Low Taxes-->Robust Economy?

[Dr. Tyler; Captain America 0]

Tax rates too, Mike.

[Guest MikeSC]

Tax rates too, Mike.

The ENTIRE point of the Laffer curve is to show the impact of taxation on gov't revenues. It is absolutely pointless when it comes to the overall economy.

-=Mike

[Dr. Tyler; Captain America 0]

Sure. But overall economy can't suck and yield high government revenues. The entire point of the Laffer curve is to show that government revenues go up as taxes decrease -- to a certain point. That would imply that the economy DOES increase as taxes decrease -- again, to a certain point. However, the argument is moot; we can't afford to drop taxes below the point where government revenues start to drop as well unless you expect Halliburton to field our army and school our children.

[Big Ol' Smitty 0]

Well, people could justify it by using that pesky "To promote the general welfare" line.

 

Nonetheless, the gross amount of waste we have in the defense department isn't helping.

The DOD doesn't have a tiny fraction of the waste that, say, DHS has. Or compared to utter pork attached to most bills in Congress.

 

And, yes, the GOP is just as bad about that as the Dems.

-=Mike

Yeah, Tom Ridge's little vacations were costing us a lot of dough.

 

I wish, however, that we could find those billions of reconstruction dollars lost somewhere in the sands of Iraq. We could buy some cool shit with that.

[LessonInMachismo 0]

http://www.amazon.com/exec/obidos/tg/detai...=books&n=507846

 

Sowell da man.

[kkktookmybabyaway 0]

Man, I GOTS to get myself to Turkmenistan then. 23.1% GDP growth! I would be sittin' pretty there.

 

For about 5 minutes before getting shot in the head...

[Stephen Joseph 0]

http://www.amazon.com/exec/obidos/tg/detai...=books&n=507846

 

Sowell da man.

Thank you for quoting that. BigOlSmitty continues to not understand the basics behind that which he posts.

 

Sigh...

[Big Ol' Smitty 0]

And do we really give a flying fuck whether or not the economy is "robust?"

 

I'm supposed to take advice from this guy?

 

You said "growth matters," as if what I cited did not factor in growth. The stat that I cited measured "potential for the world’s economies to attain sustained economic growth over the medium and long term."

 

You cited GDP real growth rate, stating that the "size & scope of the economy" don't matter. Based on growth, then, the greatest economies in the world are such places as Chad and the authoritarian hellholes of Turkmenistan & Equatorial Guinea.

 

And you can quit being so condescending. Nobody was rude to you, despite the fact that you are constantly. You act like we should all bow down in reverence before the great wrestling message board "economist."

[Jobber of the Week 0]

And do we really give a flying fuck whether or not the economy is "robust?"

 

I'm supposed to take advice from this guy?

My favorite LessonInMachismo moment is:

http://forums.thesmartmarks.com/index.php?...l=deficit&st=30

 

The deficit. Ha. Can you explain to me why and how the deficit affects you?

 

I guess he doesn't buy anything made in foreign countries. Or anything made by parts from foreign countries.

[Stephen Joseph 0]

And do we really give a flying fuck whether or not the economy is "robust?"

 

I'm supposed to take advice from this guy?

 

You said "growth matters," as if what I cited did not factor in growth. The stat that I cited measured "potential for the world’s economies to attain sustained economic growth over the medium and long term."

 

You cited GDP real growth rate, stating that the "size & scope of the economy" don't matter. Based on growth, then, the greatest economies in the world are such places as Chad and the authoritarian hellholes of Turkmenistan & Equatorial Guinea.

 

And you can quit being so condescending. Nobody was rude to you, despite the fact that you are constantly. You act like we should all bow down in reverence before the great wrestling message board "economist."

No. What you cited doesn't make sense, that's my issue with it. And, quite often, it seems that what I'm trying to get at is twisted in such a way as to make me look stupid and you right.

 

Here is what I am getting at. By all forms of measurement, the Northern European economies you cited (Denmark, Finland) are completely stagnated right now. They have high tax rates and little if any growth. Your analysis completely sidesteps the importance of history in the development of an economy.

 

I will grant that those countries are good economically sound places to live. They are not however "The best". In previous posts, I make mention that indicators of a sound economy can be found in what your growth rate matter. Institutions also matter (That's the Virginia School of Economics, Buchanan, Tullock, et. al.) I would not say that those places you cited are great places, you missed my earlier point that the fastest growing countries are developing countries, but not the most stable. In terms of Today, I was looking at modern, industrialized nations and their growth rates and per capita figures. Did you know the unemployment rate in your Northern European countries is twice that of the US (and we BITCH about 5% unemployment)?

 

I mean, FUCK. Tyler even disagrees with your notion. When the liberal and libertarian agree on something, you've got to wonder what's up...Remember this?

 

MMLS-

Sure. But overall economy can't suck and yield high government revenues. The entire point of the Laffer curve is to show that government revenues go up as taxes decrease -- to a certain point. That would imply that the economy DOES increase as taxes decrease -- again, to a certain point.

 

Mathematically:

Total Spending = Gross Income minus Savings minus taxes

or

MPC = marginal propensity to consume

MPS = marginal propensity to save

 

MPC = 1 - MPS - tax rate.

 

As that tax rate increases, three things can occur.

1) The MPS lowers by the amount of the tax rate. Effects of MPS reduction include loss of future growth potential vis a vis Solow.

2) The MPC loweres by the amount of the tax rate. Effects of MPC reduction include less consumption (duh)

3) Some combination of the two.

 

Taxes are beneficial to the point that they take care of needs that would not be met by the private sector. Thus there must be some tax rate. Tax rates below that amount lead to an inefficient amount of public sector production. Tax rates above lead to less private sector production than the optimal.

 

So, BOS and anyone else, should you care to continue to say that high tax states are better than low tax states for growth, start running some math and quoting some economics from a Nobel winner. Prove your case by fact, not by parroting someone else's paper.

[Big Ol' Smitty 0]

http://www.amazon.com/exec/obidos/tg/detai...=books&n=507846

 

Sowell da man.

Haha! From the Publishers Weekly review on the site you linked:

 

A well-known conservative columnist

 

Referring to Sowell.

 

it tends to be superficial and is written in an angry tone, often accusing others of economic ignorance, as if that is the only possible explanation for disagreement with the author's views

 

Sounds like a certain TSM economist? Just replace angry with arrogant.

 

he wades into more complex and controversial territory--macroeconomics, international economics and popular fallacies--and his effort to cover them at the elementary level results in a muddled treatment. Overall, his defense of certain conservative tenets is wielded with a sledgehammer rather than a rapier.

 

General readers can--and some of them will--find better written, more sophisticated introductions to economics, including such middle-of-the-road overviews as From Here to Economy: A Short Cut to Economic Literacy by Todd G. Buchholz or New Ideas from Dead Economists: An Introduction to Modern Economic Thought by Todd G. Buchholz and Martin Feldstein. For a conservative viewpoint, Capitalism and Freedom by Milton Friedman has yet to be topped.

 

Sowell not da man. I'll be sure not to read it.

[Stephen Joseph 0]

Just fyi: The best economics textbook is written by Paul Samuelson. Hands down, and both sides of the spectrum agree on this.

 

And maybe I wouldn't be so f'ing arrogant if I didn't have to keep reading economic misconceptions.

[Big Ol' Smitty 0]

Just fyi: The best economics textbook is written by Paul Samuelson.

A guy who, like me, has blasted the Bush tax cuts.

[Big Ol' Smitty 0]

Sure. But overall economy can't suck and yield high government revenues. The entire point of the Laffer curve is to show that government revenues go up as taxes decrease -- to a certain point. That would imply that the economy DOES increase as taxes decrease -- again, to a certain point.

 

At least one empirical study, looking at actual historical data on tax rates, GDP, and revenue, placed the optimal tax rate (the point at which another marginal tax rate increase would decrease tax revenue) as high as 80%. Paul Samuelson argues in his popular economic textbook that Ronald Reagan was correct in a very limited sense to view the intuition underlying the Laffer curve as accurate, because as a successful actor, Reagan was subject to marginal tax rates as high as 90% during World War II.

 

David Stockman, Reagan's budget director during his first administration and one of the early proponents of supply-side economics, maintained that the Laffer curve was not to be taken literally - at least not in the economic environment of the 1980s United States. In "The Triumph of Politics" he writes:

 

"[T]he whole California gang had taken [the Laffer curve] literally (and primitively). The way they talked, they seemed to expect that once the supply-side tax cut was in effect, additional revenue would start to fall, manna-like, from the heavens. Since January, I had been explaining that there is no literal Laffer curve."

[Stephen Joseph 0]

Just fyi: The best economics textbook is written by Paul Samuelson.

A guy who, like me, has blasted the Bush tax cuts.

I never said I agreed with the Bush tax cuts either. In fact, on the basis of what I said, you'd find that I probably disagreed with them.

[Stephen Joseph 0]

At least one empirical study, looking at actual historical data on tax rates, GDP, and revenue, placed the optimal tax rate (the point at which another marginal tax rate increase would decrease tax revenue) as high as 80%. Paul Samuelson argues in his popular economic textbook that Ronald Reagan was correct in a very limited sense to view the intuition underlying the Laffer curve as accurate, because as a successful actor, Reagan was subject to marginal tax rates as high as 90% during World War II.

 

David Stockman, Reagan's budget director during his first administration and one of the early proponents of supply-side economics, maintained that the Laffer curve was not to be taken literally - at least not in the economic environment of the 1980s United States. In "The Triumph of Politics" he writes:

Quote 1: The 80% study is infamously bad. I'm quite familiar with it. I'll root around and find something here at the office today, but the actual tax rate that maximized revenue is between 40-50%. The actual tax rate that maximizes both economic growth and tax revenue is around 30%, give or take.

 

Quaote 2: Correct. The Laffer Curve is a concept, theory. There is a maximizing point, but given all the other variables involved, it is definitely *not* a curve though it helps to think of it as one.

[The Czech Republic 0]

Here is a study I have done.

[Guest MikeSC]

And do we really give a flying fuck whether or not the economy is "robust?"

 

I'm supposed to take advice from this guy?

 

You said "growth matters," as if what I cited did not factor in growth. The stat that I cited measured "potential for the world’s economies to attain sustained economic growth over the medium and long term."

 

You cited GDP real growth rate, stating that the "size & scope of the economy" don't matter. Based on growth, then, the greatest economies in the world are such places as Chad and the authoritarian hellholes of Turkmenistan & Equatorial Guinea.

 

And you can quit being so condescending. Nobody was rude to you, despite the fact that you are constantly. You act like we should all bow down in reverence before the great wrestling message board "economist."

Actually, that is more like country with $2 going to $4 bragging that they increased 100%, while a country with $1,000 to $1,500 only went up 50%. The first country had more growth, but which country has more economic strength?

-=Mike

[Stephen Joseph 0]

So Democrats are more ignorant than Republicans at all points in their lives, but all get clueless over time

 

I'll agree. (joking!) Liberatarians are the horizontal axis right?

Edited April 13, 2005 by Stephen Joseph

[Dr. Tyler; Captain America 0]

Nah, they're just irrelevant in the larger scheme

[The Czech Republic 0]

I wish they weren't!

[Stephen Joseph 0]

Nah, they're just irrelevant in the larger scheme

I *heart* you too

[kkktookmybabyaway 0]

So now Steve J. is our resident arrogant economist now?

 

Damnit, now I'll have to order new letterhead...

[LessonInMachismo 0]

And do we really give a flying fuck whether or not the economy is "robust?"

 

I'm supposed to take advice from this guy?

My favorite LessonInMachismo moment is:

http://forums.thesmartmarks.com/index.php?...l=deficit&st=30

 

The deficit. Ha. Can you explain to me why and how the deficit affects you?

 

I guess he doesn't buy anything made in foreign countries. Or anything made by parts from foreign countries.

The old liberal tactic...attack your opponent personally when you have nothing of substance to say.

 

You still haven't told me how the deficit affects you.

 

"OMG, WE'RE GONNA SCREW THE NEXT GENERAAAAATION!"

 

National debt is always there. It goes up and down.

 

And you should take advice from me because chances are that I'm more successful than you are. If people would worry about taking care of their own stuff and stop losing sleep over how "robust" the economy is, then I think we'd do a lot better. Leave worrying about the economy to geniuses like Sowell.

[Dr. Tyler; Captain America 0]

The deficit slows economic growth and discouarges people from buying treasury bonds unless there's a high interest rate on them. In addition, the slow economic growth leads to unemployment rates rising. There are other effects that SJ could probably explain as well.

[Guest MikeSC]

The deficit slows economic growth and discouarges people from buying treasury bonds unless there's a high interest rate on them. In addition, the slow economic growth leads to unemployment rates rising. There are other effects that SJ could probably explain as well.

It's better for the economy for them to buy stocks and not T-bonds.

-=Mike

[Dr. Tyler; Captain America 0]

Not true. We need them to buy t-bonds to finance our debt. Our debt isn't going to suddenly decrease because the stock market is rising.

[Guest MikeSC]

Not true. We need them to buy t-bonds to finance our debt. Our debt isn't going to suddenly decrease because the stock market is rising.

We never have problems selling T-bonds. However, when the economy is so weak that T-bonds are a preferred method of investing to stocks, there is a huge, huge problem.

-=Mike

...Besides, that would also mean tax revenues are going up and T-bonds are less of a necessary tool...

[Dr. Tyler; Captain America 0]

That's the thing, we don't usually have much trouble selling them. You're right. But the stock market isn't really a good indicator of our economy anyways, and quite frankly, there is a lot more money going into t-bonds anyways. However, with a massive deficit, people are less likely to do that, and suddenly, the capital starts flowing out of the country. They don't just switch to the stock market -- which would be preferrable, of course, because that capital stays within our borders -- they're more likely to invest in, say, Japan. (I'm using this for example purposes only; I know Japan's economy is in the shitter) With a mounting deficit, it makes investors shy away from our country unless we raise interest rates considerably.

 

Plus, you're at an interesting point in this argument because you've advocated dropping taxes to the lowest possible point, and that would minimize tax revenues from stock dividends. Just a side note.

 

Either way, you can't deny that the deficit is a real threat to our country's economic health. It's never good to borrow with no hope of paying it back.

[Guest MikeSC]

That's the thing, we don't usually have much trouble selling them. You're right. But the stock market isn't really a good indicator of our economy anyways, and quite frankly, there is a lot more money going into t-bonds anyways. However, with a massive deficit, people are less likely to do that, and suddenly, the capital starts flowing out of the country. They don't just switch to the stock market -- which would be preferrable, of course, because that capital stays within our borders -- they're more likely to invest in, say, Japan. (I'm using this for example purposes only; I know Japan's economy is in the shitter) With a mounting deficit, it makes investors shy away from our country unless we raise interest rates considerably.

 

Plus, you're at an interesting point in this argument because you've advocated dropping taxes to the lowest possible point, and that would minimize tax revenues from stock dividends. Just a side note.

 

Either way, you can't deny that the deficit is a real threat to our country's economic health. It's never good to borrow with no hope of paying it back.

No, I've advocated dropping taxes until they hit the apex of the Laffer Curve. Lower and higher are equally counter-productive.

 

Our deficit, as a percentage of GDP, is nothing. The gov't is not INTENDED to be a profitable entity, considering that any profit it makes is from stealing too much money.

-=Mike