13 PM | PERMALINK

SO FACTUALL WRONG!

REAGAN TAX CUTS, '81-'86: 25.0% ACROSS THE BOARD.
CLINTON AND BUSH 41 TAX INCREASES, '90-'93: 1.5% ACROSS THE BOARD.

SINCE TAX RATES WERE STILL 23.5% BELOW THEIR 1981 LEVEL, HOW DOES THAT CONSITUTE "TAXING OUR WAY OUT OF THE 1981 TAX CUT DEFICITS".

[NOTE: TAXES ARE NOW 35% BELOW THE 1981 LEVEL THANKS TO BUSH'S 12% TAX CUT THAT MADE THE OVERALL TAX SYSTEM MORE PROGRESSIVE:

http://www.slate.com/id/2108201/sidebar/2108203/]

THE QUESTION BEING, IF REAGAN'S '81 25.0% TAX CUTS WERE BAD WHY DID CLINTON NOT RAISE TAXES 25.0% INSTEAD OF 0.8%? ANSWER, THEY WERE NOT AND CLINTON DID NOT BECAUSE THEY WERE GOOD FOR THE ECONOMY THAT GREW SO AS TO TURN THE DEFICITS INTO SURPLUSES.

OR, IF THE NOW 35.0% LOWER TAXES SINCE 1981 ARE SO BAD, WHY DON'T DEMOCRATIC POLITICIANS CALL FOR A 35.0% ACROSS THE BOARD TAX INCREASE.

TOH

MR. DRUM, YOU ARE WEAK; NOT EVEN A SKILLED PROPAGANDIST.

Posted by: The Objective Historian on February 7, 2006 at 5:16 PM | PERMALINK

The modern REGRESSIVE-DEMOCRAT is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for PERSONAL DEPRAVITY, LASSITUDE, SELF-GRATIFICATION BEFORE RESPONSIBILITY, AND UNACCOUNTABILITY.

TOH

Posted by: The Objective Historian on February 7, 2006 at 5:19 PM | PERMALINK

You guys haven't given Reagan's "trickle down" theory a chance to work yet. Hang on. The rich might start buying American goods yet instead of better made foreign goods if Bush will just cut their taxes more. You guys are so impatient. Reagan would be so pissed with you.

Posted by: murmeister on February 7, 2006 at 5:20 PM | PERMALINK

PTate in Maine - I agree entirely. It depends on what the taxes are spent. Are they investments or boodoggles. Of course we don't always know before the fact. Military expenditures are a waste of time if they don't keep you out of a war or help you win one. Roads are a good investment unless they are 'bridges to nowhere'. That's why I prefaced the statement with 'In general...'

Posted by: NeilS on February 7, 2006 at 5:23 PM | PERMALINK

SELF-GRATIFICATION BEFORE RESPONSIBILITY, AND UNACCOUNTABILITY. Posted by: The Objective Historian

Let me guess, you cribbed this from either Bob Ney or Tom DeLay's campaign literature.

Posted by: Jeff II on February 7, 2006 at 5:23 PM | PERMALINK

The Objective Historian is engaged in one of man's oldest excercises in childish temper-tantrums.

Raising his voice.

TOH - please do us all a favor, and move on to the next step. Hold your breath until you turn blue.

Then keep holding it.

Posted by: Osama_Been_Forgotten on February 7, 2006 at 5:24 PM | PERMALINK

Freedom Fighter-

Kevin is saying that increasing taxes raises tax revenue, up to a point that has never been reached in US history. I think the point is lower than he thinks, but Kevin is implictly making another point. The Laffer curve implies that there is a point where tax revenue will be maximized, so there should be some debate on where that point is located. (Kevin, if I'm reading in something you didn't mean, please correct me.) You can infer the same thing from Nomo's point about dropping tax revenue to 0.

He's said nothing about whether it will cause economic growth, and I'm not sure if anyone in this thread has made a claim on that one way or another.

(Yes, I am giving Kevin a bit of a hard time-but that's because he is one of the liberal pundits who usually thinks his claims through very carefully, so I find it really painful when he makes a claim like the one I complained about last month, or the one in the post which I objected to in this thread.)

Posted by: Nemo Ignotus on February 7, 2006 at 5:24 PM | PERMALINK

matt,

Or, think of it this way. For each of your families, there is almost on other shadow family your support. Your adopted family earns money from government spending and mandates.

I don't know about you but my adopted family lives in Iraq and works for Haliburton.

Posted by: Tripp on February 7, 2006 at 5:28 PM | PERMALINK

TOH:
Please review RFC 1855, Section 2.1.1, bullet-point #16 at:
http://www.dtcc.edu/cs/rfc1855.html

Posted by: Osama_Been_Forgotten on February 7, 2006 at 5:28 PM | PERMALINK

"Anyway, for a clue, each American family, on average, will give up $27,000 to the federal government, about 1/4 of the family paycheck. They will give up almost another 1/4 for state and local. "

So, that's $108,000 in income (27k x 4). And $54,000 a year in taxes for each family, on average (27k + 27k)?

What percentage of families would you say has such a tax bill? Good luck finding even one.

The federal income tax burden for families is at historic lows.

Posted by: zenger on February 7, 2006 at 5:30 PM | PERMALINK

Oh god! Your thinking of the LOGRITHMIC CURVE, NOT THE LAEFFER CURVE!

The logrithmic curve represents the limitations of an environment on the growth of an organism or a population of organisms.

And yes, it is applicable to tax rates and government revenue.

But it's not the Supply Side economics' "Laeffer Curve"!

Posted by: Dr. Morpheus on February 7, 2006 at 5:30 PM | PERMALINK

"Here's your clue: the government has no money. Everything they get, they take from people that work for a living."

Well, now, that is getting more and more true under Bush, of course, but I am very glad to hear you support increasing the taxes on the rich (who have inherited their money) and the investment class (whose income comes from interest and investments).

Leave us workers alone!

Posted by: Tripp on February 7, 2006 at 5:31 PM | PERMALINK

Nemo,

I alluded to it by pointing out that it must be considered in addition to the maximization of government revenues, but it was ignored.

Posted by: Yancey Ward on February 7, 2006 at 5:33 PM | PERMALINK

The Laffer curve implies that there is a point where tax revenue will be maximized, so there should be some debate on where that point is located.

If righties actually believed in the Laffer curve, they'd propose raising taxes gradually until the optimal point was reached, (correcting for other influences) and freeze taxes at that point.

But they don't actually believe in this either. They just want to find any reason to justify cutting taxes.

Posted by: Osama_Been_Forgotten on February 7, 2006 at 5:35 PM | PERMALINK

The Objective Historian: Now I told you, the medication at night is to help you think more clearly and to make you calmer. You need to take it regularly, otherwise you will get in trouble with your behavior, and might have to go back to the hospital. You don't want to do that, do you. Now take your meds!

Posted by: TOH's Psychiatrist on February 7, 2006 at 5:35 PM | PERMALINK

If you want my opinion, here it is.

Tax only the actual incomes of the filthy rich, them only, get them heavily and fund all government from that. Do not tax savings or investment, just income and dividends. (essentially a progressive consumption tax leaning on the filthy rich only)

What you will get is a very small, efficient government, providing basic services, a more or less reasonable distribution of income, less meddling in foreign affairs, a better environment, faster technological advancement, reduction in global warming, better uitilization of resources, a generally large improvement in standard of living, etc etc etc.

My reasoning is thus: If your population earns between 0 to $500,000 per year, with no taxes and basic government services, then the population can enjoy a lifetime of moving up and down the income ladder without reaching the filthy rich monopoly limits. 0 - 500,000 (pick your limits) represent to me a very healthy distribution of income.

As parts of the population approach filthy limt levels, they will defer income and pool investment. That is, they will limit their income and expand their investments. The investment pool is unavailable to government, and owned by a population with a more or less healthy distribution of living standards.

You will get small government because those who approach filthy rich will have a stake in either reducing taxes or keeping government small; not bothy. If the richy attempot to reduce the progressive rates, then the liberals and conservatives will demand ever greater government. The reverse is true. If liberals and conservatives demand special government programs for their constituents, the near filthy rich will step in on the tax reduction side.

Everyone is forced to work within an income distribution which provides sufficient incentives but keeps government in check.

It is my theory, tax trevenue and progressivity determine how much government you get. There is a kind of supply and demnd going on in congress, it is not just politics. Make the rich pay until you get the population distribution you like, and low and behold, you will get the amount of government you want.

Big government liberals and conservatives have always gone to a flat tax to expand their favorite government programs, they never increase taxes to fund their programs, they decrease taxes. Supply and demand. Reagan wanted a ,massive, humongous, almost communist expansion of governmen5t, so he went to flat taxes. Clinton wanted to get the fat assed welfare moms off welfare and on to work, so he taxed the rich.

It is an optimization problem, and there is a lot of banging against the wall on this because some idiots think you can reduce progressivity and reduce government; or increase progressivity and increase government. Not so. Contary to conventional wisdom, the two work against each other, and politics is all about pretending this is not the case.


Posted by: Matt on February 7, 2006 at 5:37 PM | PERMALINK

Look at it this way: If there are ten families making 40,000 and paying 4000 each in taxes and one family making 1,000,000,000,000 and paying 36,000 in taxes then we can cut the top rate so the 1,000,000,000,000 is paying no taxes and the other families are paying everything to taxes and the "average family tax" stays the same.

"Average" is such a useful term when the distribution is highly skewed, don't you think?

Posted by: Tripp on February 7, 2006 at 5:38 PM | PERMALINK

Tripp
Leave us workers alone!
Is there some reason that you think somebody else ought to buy your government for you? Do you think they should buy homes and cars for you as well?

Posted by: conspiracy nut on February 7, 2006 at 5:44 PM | PERMALINK

Matt,

Huh? With a tiny government how in the world do you intend to enforce this tax on the rich?

At best you'd get isolated fiefdoms. I think we already tried that model in the middle ages.

Have you studied any history at all?

Posted by: Tripp on February 7, 2006 at 5:44 PM | PERMALINK

nut,

I have two priciples:

We should all be taxed in proportion to what we get from government.

The strong should care for the weak.

Posted by: Tripp on February 7, 2006 at 5:47 PM | PERMALINK

We should all be taxed in proportion to what we get from government.
No, you don't believe this. Otherwise welfare and social security recipients, who get basically everything from the government, would be taxed the most. You want to forward some half-baked argument that the rich benefit disproportionately from government because they have more to lose.

Of course, the poor cannot afford to lose anything and stay alive, whereas the rich can afford to lose a lot and still stay alive; so the poor can less afford any loss. But you are going to ignore that. Just like you're going to ignore actual government expenditures when you make this claim.

Been there, done that.

The strong should care for the weak.
This I agree with. It's your belief that the government is a necessary (or even desirable) part of this that is unwarranted.

Posted by: conspiracy nut on February 7, 2006 at 5:54 PM | PERMALINK

THE QUESTION BEING, IF REAGAN'S '81 25.0% TAX CUTS WERE BAD WHY DID CLINTON NOT RAISE TAXES 25.0% INSTEAD OF 0.8%? ANSWER, THEY WERE NOT AND CLINTON DID NOT BECAUSE THEY WERE GOOD FOR THE ECONOMY THAT GREW SO AS TO TURN THE DEFICITS INTO SURPLUSES.
Posted by: The Objective Historian

Because, you ignorant shit, Bush the Elder was already half way there with his tax increase.

Reagan saddle Bush the Elder with a ballooning deficit. The bravest thing that man ever did, and that includes his parachuting into the Pacific during WWII, was going back on his pledge of "No new taxes." The normal economic cycle and cutting interest rates helped spur the economy in the mid- to late 1990s. Budget surpluses were the result of the budget cutting during the Clinton years, higher tax rates on the filthy rich, and booming economy.

Posted by: Jeff II on February 7, 2006 at 6:04 PM | PERMALINK

the result of the budget cutting during the Clinton years
Thank you, Newt!

You are aware that Clinton's deficits were basically the same as Bush I until Newt got rolling, right?

Posted by: conspiracy nut on February 7, 2006 at 6:09 PM | PERMALINK

You sure about at Hoss?

Posted by: Dustin Ridgeway on February 7, 2006 at 6:13 PM | PERMALINK

Thank you, Newt! Posted by: conspiracy nut

Sorry, numb nuts. The cost-cutting was primarily WH driven. As a matter of fact, Newt didn't get shit done, save for having all the incoming Rethug nimrods sign a loyalty oath, and for holding his breath until the government shut down. After that he was removed as leader of the House Republicans, and then defeated in his next election.

Posted by: Jeff II on February 7, 2006 at 6:21 PM | PERMALINK

PTate: It has been a long time since I had economics, but my memory is that the problem with taxes is not tax revenues, per se, but that governments typically choose to spend tax revenues on goods and services--bombs or social security payments, for example--that do not generate as much wealth as could be generated if the same amount were used for capital investments. In addition, governments can be ponderous, calcified and crowd out opportunities for growth and change.

Actually, I understand that much of government spending has a pretty high Return on Investment. I remember a CBO or GAO study (I can never remember the difference) from some time back that looked at specific programs and concluded that most had more benefits than they cost. The problem is that the benefits of, say, a well-maintained highway system or an educated populace are pretty difuse and hard to measure. This type of payback only shows up in increased GDP/capita and other such measures.

Posted by: mcdruid on February 7, 2006 at 6:22 PM | PERMALINK

Nemo:
The Laffer curve implies that there is a point where tax revenue will be maximized, so there should be some debate on where that point is located.

Osama
If righties actually believed in the Laffer curve, they'd propose raising taxes gradually until the optimal point was reached, (correcting for other influences) and freeze taxes at that point.

Ideally, we would determine the spending level of the government first, and then peg taxes to cover that. Most polls show people actually want to spend more on most programs, so that is why there is always upward pressure on government spending.

Posted by: mcdruid on February 7, 2006 at 6:27 PM | PERMALINK

You sure about at Hoss?
I recommend a class in English as a Second Language, but I assume that was directed at me. This is a honking PDF (which I am told I should warn people about), but if you open it, you'll see the following surplus/deficits:
1990 $-221B
1991 $-269B
[Clinton elected]
1992 $-290B
1993 $-255B
[Newt and crew elected]
1994 $-203B
1995 $-164B
1996 $-107B
1997 $ -22B
1998 $ +69B

Now as has been pointed out, Clinton is not responsible for 1992. And it does take a couple of years for anything to happen.

Posted by: conspiracy nut on February 7, 2006 at 6:27 PM | PERMALINK

CN, inane statement:
Otherwise welfare and social security recipients, who get basically everything from the government, would be taxed the most.

Firstly, social sec recipients do get taxed more, they pay social security.

Secondly, little government spending goes to welfare recipients, most goes to large corporations and their (mostly wealthy) shareholders. After all, some 50% of Federal tax receipts go to the military.

Posted by: mcdruid on February 7, 2006 at 6:30 PM | PERMALINK

Jeff II
The cost-cutting was primarily WH driven
Sure, the Soviets just happened to spend themselves into the ground while Reagan was president, Libya just happened to turn over their weapons program after Bush invaded Iraq, and the deficit just happened to shrink after Newt was elected.

Just coincidences, pay no attention to that man behind the curtain.

But ain't it funny, all those nice things coinciding with Republican's? We must be very lucky. Isn't it nice to have lucky people in charge?

Posted by: conspiracy nut on February 7, 2006 at 6:31 PM | PERMALINK

But ain't it funny, all those nice things coinciding with Republican's? We must be very lucky. Isn't it nice to have lucky people in charge?
Posted by: conspiracy nut on February 7, 2006 at 6:31 PM | PERMALINK

Yeah, Watergate, Iran Contra, S&L disaster, 9/11, Enron. . . very lucky indeed!

Posted by: Osama_Been_Forgotten on February 7, 2006 at 6:34 PM | PERMALINK

After all, some 50% of Federal tax receipts go to the military.
And again, we have lefties making shit up. You know, when the facts are so obviously against you that you have to make shit up, isn't it pretty much a sign that your argument sucks?

There was a link above to government expenditures.

Posted by: conspiracy nut on February 7, 2006 at 6:35 PM | PERMALINK

OBF
All short term things, sorted out by the courts. As opposed to the fall of the Soviet Empire and the freeing of Eastern Europe, the ongoing freeing of the Middle East (which you boys are vehemently opposing), and fiscal responsibility in at home.

At least we manage to get the big shit right.

Or should I point out Whitewater, Rose Law Firm billing records, the Travel Office, and Iranian hostages.

Posted by: conspiracy nut on February 7, 2006 at 6:38 PM | PERMALINK

Just coincidences, pay no attention to that man behind the curtain.Posted by: conspiracy nut

As a matter of fact, not one of those things had to do with anything a Republican did.

The Soviet Union had been in economic decline for a decade by the time Reagan took office. They were overextended, just like us today.

Gingrich had nothing to do with budget reduction. Again, that was WH driven, aided primarily by a booming economy that dramatically increased tax revenues at levels that fucking conservatives claimed were cripple business, in spite of the fact that most U.S. corportations have an effective tax rate of zero.

Libya had been in negotiations with the EU for four years prior to Bush taking office before the public announcement of renouncing their nascent weapons programs, which was traded for the lifting of UN sanctions so it could trade again with the EU. The U.S. had nothing to do with it.

Posted by: Jeff II on February 7, 2006 at 6:51 PM | PERMALINK

All short term things, sorted out by the courts.

Since none of the guilty parties served any time, and since convicted felons like Poindexter are still working in government, "sorted out by the courts" is a matter of opinion. Grossly and dishonestly mistaken, in the case of yours.

Posted by: Osama_Been_Forgotten on February 7, 2006 at 6:56 PM | PERMALINK

At least we manage to get the big shit right.

Like allowing control of the Iraqi government (and oilfields) to fall into the hands of Iran. Good job with that. Heckuva job.

Oh yeah, good job with catching Osama bin Laden too.

And good job with "restoring honesty and integrity to the White House" - that one puts a smile on my face just about every single day.

Posted by: Osama_Been_Forgotten on February 7, 2006 at 7:03 PM | PERMALINK

"You are aware that Clinton's deficits were basically the same as Bush I until Newt got rolling, right?"

They worked hand in hand. Clinton raised tax progressivity, and Newt cut government, the grand compromise.

"Huh? With a tiny government how in the world do you intend to enforce this tax on the rich?"

What? We have some 1 million filthy rich? Hire 500 gunmen. I am sure taxes will be paid fairly quickly.

"Have you studied any history at all?"

It is hard to extrapolate my theory to periods prior to the modern postwar state. After the war we had all sorts of modern societies trying different forms of taxation, all of them more or less modern industrial states.

Reagan flattened taxes, the federal government ballooned to 23% of the economy. Kennedy flattened taxes dramatically, and government spending began increase ten fold over the private sector. Social security is a flat tax, and it has done nothing but increase in size. Clinton put in progressivity, and Newt responded with smaller government.

In the Soviet Union taxes were very flat. (not mentioning here the enormous black market economy)

Then of course, Bush junior who has not yet found a government program he didn't like, and taxes are flatter than hell.

There is a dynamic going on that is not well understood or just ignored. Reagan wanted to sell the rich some trillion dollars in defense equipment. The rich, being smart people, told him to fuck off. So Reagan spread the price over 100 million middle class folks.

These politicians are selling us government. We are consumers of the stuff, and we judge our purchases according to our individual price. I get to be part owner of a some fighter jet for a mere $200; the same fighter jet cost the rich some $5,000. Who do you think will do the buying? The rich pay 20 times the price, but they are no closer to flying one of these things then some middle class house painter.

So, you demand the filthy rich buy all of government at some enormous inflated price, and they will certainly balk. Just what a good libertarian wants. Pick the amount of government you want, lower the price (decrease progressivity) until you get enough buyers.


Posted by: Matt on February 7, 2006 at 7:11 PM | PERMALINK

'conspiracy nut' posted:

"You are aware that Clinton's deficits were basically the same as Bush I until Newt got rolling, right?"

How could anyone be "aware" of it when it's fantasy ?

.

"1990 $-221B
1991 $-269B
[Clinton elected]
1992 $-290B
1993 $-255B
[Newt and crew elected]
1994 $-203B
1995 $-164B
1996 $-107B
1997 $ -22B
1998 $ +69B"

Newtie and the Blowhards did not take office until 1995, not 1994, and the Republican Majority never got any major budget legislation signed into law until February of 1996 (you do remember how the Republicans shut down the federal government, TWICE, in January and February of 1996 ?). By then, the budget was nearly already balanced.
.

Posted by: VJ on February 7, 2006 at 7:32 PM | PERMALINK

Kevin wrote:

"Tax increases make tax receipts go up and tax cuts make them go down"

That's blasphemous to the RightWing, as they have come to this planet from Bizarro World.

The statement quite true, but an attack against their Holy Grail.

What can I say, it's all they got ?
.

Posted by: VJ on February 7, 2006 at 7:40 PM | PERMALINK

VJ: Furthermore, the agreement that Clinton and the Republicans signed prolonged the time it took to get to surplus. The agreement involved goodies for both sides that increased spending and reduced taxes.

Matt: "BRussel, you are on to something. Reagan and Bush cut taxes and spending went way up. Clinton raised taxes and spending went down. There may be something here, look further into it."

I'm not sure what you mean by that. How could tax cuts increase government spending and vice-versa? Isn't that just correlation rather than causation? Can you explain more directly what you're hinting at?

Posted by: BRussell on February 7, 2006 at 7:49 PM | PERMALINK

Remember: we didn't grow our way out of the Reagan tax cut of 1981. We taxed our way out of it.

Looks like history will repeat itself... but it won't happen until sometime after 2008.

Posted by: E. Nonee Moose on February 7, 2006 at 8:18 PM | PERMALINK

It really should look like this:

1990 $-221B
1991 $-269B
1992 $-290B
[Clinton Elected]
1993 $-255B
1994 $-203B
[Newt and crew elected]
1995 $-164B
1996 $-107B
1997 $ -22B
1998 $ +69B

This gives somewhat more credit to Clinton.

However, the Republicans passed and Clinton vetoed a law that would have dedicated the surplus to paying down the accumulated debt. Clinton subsequently led the charge to increase federal spending.

The real problem is that federal entitlements are indexed to inflation. It would be better if entitlement increases were part of the budgetary process along with discretionary spending.


So, what's the Democratic platform so far (as constructed by Kevin)?

1. Defense and security

2. Nationalized health care ("single payer"?)

3. Better energy policy

4. Raise taxes to balance the budget

5. Judges more liberal than Alito

6. Clean government (even more campaign finance "reform")

I think you have a tough sell. Democrats won't put security first (instead, they will object to being called "soft on defense"), and there is a conflict between 2 & 3 (which require extra federal spending) and 4.

But, if you can add 4 more, you can call it the "new contract with Americans" and run on it.

Posted by: contentious on February 7, 2006 at 8:37 PM | PERMALINK

Here is another clue. Look at the appropriation process in the 20th century, how it has changed, and correlate that with the progressive income tax and deficit spending.

http://www.tax.org/Museum/1901-1932.htm

Prior to 1919, the income tax was non-existent, unconstitutional. Regressive excises taxes ruled the day. The appropriations process spread out among many committees.

Ater 1920, the progressive income tax, with as much as 77% being the top rate. 58% of government revenue came from the new income tax, including excess profits tax. This same period saw the concentration of budget authority moved to a single appropriations Ways and Means Committee. This centralized budget process kept the government in surplus, generally, and very few Americans paid taxes at all; most of it coming from the wealthy and from excise taxes. This continued until FDR.

FDR entered with the depression in full swing, and talked a lot about progressive taxes, but as the recession progressed, regressive excise taxes becamse the norm as the income drops reduced income tax revenue from the rich.

FDR basically broadened the income tax, including income taxes for the majority of Americans, not just a select few. But the burden of the depression and the war kept taxes relatively regressive and mainly based on excise taxes. During t6his period the decentralization of the budgetary process restarted, as did the growth in government expenses.

Basically we kept the decentralized budget planning process until Newt and Clinton. The authority was tightened, controlled and we went into surplus.

Under Bush, flat taxes, and every congressman and the spending is out of control.

http://www.econlib.org/LIBRARY/Enc/FederalBudget.html

Look at this paper by John Cogan on the Tragedy of the Commons. When budgeting authority is decentralized by Congress, deficit spending goes wild. When buidgeting authority is centralized in Congress, deficits are tamed.

So why does Congress sometime prefer decentralized budgeting in Congress and why does it sometimes prefer decenralized?

The answer lies in the mode of revenue collection. In general, the more taxpayers contributing to the revenue, the more budgeting committees you need. The more the budget goes out of control.

Back to my theory. As FDR said, the time for politics is over, let tax the richy (which he was never able to do). Put all the revenue collection on the rich and you have a restricted market for government programs, the "buyers" are fewer, the sales job harder, and you use a centralized, controlled spending process. You broaden the tax base to incluse all of us in a significant portion, and you want many spending committess because you have many buyers of government stuff. The process gets out of control.

Just tax the rich, fuck the poor, make them keep their money. Do this, and this single group of government service buyers will restrict the spending process, tighten the control, and get you smaller government.

Conservatives have it wrong, the Laffer curve is incomplete. Congress is a semi-controlled market for government services. If you increase the number of buyers, lower the price; and you will sell a ton of government.

Raise the price, charge a premium, and only sell to the rich, and you will sell very little of the stuff.

It is not all democracy and politics. It is a wierd combination of supply/demand and political monopolies. Just look at what is happening with earmarks for further examples of this.


Posted by: Matt on February 7, 2006 at 8:45 PM | PERMALINK

Osama:

POINT WELL TAKEN.

Bush I raised taxes about the same as Clinton, 0.5%-1.0%, i.e., nominally at most.

SUBSTANTIVELY, the myth is that Clinton raised taxes. He did raise them 3.6% marginally on the wealthiest Americans and raised some taxes in behavior-targeted policy making. But any internet resource will show he raised taxes across the board a CONSTANT-GDP 0.8%. In 1993 GDP that is $80B and that is only presuming no anti-growth effect from the new taxes. The deficit was close to $400B.

Underscore: By historical standards, Bill Clinton did not raise taxes at all.

What he did, in his skillful way, is raise them a tiny bit to quiet the Regressive-Democrats but so little as to not interfere with the supply side growth that continued after a lull in Bush I's 4th year (1992 year-long growth: 4.2% - which is spectacular by historical standards).

Again, by 1994, 92% of Reagan's tax cuts remained in place. Today, thanks to Bush II, 140% of Reagan's tax cuts are in place.

Silly, hopeful, sad, desperate, child-like BUT DANGEROUSLY IGNORANT fools.

TOH

Posted by: The Objective Historian on February 7, 2006 at 9:01 PM | PERMALINK

DRUM: SICKENLY DECEPTIVE.

If you take all of the minor "increases" you referred to in your link from 1981 to 1994 by Reagan, Bush I, and Clinton, 92% of Reagan's initial 1981 tax cuts remain in place.

Notice that he lowered the highest rate to 35% from 70% and today (and since) it has remained and gone no higher than 39.6%; the other brackets had largely gone untouched, too. There were public behavior targeted taxes, of course (cigarettes, gasoline, etc.), but, again, 92% of Reagan's tax cuts were in place in 1994 and in 2001.

Sad people: this is year 26 of Reagan's Revolution; Bush I and Clinton were relative economic non-entities (ex. Welfare Reform and NAFTA) and Bush II is an aspiring but less achieving economic imitator.

Those are the facts and I have yet to be contradicted with data that disputes the above. [There is none.]

TOH

Posted by: The Objective Historian on February 7, 2006 at 9:10 PM | PERMALINK

I see someone forgot their meds again! No binky for you tonight!

Posted by: The Objective Historian's Night Nurse on February 7, 2006 at 9:14 PM | PERMALINK

Says you.

TOH

Posted by: The Objective Historian on February 7, 2006 at 9:24 PM | PERMALINK

Contentious:

All are worthwhile in theory; but you forgot the environment (or Mr. Drum did). As an Objective Historian, that is the most progressive aspect of what is generally a Regressive-Democratic platform. Its only the typical solutions to our environmental concerns the R-Ds put forth that are regressive.

TOH

PS Tell your pal Mr. Dean that I'd consider acting as paid consultant to the R-Ds, but it would take a lot of compensation for me to take on so hopeless and frustrating a project.

Posted by: The Objective Historian on February 7, 2006 at 9:29 PM | PERMALINK

Will someone tell that "Objective Historian" to keep it down next door? I can't finish my plan to conquer Italy with all his screaming and flailing! Nurse!

Posted by: Napoleon XVI on February 7, 2006 at 9:47 PM | PERMALINK

TOH,

Right now, I would not recommend that the Democrats make a big deal out of the environment.

Supporting energy development fits in with highways, bridges, and other infrastructure; cf Lincoln and the Morrill Act, and the transcontinental railway. It isn't "regressive".

Posted by: contentious on February 7, 2006 at 11:03 PM | PERMALINK
"Gravity is "not proven fact; it is opinion," Mr. Deutsch wrote, adding, "It is not NASA's place, nor should it be to make a declaration such as this about the existence of the universe that discounts a system of Intelligent Falling by a creator."

It continued: "This is more than a science issue, it is a religious issue. And I would hate to think that the bloc of religious-leaning voters would only be getting a scientific explanation from NASA. That would mean we had failed to reward the very people who voted us into office and rely on our patronizing the most."

Posted by: Windhorse on February 8, 2006 at 12:32 AM | PERMALINK

Whoa, wrong thread. Curse you tabbed windows!

Posted by: Windhorse on February 8, 2006 at 12:33 AM | PERMALINK

Pardon, I meant to say about 50% of Fed tax recipts ex-SocSec/Medicare go to the military.

Posted by: mcdruid on February 8, 2006 at 2:18 AM | PERMALINK

Favorite video game quote:

'But NPC vendors buying things isn't Demand!'

Yeah, that about speaks it.

Posted by: Crissa on February 8, 2006 at 4:15 AM | PERMALINK

Not very Objective, is he?

Posted by: Crissa on February 8, 2006 at 4:17 AM | PERMALINK

Which would prove once again, that Republicans can't handle the truth, and would rather daddy President lie to them "in their own best ineterest".

Reagan was a top 10 President. Mondale was a fool badly in need of a spark knowing if he didn't do something dramatic would get crushed. It never mattered. He was getting crushed anyway. Politicians have taken the hint. Hillary will not be running on tax increases although it'll be hard for her to fool anyone.

Your party is screwed. You cannot stop Hillary in the primaries and she cannot win nationally. She's the one person who will ensure McCain gets the GOP nomination. Big John will crush her.

Posted by: rdw on February 8, 2006 at 8:23 AM | PERMALINK

You know that I a single male , blue coller worker pay so much in taxes I can hardly afford to work

Posted by: sticky on February 8, 2006 at 9:58 AM | PERMALINK


My principles are consistent.

The rich do benefit more from our government then the poor do. They get to live as the rich. Geez, are you saying the rich don't live better than the poor?

Or are you saying the rich don't need the government to protect them? Ya, sure. That's called Fiefdoms, we already tried that, and the rich today live much better then the nobleman of old. They've got all the luxuries that being rich in a western society can provide.

So why should the poor not be taxed, or why should we have what you call welfare? Look at point two - the strong should protect and care for the weak.

You claim to agree with this principle but claim we don't need government to do it?

Yeah, sure. When else in history have the strong, out of the goodness of their hearts, cared for the weak? At best the strong ignored the weak. At worst they exploited them.

Posted by: Tripp on February 8, 2006 at 12:44 PM | PERMALINK

You know that I a single male , blue coller worker pay so much in taxes I can hardly afford to work

Yes under the Republicans more and more of the tax burden has been moved to the middle and lower class.

Oh, and they've been adding to the burden with uncontrolled spending.

But maybe Rush doesn't mention those things.

Our MN govenor Pawlenty claims to have lowered taxes, but look closely and he has actually increased taxes by calling them 'fees' and charging the middle and lower classes the fees.

If you are a smoker in MN your 'taxes' have gone down but your 'fee' has gone. He gives $100 with one hand and then takes $200 with the other.

If you are a homeowner in MN your state tax has gone down and your property tax has gone up more than the difference.

Posted by: Tripp on February 8, 2006 at 12:51 PM | PERMALINK




 

 

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