How Will it Take for America to Recover from Catastrophic Republican Mismanagement?

It'll take at least two terms of Obama which should be easy enough when this is how inept our opposition is... http://www.youtube.com/watch?v=JEle_DLDg9Y

You have no idea what the hell you're talking about. Fiscal policy is not "the American economy." It can affect it in the long term, but they are not the same.


They didn't "replace" PAYGO with tax cuts. They did cut taxes for EVERYONE--including the rich. But they also cut taxes for lower and middle income people, in some cases more than they did for the upper class.

Here is a nice read for you--just published today.


and


Jolly old "knowing how shit works."


It's widely believed by any non-Obamatron that GDP increased so dramatically because of the injection of hundreds of billions of stimulus dollars. Of course, this effect is temporary. Retail sales, consumer confidence and the like do not support the number.

Anecdotally speaking, I was sitting in a school district budget meeting the other day. They illustrated some of the revenue problems we're having, from falling interim/transfer taxes to the stimulus funds for special education going away. That one number was a good 5% of our budget. And we're not unique. The stimulus only delayed the inevitable...downsizing, which is a painful but normal (some would argue healthy) part of the business cycle.


That article is complete bunk. The stimulus didn't result in the net creating of a SINGLE job. We've lose literally millions of jobs since Obama took office. What the Obamatrons like yourself are referring to is the fictional and impossible to calculate data that "shows" jobs saved. They then argue that the situation would have been much worse had it not been for the stimulus. Of course, this is self-reinforcing delusion of sorts. "There is no evidence because there can't be any evidence." That's what they've essentially said.


First, think Obama had not fixed a single thing. The only thing I can give him credit for is getting the $800 tax credit through. I give him partial credit for sending troops to Afghanistan, though he dithered over that decision and wasn't exactly convincing in his announcement of the policy. "We must send more troops, but they can't be there forever. We must win, but winning requires us to pull out on a timeline. We must give the military all the resources it needs, which is why we're only approving 2/3 of what they said they needed...and only for short period of time."

Secondly, you've failed to demonstrate exactly what the Bush administration did to "cause a catastrophe." Deficits did not do it, because they were manageable ones. Tax cuts raised revenue, they didn't lower it. The economy was strong for the majority of the Bush years. The Bush administration was even warning on the coming mortgage meltdown two years before it happened. But gee..get a load of this...the Democrats who at that time ran Congress refused to believe that Fannie and Freddie were in trouble.

So really...what did the Bush Admin do? Yes, Bush allowed too much spending (the GOP was complicit in this, no doubt). But was that what caused the meltdown? Of course not. The mortgage crisis caused it, and that problem started 30 years ago. Bush may not have done everything right, but he didn't rape the poor and cause the economy to implode.


At this rate? He won't. His only hope is that the resilience built into the American economy will turn the tide. But he's attacking that was well, with onerous regulations and taxes....not to mention deficits that are far from manageable. (speaking of which, how can you complain about the Bush deficits with a straight face, given that Obama has literally QUADRUPLED them and spent more money than Bush did in eight years?).

No reasonable person believes that massive spending, exploding debt and rising taxes will be good for the economy. Mumbo, this is about one thing: Redistribution of wealth. That is what the goal is, even in bills like healthcare.

The short version? You're wrong. Have a nice day.

Well at least one other person here realizes this.

It seems that Democrats and liberals do know that taxing things has the effect of reducing that thing. They just seem incapable of connecting the dots all the way through or they have convenient amnesia when it suits their goals:

Let's tax cigarettes to discourage people from smoking! Let's tax soda to discourage people from drinking sugared drinks! Let's tax fast food to discourage people from eating it! Let's tax tanning salons to discourage people from tanning! Let's tax carbon emissions to reduce carbon emissions!

Let's tax income, savings, productivity and success to...oops. Yep, it happens there too. Morons.

By the way, it works the other way too. Not only does reducing taxes tend to encourage people to engage in that activity more (to the extent that they wanted to anyway.) Subsidization also encourages an activity perhaps even beyond what people would freely chose in an unsubsidized setting.

Briefly:

- Things you tax you get less of.
- Things you subsidize you get more of.

It ain't that hard to figure out. Fucking morons.

tftfy

The American Stinker? effin' morans.

By what measure do you make that claim?

How about we look at some numbers that can more objectively get us closer to this idea of productivity. The typical number that is used is GDP. Let's look:

List of countries by GDP (PPP) per capita
This article includes three lists of countries of the world sorted by their gross domestic product (GDP) at purchasing power parity (PPP) per capita, the value of all final goods and services produced within a nation in a given year divided by the average (or mid-year) population for the same year.

On that list, Denmark is shown to have a X of 36,725 or 36,604 or 36,200 in International Dollars. As compared with Singapore (49,433 or 49,288 or 50,300), Hong Kong (42,574 or 43,922 or 42,700), the U.S. (46,443 or 46,716 or 46,400) or Switzerland (42,948 or 42,534 or 41,600) which all have comparatively lower tax burdens.

List of countries by GNI (PPP) per capita shows a similar pattern.


Or we could look at something like the OECD estimates of labour productivity levels which has a sortable data table where you can sort on "GDP per hour worked." You'll see a pattern here too.

Oh and look here. Right on the very first page:


Then there's this older article but I could find no mention of Denmark at all.

I'm sure we can find other things. I should also note that to be completely fair in all measurements it would be important to measure all taxes and taxes that are actually paid as well as regulations and inflation (which are other forms of taxes) that are things that essentially add cost to certain activities.

In short though, I'm not wrong and there is ample evidence to suggest a very strong correlation to the point of calling it a causal relationship between higher taxes and regulations and other government burdens put upon businesses and people and lower standards of living, productivity and wealth (and the reverse too...lower taxes and regulations and other government burdens put upon businesses and people and higher standards of living, productivity and wealth.)

I will try to address some of the items in your links. Since the 2nd appears to basically be a repeat of the 1st, I'll just deal with the first for sake of efficiency.

Some things that have stood out which you might not have noticed:


These are good things and should be areas where the U.S. should be paying attention. The U.S. seems to be moving in the opposite direction here.

More to the point about the tax issue though is this:

Honestly, I don't think that most are morons. Some might be...the general public that believes government can create wealth are morons...certain office holders are as well. Instead, I think that Obama, his cabinet and certain members of Congress are VERY intelligent. They simply have different goals than we do. They are true progressives in the very sense of the word. True Marxism might not be their true goal, but clearly some kind of new, government controlled capitalism is. What other explanation for their actions is there?



Dude, you simply cannot compare Denmark to the United States. Their 209 GDP was $197.7 billion. Ours was 14.26 trillion. We have 307 million people, they have 5.5 million. That's right, it has about 2/3 the population of New York City. Denmark does not provide most of the world's military security, as the US has for 60 years. Denmark does not provide foreign aid like we do. Denmark simply has many fewer responsibilities in the world.

But put that aside: Are you actually arguing that high taxes are GOOD for business? Seriously?

To be honest I'm not entirely sure. I alternate between Obama being dumb because of what he says that don't make any sense and being evil (knowing what he's saying and doing won't work but doing it anyway for other "more important" reasons.) And I'm not sure which would scare me more.

The funny thing is that I'm actually more inclined to believe that people like Pelosi, Reid, Frank, Dodd, etc. are actually all very smart (okay, maybe not Dodd), very shrewd but very evil and they know exactly what they're doing. On ObamaCare for example I think they didn't give a shit how they got it rammed through, they knew it would be nearly impossible to repeal it.

Any liberal who would argue that taxes have no impact on the economy would be a moron. But rather than morons, they're not only thinking further than what you give them credit for, they're thinking further about it than you are. They're thinking in terms of externalities, while you're thinking only in terms of the isolated transaction of collecting taxes.

Two points:

1. Taxes hurt the economy, but the spending can help the economy as well, depending on what it's spent on. For example, investing in transportation benefits the economy by providing an infrastructure that everyone uses to conduct commerce. If the country and its economy are threatened by foreign enemies, the economy is helped by fighting them. Same with police stopping crime, and many other things. Of course, the government can waste money too, but not all spending is wasteful by definition.

I think most conservatives probably agree with that. But I don't think conservatives do understand the next point:

2. With respect to social services and the safety net, like education, health, retirement, etc., liberals often frame this as a simple moral question, and to me, that's a good enough argument. We should guarantee basic human dignity.

But there's an economic argument too. When the lower and middle classes understand that there is a basic safety net like Obamacare provides, they can take economic risks like starting a business without fearing that if it fails they'll never be able to bounce back. Public education means that even the poor can move up. These public services loosen up the economy so that more people are able to participate fully.

This, to me, is the basic difference between conservatives and liberals, with respect to economic policy: Conservatives believe a strong social safety net in a free market economy encourages laziness, and liberals believe it encourages economic activity.

On taxes and budget deficits, SDW and I have been back and forth on this for probably 10 years now, devoting a good portion of our combined 20,000 posts to this topic. I'll just say that I agree with the article that SDW cites, that taxes may not pull in their full revenue potential, and tax cuts may reduce revenues less than they seem, but disagree with the theory that cutting taxes raises more revenue than it loses (except perhaps in very narrow situations).

Actually they are not, because if they were they would be doing things differently.



This is highly debatable. But very Keynesian of you.



You're assuming that transport services would not be provided privately and, possibly, more safely and efficiently.



Ah, that didn't take long, the typical pro-government "since you're arguing for lower taxes and smaller government you don't want things like defense and police and stuff! See, we need more government."



I thought liberals were against legislating morality and all that? But more to the point is are a couple of errors first that a) government can "guarantee basic human dignity", b) that it does it better than the private sector activities can.



You have it pretty much 100% backwards. When the government is constantly interfering it creates uncertainty that stifles risk taking. ObamaCare will be an example that gives many businesses pause in hiring and expanding do to the potential increase in cost of each employee. This will hurt the poor disproportionately as do most liberal do-go policies. Furthermore the anti-business tone and the uncertainty about which industry is going to get the attention of Obama, when the next tax increase will be, what unfavored group will be the target after the rich have been sufficiently soaked creates enormous friction for free enterprise activity.



Education can help people move up. It needn't be public and there is much debate here whether or not the poor are even well served by the government schools.



And the conservatives have more logic, reason and evidence on their side than do the liberals on that point.

But there's considerable disagreement about how much government revenue is created by tax cuts. Most economists, I think it's fair to say, think that the government revenues are less as a result of most tax cuts. Not all, but most. That means that unless you cut government spending there's going to be more debt than would have otherwise been.

-

"The Washington Post, October 17, 2006:
"Federal revenue is lower today than it would have been without the tax cuts. There's really no dispute among economists about that," said Alan D. Viard, a former Bush White House economist now at the nonpartisan American Enterprise Institute. "It's logically possible" that a tax cut could spur sufficient economic growth to pay for itself, Viard said. "But there's no evidence that these tax cuts would come anywhere close to that."
Economists at the nonpartisan Congressional Budget Office and in the Treasury Department have reached the same conclusion. An analysis of Treasury data prepared last month by the Congressional Research Service estimates that economic growth fueled by the cuts is likely to generate revenue worth about 7 percent of the total cost of the cuts, a broad package of rate reductions and tax credits that has returned an estimated $1.1 trillion to taxpayers since 2001.
Robert Carroll, deputy assistant Treasury secretary for tax analysis, said neither the president nor anyone else in the administration is claiming that tax cuts alone produced the unexpected surge in revenue. "As a matter of principle, we do not think tax cuts pay for themselves," Carroll said. http://www.washingtonpost.com/wp-dyn...601121_pf.html

Gregory Mankiw, former Chairman of George W. Bushs Council of Economic Advisors, 2003-2005. Economics professor at Harvard.

Below is a description by Matt Nesvisky of the National Bureau of Economic Research of NBER working paper by Gregory Mankiw and Matthew Weinzierl, December 2004:

some observers have suggested that tax cuts can generate so much economic growth that they may more than pay for themselves. Most economists are doubtful about either such extreme. The consensus view is that tax cuts indeed influence national income, but not to the extent that they are fully self-financing.
Mankiw and Weinzierlfind that, in the long run, about 17 percent of a cut in labor taxes is recouped through higher economic growth. The comparable figure for a cut in capital taxes is about 50 percent. http://www.nber.org/digest/jul05/w11000.html

In the actual report described above by Nesvisky, Mankiw and Weinzierl state in the introduction:

To what extent does a tax cut pay for itself? This question arises regularly for
economists working at government agencies in charge of estimating tax revenues.
Traditional revenue estimation, called static scoring, assumes no feedback from
taxes to national income. The other extreme, illustrated by the renowned
Laffer curve, suggests that tax cuts can generate so much economic growth
that they completely (or even more than completely) pay for themselves. Most
economists are skeptical of both polar cases. They believe that taxes influence
national income but doubt that the growth effects are large enough to make tax
cuts self-financing. http://post.economics.harvard.edu/fa...ng_05-1212.pdf

Mankiw on his blog, 5/31/06:

Some supply-siders like to claim that the distortionary effect of taxes is so large that increasing tax rates reduces tax revenue. Like most economists, I don't find that conclusion credible for most tax hikes. http://gregmankiw.blogspot.com/2006/05/must-read.html


Mankiw on his blog, 3/11/07:


Senator McCain tells the National Review :


"Tax cuts, starting with Kennedy, as we all know, increase revenues."

I doubt that, in fact, Senator McCain believes we are on the wrong side of the Laffer curve. But unfortunately, fealty to the most extreme supply-side views is de rigeur in some segments of the Republican party.http://gregmankiw.blogspot.com/2007/...fer-curve.html
Mankiw on his blog, 7/2/07:
I used the phrase "charlatans and cranks" in the first edition of my principles textbook to describe some of the economic advisers to Ronald Reagan, who told him that broad-based income tax cuts would have such large supply-side effects that the tax cuts would raise tax revenue. I did not find such a claim credible, based on the available evidence. I never have, and I still don't.

The book made clear that the critique applied to a particular reason to favor the tax cuts, not necessarily to the policy of cutting taxes. There are many reasons a person might favor tax cuts besides the belief that tax cuts are self-financing there is a big difference between rejecting a policy and rejecting one argument made by some proponents of the policy.
My other work has remained consistent with this view. In a paper on dynamic scoring , written while I was working at the White House,

Matthew Weinzierl and I estimated that a broad-based income tax cut (applying to both capital and labor income) would recoup only about a quarter of the lost revenue through supply-side growth effects. For a cut in capital income taxes, the feedback is larger--about 50 percent--but still well under 100 percent. A chapter on dynamic scoring in the 2004 Economic Report of the President says about the the same thing.



even if I had changed my mind on this issue and somehow decided that broad-based tax cuts were self-financing, I would not feel bad about it. But the truth is, I haven't changed my mind.http://gregmankiw.blogspot.com/2007/...nd-cranks.html
Mankiw, Op-Ed, New York Times, 2/3/08:
"Republican candidates are fond of saying we should cut tax rates because doing so would incentivize more rapid economic growth (true) and raise tax revenue (wishful thinking)."

http://www.nytimes.com/2008/02/03/bu...prod=permalink
Andrew Samwick, Chief Economist on Staff of Bush's Council of Economic Advisers, 2003-2004
January 03, 2007
A New Year's Plea

To anyone in the Administration who may read this blog, I have one small wish for the new year. Please stop your boss from writing or saying the following:

"It is also a fact that our tax cuts have fueled robust economic growth and record revenues."

You are smart people. You know that the tax cuts have not fueled record revenues. You know what it takes to establish causality. You know that the first order effect of cutting taxes is to lower tax revenues. We all agree that the ultimate reduction in tax revenues can be less than this first order effect, because lower tax rates encourage greater economic activity and thus expand the tax base. No thoughtful person believes that this possible offset more than compensated for the first effect for these tax cuts. Not a single one. http://voxbaby.blogspot.com/2007/01/new-years-plea.html

Samwick interviewed (audio) 9/24/07 http://www.onpointradio.org/shows/20...924_a_main.asp


Edward Lazear, current Chairman of Bushs Council of Economic Advisers
The Christian Science Monitor, June 25, 2007:
Another supply-side theory, now less popular, was voiced by Bush in February 2006: "You cut taxes, and the tax revenues increase." The theory is that with lower marginal tax rates, people work harder and longer, thereby raising their income and paying more taxes on it. But even topBush economic advisers now reject that thesis. "I certainly would not claim that tax cuts pay for themselves," Edward Lazear, the current chair of the Council of Economic Advisers, has stated. http://www.csmonitor.com/2007/0625/p...gn.html?page=2

Lazear, Testimony before the Senate Budget Committee State of the Economy and the Budget, September 28, 2006:
To determine the effect of tax cuts on revenue, we need to ask, What would revenues have been absent these cuts? This question can be answered by providing estimates of what revenue would have been had we not cut taxes...Will the tax cuts pay for themselves? As a general rule, we do not think tax cuts pay for themselves. Certainly, the data [we have] presented above do not support this claim.
http://www.whitehouse.gov/cea/lazear20060928.html

President Bushs Council of Economic Advisors (Chaired by supply-side economist Glenn Hubbard) concluded in its Economic Report of the President, 2003, that:
although the economy grows in response to tax reductions (because of the higher consumption in the short run and improved incentives in the long run) it is unlikely to grow so much that lost revenue is completely recovered by the higher level of economic activity. http://www.gpoaccess.gov/usbudget/fy04/pdf/2003_erp.pdf

BusinessWeek, FEBRUARY 17, 2003:
R. Glenn Hubbard, chairman of the White House Council of Economic Advisers, estimates that as much as 40% of the cost of the Administration's proposal would be offset by higher economic growth.
http://www.businessweek.com/magazine...tm?chan=search

Glenn Hubbard in THE WALL STREET JOURNAL, November 29, 2005:
Moderator, asks : On taxes, do either of you believe that a significant tax increase is either wise or inevitable either in President Bush's term or in the first term of his successor?

MR. HUBBARD writes: ... I think the administration is missing an important opportunity to talk with the American people about the enormous looming entitlement liabilities and the large implicit flow deficits (larger than the official deficit) that go with them. If we cannot bring these deficits (which conventional spending restraint and economic growth will not control) under control, we will have to raise taxes, with significant adverse consequences for economic growth. I do not believe that a significant tax increase is wise or inevitable. In the context of my earlier remarks, I say this because I believe we should and will scale back the growth in the entitlement programs that are the clear and present fiscal danger.
[The obvious implication in Hubbards statement above is that raising tax rates would have a POSITIVE net impact on revenues] http://online.wsj.com/article/SB113320203715608216.html

Ben Bernanke, Chairman of the Federal Reserve
Testimony before Congress, April 27, 2006:
Chairman Bernanke: The other comment I would make on your issues with respect to evenues I have addressed in a recent letter, and that concerns the issue of dynamic versus static scoring. To the extent that tax cuts, for example, promote economic activity, the loss in revenues arising from the tax cut will be less than implied by purely static analysis which holds economic activity constant.
[skip to later in Q&A session]
Senator Reed:Thank you, Mr. Chairman. Thank you for your testimony today. And just in line with the question about the effect of tax cuts, the former chairman of the Council of Economic Advisors, Greg Mankiw, wrote in his macroeconomic textbook that there is no credible evidence that tax cuts pay for themselves and that an economists who makes such a claim is--quote--``a snake oil salesman who is trying to sell a miracle cure.'' Do you agree with that?

Chairman Bernanke: I don't think that as a general rule tax cuts pay for themselves. http://frwebgate.access.gpo.gov/cgi-...d=f:29738.wais

Bernanke testimony before Congress, Janurary, 2007:
The general view is tax cuts don't pay for themselves. http://online.wsj.com/article/SB1169..._whats_news_us

Alan Greenspan

Greenspan at House Budget Committee hearing, 9/8/04:

[Rep. Jeb] Hensarling [R-TX]: the latest reports I see from Treasury indicate that revenue is actually up since we passed the latest round of tax reliefseemingly suggesting that at least in this particular case, that maybe tax relief did help ignite an economic recovery that has added revenues to the Treasury and actually helped become part of the deficit solution as opposed to
part of the deficit p roblem. So my first question is, have you seen these reports from Treasury, and do you concur that revenues are up now over what they were a year ago?

Mr. Greenspan:Well, Congressman, I think the general conclusion about the fact that revenues are lower than they would otherwise be without the tax cut, but higher because of the tax cut, is best described by saying that a tax cut will immediately lose revenue, and then to the extent that it increases economic activity and generates a larger revenue base will gain some of it back. It is very rare, and very few economists believe that you can cut taxes and you will get the same amount of revenues. But it is also the case that if you cut taxes, you will not lose all the revenue that is implicit in the so-called static analysis.
http://frwebgate.access.gpo.gov/cgi-...d=f:95792.wais

Greenspan, September, 2007: [The following is my own commentary.]
Alan Greenspan has expressed regret that his comments were used to support the Bush tax cuts. The inherent implication must be that he believes that those tax cuts have had a net negative impact on revenues and will continue to do so if extended (or at least that the combined effect of revenue impact and additional interest expense has had a negative budgetary impact and will continue to do so). Otherwise, there would be no reason to be regretful.

From The Economist magazine:
Jan 12th 2006:
A surprising rise in tax revenue last year has pushed this chutzpah even further. Mr Bush last week implied that the supply-side fantasy might hold after all: tax cuts do pay for themselves. There's a mindset in Washington that says, you cut the taxes, we're going to have less money to spend, he noted contemptuously, before claiming that recent experience suggested otherwise.
Even by the standards of political boosterism, this is extraordinary. No serious economist believes Mr Bush's tax cuts will pay for themselves. A recent study from the Congressional Budget Officesuggested that, after ten years, up to one-third of the cost of a 10% cut in income taxes can be recouped from higher economic growth. That fraction may be higher for cuts in taxes on capital alone. But it is nowhere near 100%. http://economist.com/world/na/displa..._id=E1_VPRJGQV

July 12, 2006
All told, Mr Bushs tax policy may have played a modest role in boosting a temporary revenue surge. But that is very different from suggesting, as the White House does, that tax cuts were the main cause or that they permanently pay for themselves. Most serious economists have long laughed at the idea that Mr Bushs tax cuts raise revenue. Now, it seems, the presidents own boffins agree. Deep in the Mid-Session Review is a claim that the Bush tax cuts could eventually raise the level of GDP by 0.7%, a relatively modest effect, and one that itself depends on the tax cuts being financed by lower spending. http://economist.com/agenda/displays..._id=E1_STVJTRP

Below is the executive summary of the Congressional Budget Office report mentioned above by The Economist (Jan 12 article). Note: this analysis does factor in the additional debt service caused by revenue loss and the resulting higher debt levels.
Congressional Budget Office, Economic and Budget Issue Brief, Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates, December 1, 2005:
Summary
Changes in tax policy can influence the economy, and those economic effects can in turn affect the federal budget. Although conventional estimates of the budgetary effect of tax policies incorporate a variety of behavioral effects, they are, nonetheless, based on a fixed economic baseline. For that reason, they do not include the budgetary impact of any possible macroeconomic effects of tax policies.
This brief by the Congressional Budget Office (CBO) analyzes the macroeconomic effects of a simple tax policy: a 10 percent reduction in all federal tax rates on individual income. Because there is little consensus on exactly how tax cuts affect the economy, CBO based its analysis on a number of different sets of assumptions about how people respond to changes in tax policy, how open the economy is to flows of foreign capital, and how the revenue loss from the tax cut might eventually be offset. Under those various assumptions, CBO estimated effects on output ranging from increases of 0.5 percent to 0.8 percent over the first five years on average, and from a decrease of 0.1 percent to an increase of 1.1 percent over the second five years. The budgetary impact of the economic changes was estimated to offset between 1 percent and 22 percent of the revenue loss from the tax cut over the first five years and add as much as 5 percent to that loss or offset as much as 32 percent of it over the second five years.
Douglas Holtz-Eakin, Director http://www.cbo.gov/ftpdocs/69xx/doc6...centTaxCut.pdf



Bartlett, National Review, April 7, 2003
Supply-siders believe that a dynamic analysis of President Bushs tax plan would show approximately...that the net revenue loss will be between 25% and 33% less than a static estimate would show.

Bartlett on Real Clear Politics, March 28, 2006:
Bush Tax Cuts Don't Pay For Themselves
How likely is it that the Laffer curve is causing revenues to rise, as opposed to normal operation of the business cycle? Not much, in my opinion.
First of all, the Laffer curve came to prominence during a period when the top tax rate on dividends was 70 percent, and the rate on long-term capital gains was 40 percentHowever, when President Bush took office, the top rate on dividends was down to 39.6 percent, and the rate on long-term capital gains was just 20 percent -- far below the rates Ronald Reagan inherited. It is very implausible that these rates were in the "prohibitive" range of the Laffer curve, such that a rate reduction would raise revenue.
But even if we grant the theory, how likely is it that the recent rise in revenue owes anything to this effect? Again, not much.
The fact is that it is only in very exceptional circumstances that there would even be the possibility of a tax cut that would so stimulate growth that it would pay for itself. Even the Bush Administration admits this. The 2003 Economic Report of the President (pp. 57-58) says, "Although the economy grows in response to tax reductions ... it is unlikely to grow so much that lost tax revenue is completely recovered by the higher level of economic activity."
A study by the Congressional Budget Office in December 2005 found that a tax-rate cut would recoup at most 20 percent of the static revenue loss in the first five years.
In short, there is very little likelihood that revenues are rising because the 2003 tax cuts or would fall if they are not extended. The case for extending them must be made on other grounds.

Heritage Foundation -- by Tracy Foertsch, Ph.D. and Ralph A. Rector, Ph.D , February 15, 2007 (EGTRRA and JGTRRA refer to the 2001 and 2003 tax cuts, respectively)
Extending EGTRRA's and JGTRRA's expiring provisions has a positive effect on U.S. GDP, incomes, and employment over the 10-year budget period. It also generates substantial revenue feedbacks ($295.5 billion). Ignoring the macroeconomic effects of the extension plan on individual, non-corporate business, and corporate incomes puts federal tax revenues $991.9 billion below the CBO's projected baseline levels over 10 years. Taking the dynamic effects of the extensions into account reduces the estimated revenue loss to the Treasury to $696.4 billion over 10 years.(Footnote:These estimated changes in federal individual income tax revenues exclude net refundable credits.)http://www.heritage.org/Research/Taxes/wm1361.cfm


Charles Wheelan (Wheelan writes on economics, and is author of "Naked Economics" http://www.amazon.com/gp/product/039...255213-9600866 , although he has no economics degree. His Ph.D. is in public policy from the Harris School at the University of Chicago. His favorite economist is Gary Becker, favorite economics writer is Milton Friedman and favorite economics blogger is Greg Mankiw, all conservative economists)
March 13, 2007:
The Biggest Economics Charlatans: The supply-siders who continue to insist, in the face of all evidence and academic opinion to the contrary, that a country like the United States can boost tax revenues by cutting taxes. Based on my past skepticism of the supply-siders, I know that I'll soon be bombarded by angry comments and emails pointing out government revenues went up after some favorite tax cut, such as the Reagan or Bush tax cuts. But that alone tells us nothing, as government revenues always trend up due to inflation and economic growth. The appropriate question is not whether government revenues were higher after the tax cut than before, but rather whether revenues are higher than they would have been in the absence of the tax cut. All credible evidence on this subject says that there are a lot of good things about tax cuts, but raising extra revenue is not one of them. http://finance.yahoo.com/expert/article/economist/26418

Wheelan, May 2, 2006:
Debunking One of the Worst Ideas in Economics
I'm going to write about what I consider to be the two worst economic ideas -- or at least ideas that pass as economics, though both have been thoroughly repudiated by nearly all credible thinkersthe most pernicious bad ideas in economics are those that have a ring of truth. They're hard to debunk because they have a certain intuitive appeal. As a result, they stick around, providing bogus intellectual cover for bad policy, year after year, decade after decade.
Laffersupposition: If tax rates are high enough, then cutting taxes might actually generate more revenue for the government, or at least pay for themselves.In fairness to Mr. Laffer, there's nothing wrong with this theory. It's almost certainly true at very high rates of taxation. But here's the problem when we take Laffer's theory and try to apply it in the U.S.: We don't have a 99 percent marginal tax rate. Or 70 percent. Or even 50 percent. So cutting the tax rate from 36 percent to 33 percent is not going to give you the same kind of economic jolt as slashing a tax rate from 90 percent to 50 percent. There's no huge black market to be shut down, no big supply of skilled workers to be lured back into the labor market, and so on. Will it generate new economic activity? Probably. And that will generate some incremental tax revenue for the government. But remember, it also means that the government will be taking a smaller cut of all the economic activity that we already have.
Think about a simple numerical example: Assume you've got a $10 trillion economy and an average tax rate of 30 percent. So the government takes $3 trillion. Let's cut the average tax rate to 25 percent and, for the sake of example, assume that it generates $1 trillion in new economic growth (a Herculean assumption, by the way). So now, what does Uncle Sam get? One quarter of $11 trillion is only $2.75 trillion. The economy grows, government revenues shrink. That's basically what happened with the large Reagan and George W. Bush tax cuts In both cases, government revenue was lower than it would have been without the tax cuts.
Neither the Reagan nor the George W. Bush tax cuts were "self-financing," as the Laffer disciples like to arguethe bottom line from the Bush Administration itself is that tax cuts reduce Uncle Sam's take.
http://finance.yahoo.com/expert/article/economist/4065 "
~ http://swordscrossed.org/node/1671

Interesting. You just spent an incredibly long post arguing against a point I wasn't even making. I know there is debate about the so-called Laffer Curve effect. In fact even the Laffer Curve itself indicates you can cut taxes and cut revenue. It also, of course, says there is a point where raising tax rates will reduce revenue (which seems to be completely denied by liberals and non-economists and even some economists.)

But the point I was making is the simple fact that when you tax something, you will generally get less of it. When you subsidize something you'll get more of it. These are general principles and based on economics 101. The extent of the effect will differ, of course, based on a lot of factors (how much, when, where, etc.) But the general principle still applies. My additional point was that liberals tend to get this relationship when it suits their needs (social engineering plans and all that) but seem to forget it when it's convenient to do so (e.g., we can just raise taxes on rich and we'll get all the money we need because every rate increase will result in a corresponding dollar increase in revenue.) They also fail to recognize the potentially deleterious side-effects of subsidizations (even when they are not directly called or recognized as subsidies.)

P.S. There is another interrelated issue in your comment that begs the question about the goal or purpose of tax cuts. It is often assumed (both by the left and the right, but mostly the left) that tax cuts have to be "revenue neutral" or even should increase revenues. In my own view this begs that questions that that's a worthy goal. Sometimes the best thing would be to reduce revenue (and spending along with it.)

Well here's hoping there's real Republican reform by then. They really need to get their act together otherwise the cycle will swing the other way and we'll have to start this process all over again. I'm pretty sure though that some " Change " will have to take place with them as well for them to get back in the limelight. I know they don't look at it this way now but they really have done a lot of damage to their image and when Healthcare Reform doesn't turn out to be the boogey man they want it to be that'll be reenforced. So I'm thinking they'll have to get serious by then and do something about their situation. Just trying to look at things in a realistic light.

I see he caught his spelling error just in the nick of time!

Tell me. Any theories as to who MJ really is? I suspect he's been here before.

Actually, sweetie, that was franksargent changing the content of my post. Hence the "tftfy."

\

P.S. If I were you, I'd be very, very careful about calling out spelling and word usage errors in other people's posts.

I'd be careful yourself since in over 10 years here I've yet to find anyone perfect.

Sweetie.
Here comes the tit for tat I know

Is that your way of apologizing for the incorrect assumption?

My apologies. I wrongly thought you agreed with SDW on this.

No. I don't think any apology to you is necessary.

And that's the "have you stopped beating your wife" question.

The facts of the matter are that there can be a positive relationship between tax rate cuts and tax revenue. There isn't always, but then that would be a straw man since I don't believe anyone is actually claiming that. The real point on this particular issue is that liberals seem to deny that this can happen at all? That cutting tax rates can have a stimulative effect on the economy at all and actually result in (sometimes much) greater economic activity and, therefore, greater tax revenue.

No. There are definite differences between him and SDW. For one thing he claims not to have been for the war in Iraq. Something that SDW is very clear about.

So, when you assume someone has done something in error and go out of your way to call it out publicly and are then found to be wrong yourself, you don't apologize?

That would have been true if you hadn't used the " Sweetie ". It went right out the window with that.

ok sweetie

Tit for tat. Hiss spit.

I'm wondering if you'll even be around here after November.

No it was just an apology. Could you clarify how often you think that tax cuts generate more government revenues through greater economic activity?

My theory is that he/she is a person with an opinion very different from yours, which you obviously find intimidating and threatening.

What do you mean by how often? Like how many times a governing entity has cut taxes and revenue has gone up or under what conditions this would happen generally?

I don't have the data handy on the first question. The second question is related to how high the rates are to begin with and how much you're cutting them. Where you are on the curve in other words. There also will be something of a lag in the effect for obvious reasons. Finally it depends on how you cut the taxes and what taxes you cut. Income specifically? Corporate or personal? Top tier or bottom? Temporary or permanent?

It's not as cut-and-dried as it is made to seem (by both proponents and opponents). There are multiple factors involved.

On the other hand I don't get too concerned with tax cuts needing to be revenue neutral at all. I'm of the opinion that if you think a tax cut of X would result in Y less revenue, then you should cut spending by Y (or more). If the tax cuts do result in more revenue then you're either in surplus or cutting your deficit. Great! So I don't tend to argue for tax cuts from the "it will increase revenue" perspective first because while it can be true, it's complicated and counterintuitive which makes it hard to explain to most people. Second, I don't really want the government to have more revenue. I argue for tax cuts because I believe it's the right thing to do. In my view taxes are theft plain and simple. If we feel we absolutely require them, they are a necessary evil and should be kept to the absolute minimum (as with government control, power and intervention in general.)

Most of your post is just line-by-line assertions that I am wrong.

But I think I know the problem - it's that there just isn't any evidence of a successful system that takes the total laissez-faire approach that you advocate. The countries that are economically successful invest heavily in public infrastructure and social safety nets: The US, Europe, parts of Asia, and a few other places.

In contrast, you just can't point to a country that is economically successful and has no social safety net or government investment in public goods. There's an almost perfect correlation between economic failure and lack of public infrastructure on the one hand (i.e., third world countries), and economic success and massive public infrastructure on the other (i.e., the wealthy countries).

Or if you look within the states of the US, it's the "big-government" blue states like CA and NY that drive the US economic engine, and the "small-government" red states like in the poor south that fail to prosper.

Or you can look back throughout history and see that economic activity has skyrocketed as governments have invested heavily in infrastructure and public goods.

Maybe it's possible that some system like you want could exist, but no one has tried hard enough yet. In the meantime, I'll live in the real world and leave you to your theoretical one.

Ahhh...the ever popular..."Can you point to anyone who's doing that way? No. Didn't think so. So it can't work." argument.



There may be those correlations, but correlation does not prove causation. There is also a strong correlation between places with strong (or stronger) property rights, rule of law, lower taxation and government meddling and wealth creation, prosperity, health, wealth, longevity, security, etc. And this correlation has also been shown in many cases to actually be causal.



are going bankrupt and failing under the weight of their massive government programs, spending and taxation. Thanks for pointing those out!



Once again you have this all completely backwards. If history teaches us anything it is that as government (or kings) have gotten out of the way, save for protecting life, liberty and property; have let freedom prevail, the prosperity has followed. Furthermore it is because these places become wealthy that they are more able to afford many of the things you're talking about.



Except that you appear to be using the absence of any example as an argument for doing the opposite of what I (and others) argue for. That's simply fallacious. Secondly, why should we use the absence of an example to avoid even experimenting with greater freedom? Using the "this is reality so deal with it" argument is very convincing. Should that same argument have been used during the time of slavery? Should it be used for continuation of bogus wars? What about the continuation of other injustices and/or obvious failures?


P.S. I should note, again, that you (and others) make the faulty assumption that some of things you talk about (even including "social safety nets") can only be provided by government and cannot or will not be provided by private actors in a society. I believe this is a false assumption and I believe we have historical examples to suggest it is false.

What's wrong with this sentence?

So you really really believe in this right?

Thanks for pointing out my error. I've corrected the mistake.

Most transport services are provided privately. However most road ways are build and maintained by tax payer $.

I would like you to give me a scenario on how let's say the 10 freeway from Santa Monica to Jacksonville would function as a private road.
Start with the purchase of real estate.....
Call it the SIM 10 Freeway.

I'll let you use your imagination or study your own history. But I will say that private roads, turnpikes/tollways and railroads (same idea) are not unprecedented in American history at all and they solved the problems of land acquisition* as well as creation of fee structures and payment schemes.

*Land acquisition would likely be handled very much as it is today for large projects that require acquiring large amounts of land from multiple owners. This happens all the time today. More typically for something like a major housing, retail, manufacturing or office development. I'm not an expert in this, but I know it is usually done quietly and through levels of indirection to avoid speculation driving prices too high. Land is also often acquired using option contracts to secure the right to buy without actually buying everything until all the options are locked up.