Cheney Says New Unit Will Prove Tax Cuts Boost Revenue

[rodeodance]

http://www.washingtonpost.com/wp-dyn/content/article/2006/02/10/AR2006021001855_pf.html

Cheney Says New Unit Will Prove Tax Cuts Boost Revenue

By Nell Henderson
Washington Post Staff Writer
Saturday, February 11, 2006; A11

Vice President Cheney said Thursday night that the verdict is in before the Bush administration's new tax analysis shop has even opened for business: Tax cuts boost federal government revenue.

That assertion won applause from his audience at the Conservative Political Action Conference, but it is a long-standing source of debate among many economists and tax experts at a time of rising federal budget deficits.

.......

"The president's tax policies have strengthened the economy, as we knew they would," Cheney told the conference, according to a text posted on the White House's Web site. "And despite forecasts to the contrary, the tax cuts have translated into higher federal revenues."

...........

Bush's proposal, unveiled in his budget plan last week, comes as he is pushing Congress to make permanent the recent tax cuts that are scheduled to expire in coming years. The nonpartisan Congressional Budget Office predicted last month that the budget deficit would swell to $337 billion this year and that the red ink would end in 2012 only if the tax cuts were allowed to expire.

[kentuck]

1. This is a real Whopper ! Wonder how many will believe it ??

The real deficits are over $500 billion per year, counting the money Bush and Cheney have taken off the books because of the war. That money doesn't count in their figuring.

And we're looking at more than $3 trillion dollars in additional debt in their terms in office. Yep! Their taxcuts are increasing revenues. Even the morons will have to question that statement.

[OneTwentyoNine]

2. Another 250 workers at Boeing Wichita went out the door a few weeks back..

Another 84 will follow them about mid-March when their 60 day notice of lay-off is up. Hell one of our local stations--NBC affiliate laid of 25 people a couple of weeks back.

These aren't Walmart wage jobs--all were high paying and are now gone. Booming economy my ASS....

[HereSince1628]

3. The Laffer curve is laughing in the grave.

The basic economic idea is that there is an "optimum" tax rate which produces the most revenue for the government. The basic political idea behind it is that old trickle down, voodoo economics.

The rebirth of the Laffer curve and voodoo economics by Cheney is remarkable only because it is an example of Cheney's monochromatic reliance on the more radical of stupid republican ideas of the 70's and 80's. History is really all we need to predict Cheney's next move.

Legend has it that the Laffer curve was originally scketched out on the back of a restaurant napkin. Various critical analyses of the idea were conducted and one glaring problem stood out.

Although it is unlikely that for any long period the country actually taxes at the optimum level for maximum revenue generation, the problem with applying the curve to the street is it's no easy thing to be able to know if you are above or below the optimum because being symmetrical either side of the Laffer curve (taxes too low, too high) could produce the same revenue.

The wonderful part of that result is that it is left to the trial and error of idiot ideologues to assume the starting position. Hey, give the rich taxbreaks!

When will Republicans learn that trickle down economics doesn't work because the solid gold faucets it builds for the Rich simply don't leak? It's worse today than in the 80's. Now their are many fewer barriers to investing surplus money overseas. Today the money the rich get from tax breaks produces palm tree shaped man-made islands on the Indian Ocean, not more American factories producing Chevy's, Fords, Maytags, Levi's, etc.

[Telly Savalas]

16. Cheney has a magic 8-ball that helps him determine the 'optimal rate'

The Laffer curve isn't necessarily a screwy idea. My guess is that a 50% tax rate would raise a lot more revenue than a 99.9% rate because it wouldn't discourage economic activity as much.

But as applied by the radicals in the GOP, yes it equates into a stupid idea. For instance, if we take a reasonable capital gains tax rate and cut it in half, is it rational to expect that total capital gains will double? It would take an unbelievable rate of economic growth to accomplish that.

Perhaps Bush should talk to his dad about what he called such ideas back in the 1980 campaign.

[bananas]

18. Martin Gardner wrote about this in Scientific American at the time

He made a great squiggly diagram to explain why it was nonsense.
Wish I had a link, maybe someone can find it.

Legend has it that the Laffer curve was originally sketched out on the back of a restaurant napkin. Various critical analyses of the idea were conducted and one glaring problem stood out.

[Fredda Weinberg]

20. "The Education of David Stockman"

is where the Laffer curve was described as being drawn on the back of a napkin. No legend there.

[bananas]

21. Found it!

Explained on this page http://ase.tufts.edu/cogstud/papers/tempanom.htm
http://ase.tufts.edu.nyud.net:8090/cogstud/graphics/tempfig4.gif

[eppur_se_muova]

22. Wow, thanks for that post! I knew the Laffer curve was BS, but...

hadn't seen any serious analysis = debunking of it.

[populistdriven]

4. Yep tax cuts sure do work & the data proves it::

The Repukes plan is to screw up the economy so much that it leaves the next Democratic president with few options:

:sarcasm:

[Toots]

10. This is a perfect example of opportunity lost

Some one should take these graphs and use infomercials just like Ross Perot and hammer at the GOP relentlessly about this. It is so very obvious the GOP does not know how to govern for the benefit of the country, just the few the wealthy and the powerful. This is why both Gore and Kerry lost. They never used the ammunition that was readily available. These graphs along side Republican quotes about how Clinton's budget would devastate the American economy and then when they get the opportunity to "show" how it is done they fail in the most spectacular manner. We get handed these gifts on a silver platter and we blow it "Big Time"

[ProSense]

5. New headline

Cheney says Bush will prove tax cuts boost revenues

Forecast provided by the new tax cut spin shop...

[orwell]

6. I see...

...so if we cut the tax rate to zero, we will receive the highest federal revenues.

Now I get it...

[Toots]

7. Well that is like them saying if we raise minimum wage to a $100. an hour

Kennedy proved we can have some tax relief and yet spur growth. FDR proved a minimum wage works to build a strong middle class. Bush* and the GOP as a whole carry the idea to almost the same extreme as you.

[orwell]

9. You do realize...

...that there are serious proposals to cut cap gains to zero?

I thought so.

Any extreme you can imagine can and will be proposed as one side or the other gains political monopoly. You can count on it.

How about this extreme? A private banking cartel creates fiat money out of thin air to "guide" economic growth under the rubric of free market capitalism and in the process waters the money stock at the rate of 20x in half a century.

Is that extreme enough for you?

[dtotire]

8. Lowering Taxes cannot Boost Revenue

You can understand why lowering taxes cannot boost revenue if you understand econometric models.

The basics of a simple econometric model are these:

(1) C+ I+ G= Y Y= National Income
C=Consumer Purchases of Goods +Services
I=Net Private Investment
G= Government Purchase of G+S
(2) W+ P =Y= NNP W = Wage Income
P= Non-wage Income (Profits)
NNP= Net National Product

(3) C= a0 + a1(Y-T) + u1 T=Taxes

(4) I = b0 +b1P +b2K+ u2 K= Net Capital Stock

(5) W= c0 + c2Y + C3t +u3 t= time

(6) K= K(t-1) + I

These equations were taken from a publication from the St. Louis Federal Reserve Bank and are on the internet. They can be found in most elementary economic textbooks. A more sophisticated model can be found in the publication, dated May 1966. It is very technical.

http://fraser.stlouisfed.org/publications/SCB/page/7704/download/11256/7704_1965-1969.pdf

http://fraser.stlouisfed.org/publications/SCB/page/7707/download/11257/7707_1965-1969.pdf

As you can see, the only way to increase the National Income is by increasing C, I, or G. Decreasing T will increase C slightly, but will increase the National Debt, which will mean increases in interest, which would decrease investment(I). As qualified economists tell us,
There is no free lunch. Cheney wants us to believe there is. He is an idiot. Reagan also believed there was, but he did not understand economics.

[orwell]

11. Of course I get it...

...I was being facetious.

Of course there are optimal rates. In a perfect world I would prefer any form of taxation to most directly impact those who receive the most benefit from the government good or service provided. It is especially important to effectively price all externalities into the final cost of the good or service as to not provide implicit or explicit subsidies.

But that is not what you hear from the cut taxes crowd. You hear this simplistic pabulum that lower taxes = higher revenues. It is as if this "causality" occurs in a vacuum, which of course it doesn’t. Sometimes lowering taxes results in higher revenues, sometimes it doesn’t. Sometimes the higher revenues are short-lived, to be followed by lower revenues. Sometimes they aren’t.

The bottom line is this, you can’t run internal and external deficits forever. Tax policy is economic policy, not political policy. As long as you can get away with promising the minions a free lunch - like fiat money - and they see no real world cost, they will eat it up like a free bowl of ice cream on a hot summer day.

This is a society where many true long-term costs are externalized. That is why we are descending into fiscal and moral chaos.

Thanks for the post.

[MadMaddie]

23. Hey , Hey.....I am Communications Major...

Dammit, Now I have to book mark this formual and go study it!!:wow:

[Telly Savalas]

17. It's asymptotic

Y'know. Like f(x)= 1/x

While zero taxes wouldn't raise any revenue, if we had a 0.00000001% top marignal rate, it would raise enough revenue for the government to quadruple it's spending and still have enough of a surplus to pay down the debt.

[Yo_Mama_Been_Loggin]

12. Another department of propaganda

Or cherry picking.

[Humor_In_Cuneiform]

13. I believe, I believe this liar is now telling the truth. Yessireeee

Makes sense to me.

Just keep talking Mistah Chainy.

I wait in anticipation, even with bated breath, for your next truthful pronouncements.

waiting, and waiting, and waiting, ...

[leesa]

14. Right. The rich don't pay any taxes. The corporations left in America

don't pay any taxes and most are getting huge government welfare payouts. Many companies have moved overseas so of course THEY aren't paying any taxes. Fewer people have good jobs, so they aren't paying taxes. Just where is this fantasy revenue coming from??

[sandrakae]

15. Dick Cheney needs to STFU.

[MrBenchley]

19. And he'll shoot them if they don't prove it...