TIME magazine blows holes in Republican tax-cut myth

[kentuck]

Omaha Steve has a posting on this topic in GDP. Pass it on to your Republican friends. Oh, you don't have any Republican friends? Pray tell, why??
===================

http://www.time.com/time/magazine/article/0,9171,1692027,00.html

<snip>

If there's one thing that Republican politicians agree on, it's that slashing taxes brings the government more money. "You cut taxes, and the tax revenues increase," President Bush said in a speech last year. Keeping taxes low, Vice President Dick Cheney explained in a recent interview, "does produce more revenue for the Federal Government." Presidential candidate John McCain declared in March that "tax cuts ... as we all know, increase revenues." His rival Rudy Giuliani couldn't agree more. "I know that reducing taxes produces more revenues," he intones in a new TV ad.

If there's one thing that economists agree on, it's that these claims are false. We're not talking just ivory-tower lefties. Virtually every economics Ph.D. who has worked in a prominent role in the Bush Administration acknowledges that the tax cuts enacted during the past six years have not paid for themselves--and were never intended to. Harvard professor Greg Mankiw, chairman of Bush's Council of Economic Advisers from 2003 to 2005, even devotes a section of his best-selling economics textbook to debunking the claim that tax cuts increase revenues.

...more

[Generic Brad]

1. That's like saying we get a pay increase every time we lower our wages

It's absurd on the face of it. Perhaps they subscribe to the theory that less is more.

[ThomWV]

12. Not really. It is possible to cut taxes and increase revenue

The presumption is - and in another Galaxy far far away it may indeed actually happen - that if people are taxed less they will take the money that would otherwise have been taken from them and invest it in new means of production (Capital). They then think, and it could happen, that the new means of production will employ additional people who will themselves become able bodied tax payers and that the amount they pay in will exceed the funds you invested in the machinery by which they make their money.

In truth the money saved by those who are taxed less in this country doesn't go to increasing productivity in this country. It builds new factories (capital) in foreign countries and it buys vacation homes with few neighbors and great views.

So although it could in fact happen it indeed never does.

[lumberjack_jeff]

34. If you increase revenue while "cutting taxes"...

... then you haven't cut them at all, only shifted them onto those who weren't affected by the cuts.

I don't know how this can be so mysterious.

[Recursion]

45. The Laffer curve is qualitatively correct, just numerically useless

Yes, it is true that if the tax rate were 100%, lowering taxes would increase revenue.

And the tax-revenue system is probably linear enough to be roughly modeled as a differential equation (though Martin Gardiner once did a column showing it's not even remotely a "function").

It's a point of theoretical and mathematical interest; the problem is it became this bizarre doctrine of faith.

[truedelphi]

61. I'd say that your reply is right on the money. n/t

[Seabiscuit]

71. Yeah, cutting taxes may increase revenues somewhere in the Andromeda galaxy, but not in this one.

[Mountainman]

18. One thing that is never talked about when Reagan lowered taxes is that it was raised in other ways.

The depreciation rules were changed. Instead of using accelerated depreciation to reduce taxes in early years of an asset's useful life, you had to pay more in taxes because there was no longer the ability to defer taxes. So revenues went up and the tax cut was given the credit by the hucksters on the right. The problem isn't that they lie, the problem is that Joe sixpack believes the lies.

[kentuck]

40. Most specifically...

I recall how he taxed unemployment checks and how he pushed for the increase in the Social Security contributions, which kept the deficits from being totally in outer space. We had to wait for the Junior Bush to accomplish that feat.

[AX10]

2. Reagan was one of the greatest con-artists the Western world...

has ever seen, if not, the entire world has ever seen.

[HughMoran]

3. You mean simple-minded right-wing talking points aren't true?

Now there's a surprise. Is there anything that right-wing nut jobs say that makes any sense at all?

[librechik]

86. don't forget emotionally manipulative

no wonder so many hateful greedy Amurkans bought into the supply side snake oil. It feeds their racism, classism and social climbing agendas just fine.

[simmonsj811]

4. KICK

K&R

[lildreamer316]

5. KICK AND REC. Wow.

thaaaaaaank YOU.

[DCKit]

6. With that reasoning, they could tax us at 0%...

then we could all live off the tit of the wealthiest welfare state in the history of the universe.

I've got a perpetual motion machine for licensing and one for free energy as well.

[Usrename]

7. We'd be awash with too much wealth.

The oceans would soon fill up with all that extra money and sea level would begin to rise.

[unpossibles]

47. well a rising tide does raise all boats

but sadly, most of our boats have holes in them.

[Hosnon]

9. Fiscal conservatives

at least claim that a point does exist when lower taxes equates to lower revenue. However, I rarely see anyone claim that we have reached that point or are even close to it.

That said, I do think that the Laffer Curve is accurate to some degree, if only in that lower taxes can increase revenue and that higher taxes can decrease revenue. At what point this occurs and of what shape the actual "Curve" is I am not as sure.

[pampango]

30. Two ways to minimize tax revenue - tax rate of 0% or a rate of 100%.

At 0% there may be plenty of economic activity, but no taxes collected. At 100% nobody is going to work, since they don't get to keep any of their income, so tax collections would be zero.

IMHO, it is an over generalization to contend that lowering tax rates will always increase or always decrease revenue or the reverse. If you lower tax rates from near 100% you will get more revenue, because some people will start working and paying taxes. If you lower rates from 10% to 5%, it won't increase revenues.

[deacon]

8. kick and highly recommend!

[baldguy]

10. In 1980, I was 16 & I could see that Reaganomics was bullshit.

[Skittles]

31. can you BELIEVE how many people fell for Reagan's crap?

it was the first time I remember thinking how stupid, greedy, gullible a great number of Americans were - there are even some DUers who voted for his sorry ass. Truly SICKENING.

[NewJeffCT]

39. Look at it this way

Remember how we heard that Bush's tax cuts primarily benefited the richest 1% of Americans?

That part was true, of course.

The problem is that almost 20% of Americans believe that *they* are in that richest 1%.

[Vinca]

11. I haven't read the article yet, but if a person has half a brain it doesn't

make sense that we borrow kazillions of dollars and pay kazillions of dollars in interest if we're raking in big bucks from tax cuts for the wealthy. I'm no economist, but if I operated like that I'd be in bankruptcy court.

[MiniMe]

13. Reagans 2 biggest lies that keep going...

Cutting taxes raises revenue, and deficits don't matter. Those 2 things alone have almost destroyed this country.

[JHB]

16. "deficits don't matter" is Cheney's lie, not Reagan's...

Reagan's second lie was "deficits are always the Democrat's fault, with all those entitlements to 'special interests'"

("entitlements" being various aid programs grouped with Social Security in order to make them look more expensive than they were; "special interests" being people, not businesses; and both combined being a code phrase for "givaways to lazy, shiftless minorities")

[ProfessorGAC]

22. Nah! Reagan Shared it Too

The defense build-up with borrowed money was always framed in the "hope" that economic growth from low taxes would increase revenue.

Cheney learned that mantra from the Reaganites. He is the one who flat out said they "don't matter". But, he got his "theory" from the original gang that couldn't shoot straight.

The Professor

[JHB]

24. Well, I wasn't expecting the Spanish Inquisition...

"Their two biggest lies were tax reductions increase revenues, deficits don't matter, and all deficits are the Democrats' fault...
no, wait,... their THREE biggest lies...."

but this is about Reagan, so lets just skip to...

"Amongst their diverse and multifarious whoppers were..."

:evilgrin:

[ProfessorGAC]

25. LOL! Very Good!

Well, that capped it off nicely!
GAC

[Ignis]

36. *snort* Thanks for the laugh!

I thought there was little to laugh about re: Reagan's economic policies, but I was wrong.

:spray:

[gratuitous]

14. Why do Republicans want to give government more money?

I thought giving "our" money to the big, bad government was evil, wrong, wicked, mean and nasty. Why do Republicans favor economic policies that "give" the government more money? It's a puzzlement, it is.

[Mountainman]

20. Because the government is the mechanism to channel the money back to themselves.

Haliburton lives on government contracts. The owners of Haliburton want more and more military spending because it goes straight into their pockets. The borrowed money will ultimately be paid back by the middle class unless tax rates are increased on the wealthy who benefit most by government spending when repukes are in power, yet the borrowed money did not help the wellbeing of the middle class.

When ever the right gets into power the middle class is bamboozled into screwing themselves in the ass. The right spends more than the left but they borrow to spend and defer the payment until they are out of power then blame the left for raising taxes to pay for the principal and interest on the loans.

[kentuck]

26. Bingo!

You have uncovered the secret for the existence of the Republican Party! You have nailed it!

[AllegroRondo]

15. and the corollary - cut taxes to corporations, and they'll use it to expand and hire more people

how many times did * say this when pushing for his 2001 tax cuts? "cutting taxes to businesses will allow them to use that money to hire more people!"

nope, doesnt work. no company ever hired someone because they had extra money laying around. they hire to meet demand for their products and services.

[JHB]

19. Better to ask "How many times did REAGAN say" it...

His whole argument selling point was that companies would use the money to modernize their aging industrial plant. What we got was mergers, LBOs, and the only new plants were built in other countries.

[TahitiNut]

17. It's only true when the tax rate is above some (arguable) "optimal" tax rate.

It's just not reasonable to assume that that "optimum" rate is below the current rate for all taxpayers, and most certainly not those at the top income tax rate, as may have been arguable during the Eisenhower years when the top tax rate was 90%.

What I find most interesting about the claim is that it an only be reasonably assessed for validity in a tiered tax system in those same income tiers ... and is more probably true at the lowest income levels and NOT the higher income levels.

This claim is a cornerstone claim for "supply side" advocates.

[lfairban]

42. Thank you!

I was just about to write this same post with both points, the maximum of the curve and the dependence on income level.

I feel that it would be better to lower the regressive taxes such as sales taxes and increase the progressive ones that target higher income earners. If you give back money to people with low incomes, they will go out and spend it, increasing the speed that money circulates in the economy. This will give the maximum offset that could conceivable be greater than the cost.

[TahitiNut]

59. Exactly. It's also not new with Laffer. Von Mises and Keynes both noted the effect before Laffer.

It's an OLD theory, based on the "Law of Diminishing Returns" -- but repeatedly and simple-mindedly MIS-stated by the corrupt right-wing frauds.

Laffer was/is a simpleton and dolt.

[ProfessorGAC]

21. I Know Greg Mankiw

Talked to him a few times. Smart guy. Well versed in economic theory and fiscal applications. Nice man, too.

He's far less into the math and predictive side of econometric analysis than the group with whom i associate, but a good teacher and a knowledgable guy.

And, from this article, he has no aversion to the truth. I should call him. I haven't talked to him for a few years.
The Professor

[dtotire]

35. Greg Mankiew

Prof. Mankiew was quoted as saying that any politician who claimed tax cuts raise revenue was selling snake oil. This could also be said of these right-wing radio talk show host like Limbaugh and Hannity.

[CT_Progressive]

23. K&R

[kentuck]

27. The Democrats have been running scared of the tax issue..

They should use this TIME article to educate the public and dispense with the Republican lies once and for all. They do not necessarily have to call for higher taxes but they can document that most economists say the Republican mantra is all a bunch of BS. It's a great tool for them to fight the present budget battle on. But I won't hold my breath...it's vacation time!

[IronLionZion]

28. The tried and proven way to increase rev. is through full employment, fair wages, benefits, etc.

A happy, educated, confident, employed citizenry would rock our world in ways that Americans wonder about but northern Europeans actually live by every day. I miss the Clinton years. They weren't perfect, but they were so damn GOOD!!!

[JHB]

29. Thirty years later, Laffer is still a damn fool

From the TIME article:

--------------
"Laffer is a bona fide economist with a doctorate from Stanford. He's also largely responsible for the Republican belief that tax cuts pay for themselves. Now 67, Laffer runs economic-consulting and money-management firms in Nashville. About the best I could get out of him on the question of whether the Bush tax cuts have paid for themselves was "I don't know." But that's only part of the story.

***
And how did (Reagan's tax cuts) work out? Laffer is convinced that the reduction of the top tax rate from 70% to 28% during the Reagan years paid for itself--in part by encouraging the rich to stop finagling--and the evidence mostly backs him up. "You find these enormous responses in the upper brackets," Laffer says. "These guys fire their lawyers and accountants and actually pay their taxes. Yay! Isn't that what we want them to do?"

But Reagan's tax cuts for the nonrich were big money losers, and it took the fiscal discipline of Bill Clinton to mop up the resulting red ink. Laffer gushes with praise for Clinton, but he's also a fan of Clinton's successor. "What Clinton did was, he gave Bush the fiscal flexibility to do what was right," Laffer says. In the face of the recession and terrorist attacks of 2001, Bush "needed to stimulate the economy and spend for defense, and Clinton gave him the ability to do that."

In other words, the Bush tax cuts were meant to create big deficits. But Laffer's O.K. with that. "The Laffer Curve should not be the reason you raise or lower taxes," he says. Perhaps not, but it does make for great campaign promises."
------------------


Note that Reagans cuts "worked" because they supposedly reduced upper-bracket tax evasion schemes, which isn't how the theory goes, and is a one-time gain that can't realistically be applied yet again to the Bush cuts.

At least now his work is more in line with his actual skills. "Economic-consulting and money-management firms" may hire economists, but the people who run them are better characterized as salesmen, and that's about the kindest description you can give of Laffer too.

[EVDebs]

57. Reagan cut taxes, before he had to raise them with 'revenue enhancements' LOL !

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=209&topic_id=5989&mesg_id=5994

[dtotire]

32. Jonathan Chait Has Written A Book

Here he debunks supply-side economics:

The Big Con: The True Story of How Washington Got Hoodwinked and Hijacked by CrackpotEconomics (Hardcover)

by Jonathan Chait (Author)
Publishers Weekly

The author, a senior editor at the New Republic, is best known for declaring I hate President George W. Bush in 2003. This book traces the roots of his dislike back 30 years, when supply-side economics took over the Republican Party and made cutting taxes the GOP answer to all political and economic questions. American politics has been hijacked by a tiny coterie of right-wing economic extremists, Chait declares, some of them ideological zealots, others merely greedy, a few of them possibly insane. To which he adds, the Republicans' success at defeating the democratic process explains why it has been able to enact its agenda despite a lack of popular support. The rhetoric is inflammatory, but the case is laid out with clarity. Chait claims that traditional Republicans, religious people and social, fiscal and foreign policy conservatives have been cheated as much as liberals, and that unparalleled corruption and ruthless cynicism in Washington and the timidity of nonpartisan media allow the minority to rule. His analysis should appeal to anyone interested in politics, though many may find the style too irritating to endure. (Sept. 12)

http://www.amazon.com/Big-Con-Washington-Hoodwinked-CrackpotEconomics/dp/0618685405/ref=pd_bbs_1?ie=UTF8&s=books&qid=1197658508&sr=8-1

Worthwhile book to get.

[OzarkDem]

80. Crackpot GOP economics

He makes a solid case that the very people who form the base of the GOP have been hurt by their idiotic leaders economic scams as much as anyone else.

What more can you expect from people whose brains are daily saturated with right wing blather from Rush and Faux News and who don't believe in science?

Please sir may I have another?

[Evoman]

33. Good...now if they would just put the article in Idiot Conservative Christian Weekly, then it might

Actually reach the people who need to read it.

[NashVegas]

37. LMAO! Have They Found Something Else to Blame on Clinton?

In a back-handed kind of way?

But Reagan's tax cuts for the nonrich were big money losers, and it took the fiscal discipline of Bill Clinton to mop up the resulting red ink. Laffer gushes with praise for Clinton, but he's also a fan of Clinton's successor. "What Clinton did was, he gave Bush the fiscal flexibility to do what was right," Laffer says. In the face of the recession and terrorist attacks of 2001, Bush "needed to stimulate the economy and spend for defense, and Clinton gave him the ability to do that."

[NewJeffCT]

38. I think the best tax cuts can do

is make up 10-20% of the lost revenue.

So, if you cut taxes by $100 billion, you will increase tax revenues because of business growth, etc by $10-20 billion. Meaning, the government has lost about $80-90 billion because of the tax cuts... that was from some Reaganites, too.

[Hidden Stillness]

41. The People are the Source of Economic Health, not Individual Corporations

Of course, this ridiculous claim can be easily blown apart by any reasoning at all--like a claim that you can pay off your credit card bill faster by lowering the payments you send in; obviously nonsensical.

The basis of this insane belief for corporatists, though, is that it has to be based on a belief, also false, that economic growth and health comes from corporations and corporate management itself. Some 70% of the GDP is from consumer purchases, (I heard this again a few weeks ago on "PBS NewsHour" and again from Joe Biden yesterday, either at the Iowa debate or on TV afterward), which is why direct cash payments to the poor/unemployed always instantly helps a depressed area.

Lower taxes lowers the revenue Government gets; lower taxes weakens the economy and destroys Government services people need for economic recovery. Not particularly difficult.

[AX10]

43. Reagan Voodoo "man"

popularized this BS. This is one of the myths we MUST dispel.

[proud2BlibKansan]

44. . . .

[dtotire]

46. Post This Article on Free Republic

See what response it will get from Freepers.

[DangerDave921]

48. whose money is it anyway?

I don't think tax cuts should necessarily be analyzed in the framework of whether the government revenues will go up or down. That has an inherent assumption that the government's finances trump my own. My taxes are my money, first and foremost. So tax rates should be analyzed in the framework of what is a fair rate, with the understanding that it is my money, not the governments.

Also, tax raises and tax cuts always ignore the primary wrongdoing of this government -- TOO MUCH SPENDING!!! Can I say it again? TOO MUCH SPENDING!!

[Occam Bandage]

49. Okay. What spending will you cut?

You don't like "the government" spending your money. So what shall we spend less on?

[DangerDave921]

51. Excuse me?

Where did I say that I don't like the government spending my money? I didn't say that at all. Obviously, there is a lot of government spending that is necessary to the orderly administration of government and services.

What shall we spend less on? How about the 15,000 or more pork barrel spending projects that get stuck into every bill? How about more oversight on all government spending so that we can eliminate waste that is sometimes calculated at 15-20% of the total budget. How about the billions spent on the war on drugs that does nothing to eliminate dependency? Show me a line item budget and I'd be glad to highlight the costs I'd cut.

[Occam Bandage]

52. The problem, of course,

is that there is no clear definition of "pork." What your representative might call pork, mine might call a necessary public good. What mine might call pork, yours might call a valuable investment in his community. You might call fixing potholes pork, I might call it necessary for commuters. I might call building a new theater pork, you might call it necessary to sustain the arts. I might call an agricultural subsidy pork, you might claim it's necessary to preserve America's food security. You might call a research grant pork, I might claim it's valuable research needed to maintain America's competitiveness. I might call development of a new engine turbine pork, you might claim it's necessary to maintain America's military edge. And no matter what one calls pork, the other will talk about jobs created or preserved. While nobody likes pork in other districts, everyone votes for the candidate who can bring home the bacon.

"Cutting pork" is a good bumper sticker, but when it's time to pull out the scissors, suddenly everyone realizes they all thought "pork" meant different things.

[kentuck]

55. The basic difference between Repubs and Democrats...

is that Republicans have an inherent dislike for "government". Democrats believe government can be used to accomplish great things. Are you sure you are in the right Party?

[DangerDave921]

75. Stretch

You are so stretching. Because I'm a democrat means I can't even question the amount of money that should be paid in taxes?! Of course the government can do great things. But as in everything in life, I think it's appropriate to look at the cost. Otherwise, the government could take 90% of my money, no questions asked, and I'm supposed to just sit back and accept that.

And is cutting spending really such an awful thing to consider?

[kentuck]

50. And let me expound on that also...

Too much spending.....on the wrong stuff...in my opinion. I could see cutting the Defense budget in half easily.

[EVDebs]

54. Now that we're building 'Permanent Bases' in Iraq, I'd guess it's IRAQI money ? ?

Unless Freepers think US taxpayers (themselves included) are the biggest jackasses on earth, that is,

Iraq war could cost US over $2 trillion, says Nobel prize-winning economist
http://www.guardian.co.uk/Iraq/Story/0,2763,1681119,00.html

$2 trillion puts penney ante 'porkbarrel' projects to shame, dontcha think ?

And let's not forget the $2.3 trillion they already can't account for over at DoD,

The War On Waste
Defense Department Cannot Account For 25% Of Funds — $2.3 Trillion
http://www.cbsnews.com/stories/2002/01/29/eveningnews/main325985.shtml

[progressive_realist]

70. I have some bad news for you

All money is, in fact, the government's, not yours. You might observe that "United States of America", not "DangerDave921", is printed on every dollar you get.

All snarkiness aside, the government's rights to everything you supposedly own trump your own rights to those things. Governments' right to taxation (which all countries have, not just ours) allows them to tax at any rate they choose, even 100%. Eminent domain and other rights of the state allow them to seize any real property you "own". And these are among the oldest rights claimed by the state. Newer concepts like "the public good" allow governments even more intrusion into private "ownership" rights.

Private property is a myth. Nations are considered free with respect to how much their governments respect their own rules they have laid down, but ultimately the rules are made by and for the benefit of governments, and they have the power to change or ignore private property rules at will. Don't believe me? Declare that you and your little house in the suburbs are no longer part of the United States and instead belong to Russia, and see how that turns out for you.

Note that I am talking about how things are, not how they should be. How things should be is a whole separate discussion.

The standard property rights are the right of use, right of transfer (sale), right of disposal, and right of exclusion. The government grants you these rights for "your" money, defined as whatever money is left over after the government takes its share. But you have no legal rights of use, transfer, disposal, or exclusion for the money the government takes from you for its use. And you legally must pay those taxes. Therefore, there is no meaningful sense in which money the government assesses in taxes belongs to you.

[Chulanowa]

72. Well, no, actually, it's not necessarily "your money"

You do not exist in a vacuum, and you would not have earned a dime without at least some of the following:

* Printing the very dollar bills with which people trade.
* Public roads.
* Rural electrification.
* Government subsidized telephone wiring.
* Satellite communications.
* Police protection.
* Military protection.
* A criminal justice system.
* Fire protection.
* Paramedic protection.
* An educated workforce.
* An immunized workforce.
* Protection against plagues by the Centers for Disease Control.
* Public-funded business loans, foreclosure loans and subsidies.
* Protection from business fraud and unfair business practices.
* The protection of intellectual property through patents and copyrights.
* Student loans.
* Government funded research and development.
* National Academy of Sciences.
* Economic data collected and analyzed by the Bureau of Economic Analysis.
* Prevention of depressions by Keynesian policies at the Fed (successful for six decades now).
* Dollars protected from inflation by the Fed.
* Federal Emergency Management Agency.
* Public libraries.
* Cooperative Extension Service (vital for agriculture)
* National Biological Service.
* National Weather Service
* Public job training.

To say nothing of the many chunks of legislation that protect your rights as a worker... Not to mention the fact that your labor is a shared effort with your co-workers. The reality is that your paycheck does not magically appear by the pure sweat of your brow alone, and that you actually borrow a chunk of it for the very ability to earn what's left of it.

[DangerDave921]

76. OK

While I see your point, it is totally inapplicable to what I was saying. Nowhere did I say that I was an island whose earning capacity was in no way related to my fellow man. Of course we are all interconnected. Does that mean I can walk up to you and take a couple hundred out of your wallet if I feel like it? Of course not. In that sense of things, it is YOUR money.

My point was that it is an inappopriate argument to analyze tax cuts in terms of how much revenue the government will lose or make. The focus should be on what is a fair tax rate for the individual whose money is being taken. And yes, we do need to analyze our government's spending to make sure that they're spending our money on valid things, are not wasting it, etc. Taxes are obviously necessary. The amount, however, and spending, should alwasy be openly discussed.

[OzarkDem]

79. Most corporations don't pay any taxes

Doesn't it bother you that you're having to pick up the tab for them?

[Chulanowa]

81. Do I have a contract with you?

If not then no, the money in my pocket is not yours to claim. However, citizens of a state do have a contract with that state. They provide money (taxes) in exchange for services from that state - all that stuff I listed, plus more. There is transferral of wealth, from up to down,at least in an ideal system. This is because the people on the lowest economic rungs are nevertheless integral to our society. If they cannot live, they cannot provide their services, the bottom of the pyramid collapses, and we all suffer.

Your point, to quote, was "TOO MUCH SPENDING!" paired with the argument that it's all your money and nobody else's. That's sort of a libertarian anti-welfare red flag, whether you realized it or not. If you want to make an argument for smart spending, I'm all for it.

[DangerDave921]

83. Paranoid

I say "too much spending" and you say that's an anti-welfare red flag? That's quite a jump. Where did I say anything about welfare?

As for libertarian views, I see it more as an inherent suspicion of government, i.e., the need to question government, keep it in check, and keep it honest. Government, since it carries such power over our lives, must always be scrutinized and kept for the people. And when politicians start to believe they can take as much money from you as they care to, and spend it on whatever they care to, yes I believe it is the duty of the citizenry to stand up and demand accountability. If you want to call that libertarian, I guess you can do that. But to me, it's just the desire for honest, sensible government.

[Chulanowa]

84. Too many Paulista knuckleheads of late

And no, I don't call that Libertarian... Libertarians don't want smart government, they want small government. Sorry about hte misunderstanding :)

[DangerDave921]

85. It's all good. eom :)

[OzarkDem]

78. Then get out of Iraq, it will save a lot of money

Its my money, too and I'm sick of it being wasted on a useless illegal war.We're spending billions on Iraq every week.

In the meantime our infrastructure is crumbling, as well as our health care system - due to growing numbers of uninsured people.

Get rid of the wasteful defense spending and there will be plenty of tax cuts to stimulate growth.

As info, tax cuts are only helpful in the short term when used to stimulate spending for economic growth. Cutting taxes when it would hurt the economy isn't a good idea.

[EVDebs]

53. VooDoo Economics, anyone ? Or just DooDoo Economics as *'s Council of Econ Advisors would call it

[acmavm]

56. And who here didn't know this all along? I doubt that there are very

many people here stupid enough to have believed the 'the tax cuts will pay for themselves' bullshit.

[namvet73]

58. Yes and E = -mc^2

which yields an atom bomb that sucks in rather than blows out.

[RaleighNCDUer]

60. "the tax cuts enacted during the past six years have not paid for themselves"

That is just flat wrong.

Each and every one more than paid for itself by increased donations to the Republican party coffers.

National coffers? Not so much.

[B Calm]

87. Tax cuts for the rich, then borrow and spend economics...

[AzDar]

62. Kick!

:kick:

[Flagrante]

63. It's not as simple as just increase vs. decrease

It makes intuitive sense that change in revenues as a function of change in tax rate is related to absolute tax rate, and follows a curve much like this:



Where tax rate is the x-axis (increasing to the right), and resulting revenue is the y-axis (increasing upward).
Take the extreme cases: all the way to the left there are no taxes levied and no revenue gained; all the way to the right represents the case where all money is taken by the government and no economy can exist. The optimum revenue per taxed dollar is when x = 0 (on this graph). Increasing taxes above that point, or decreasing them below it, decreases revenues. Chances are however that we are not taxed now at the optimum point. If we are taxed above the optimum point, say where x = 1, then decreasing taxes would indeed increase revenues. If we are taxed at below the optimum point, say at x = -1, then decreasing taxes would decrease revenues (this is where I think we exist now, around were x = -1). The trick is to determine where we are taxed right now relative to the curve. Are we above or below the optimum point? Once we know that then a serious answer to the question is at hand. Do any economists here have an idea about where we are now relative to the curve?

[uberllama42]

65. Even that is an oversimplification

The Laffer curve is a Gaussian distribution like that graph, but the curve is not nearly that smooth. The problem is that the Laffer model homogenizes every tax levied by the government into a single rate. In reality different taxes have different effects on growth. Sales taxes discourage consumption, but tariffs on foreign goods specifically discourage imports, which actually raises GDP.

The assertion that cutting income taxes encourages people to work more assumes that leisure is an inferior good over a broad range of incomes. An inferior good is one for which demand increases when income decreases (e.g. ramen noodles, Greyhound buses, anything secondhand). Studies have shown that leisure is only an inferior good over a very small section of the curve, which is to say that most people work the same number of hours or less when their income increases. The increase in GDP is very modest and therefore has very little chance of compensating for lost revenues.

Don't even get me started on what government deficits do to private business investment.

[Auggie]

64. THIS is supposed to be a big Time revelation now? Where were they six years ago?

They wait until the pendulum of public opinion is swinging against Bush -- when it's "safe" to show an ounce of backbone and say something against the administration.

[The Backlash Cometh]

66. You, you mean they lied to us? Again?

[SlavesandBulldozers]

74. the surprises never cease ;) n/t

[Roland99]

67. There was a news article a few years ago that tax revenues were the lowest % of GDP in *40 years*!!!

[Jamastiene]

68. Of course, the tax cut itself, blows holes in itself.

I think it's called shooting America in her own foot.

[whistle]

69. Inflation since BushCo took over has pretty much wiped out all middle class

...tax cuts

[whoneedstickets]

73. There IS truth in the Laffer Curve!

The PROBLEM is that republicans always think we are past (to the right) the apex (ie reducing taxes will bring increased revenue) where as the opposite is the case and we are well to the left of the apex of the curve with lots of room to increase revenue through taxation.

[lonestarnot]

77. I didn't need for them to blow the hole if you know what I mean.

:evilgrin:

[ticktockman]

82. The reasons for the phony argument that tax cuts pay for themselves

If there's one thing that economists agree on, it's that these claims are false. We're not talking just ivory-tower lefties. Virtually every economics Ph.D. who has worked in a prominent role in the Bush Administration acknowledges that the tax cuts enacted during the past six years have not paid for themselves--and were never intended to. Harvard professor Greg Mankiw, chairman of Bush's Council of Economic Advisers from 2003 to 2005, even devotes a section of his best-selling economics textbook to debunking the claim that tax cuts increase revenues.

When I heard about the touted rise in revenues after the Reagan tax cut, I went and looked at the numbers myself. After all of the bragging that I'd heard from supply-siders, I really expected to find something. Instead, the numbers were pretty much what one would expect. When taxes are cut, revenues go through a quick drop and then continue to grow with the GDP as before, just at their new lower level. Hence, tax cuts are not a free lunch. They require us the weigh their benefits versus their costs, just like most things in the real world.

I've posted the results of my study of the numbers at http://home.att.net/~rdavis2/taxcuts.html . For years, I've asked supply-siders to tell me any specific numbers or conclusions in my analysis that they disagree with. Alternately, I've asked them to post a link to one serious economic study that purports to show evidence of any income tax cut that has ever paid for itself. None have.

This is one of the insidious problems with the myth that tax cuts pay for themselves. It's now impossible to have a rational conversation with many supply-siders about the costs versus the benefits of tax cuts. If tax cuts are truly a free lunch where everybody wins, no such conversation is necessary! I can't help but wonder if this short-circuiting of the debate is a major reason why many Republicans make the argument that tax cuts pay for themselves. They support them for other reasons but use what they know is a phony argument to avoid debate. Since they will not openly state their agendas, they are likely beyond convincing. However, there may be others who truly are fooled by these phony arguments. It is worth passing this information on to them.