Red Pill: Laffer Curve - Everything Trump and GOP got wrong about Supply Side

[hazlnut]

Almost everything Republicans get wrong about the economy started with a cocktail napkin

The problem is, this tidy arc of cause and consequence doesn’t exist in the real world. Sure, extremely high tax rates douse economic activity. But there’s no reason to assume the relationship between tax revenue and tax rates is perfectly U-shaped. And the equilibrium point at which a government collects the most revenue possible without dragging down the economy is impossible to know—and varies by country. There was no reason in 1974—or, for that matter, now—to think the US was on the curve’s “prohibitive” half (many economists put the inflection point for the highest marginal tax rate at around 70%). In fact, without detailed data, you can’t tell where on Laffer’s curve (or non-curve) you are at all.

Laffer’s general idea of supply-side stimulus can sometimes work. Cutting tax rates that primarily benefit rich people shifts wealth from the middle classes to the rich. That might sound unfair, but in developing countries where there’s not enough money to fund the investment needed to spur growth, a Laffer-style policy could (temporarily) help stimulate economic expansion by channelling wealth to potential investors.

But this scenario is not applicable to the US. Private investment tends to ebb and flow with the business cycle; when demand is feeble, so is investment. Cutting taxes on America’s rich isn’t going to encourage them to invest more—they already have plenty to spend and aren’t spending it. Worse, by shifting wealth from middle class families to the moneyed few—a group that is able to consume far less than the working masses—this sort of policy suppresses consumption, which in turn discourages investment in productive businesses. Slowing demand drags on growth, causing debt and unemployment to rise.

I don't think Trump, if he really understood economics at all, would buy supply side at all. He just wants the breaks for himself.

The joke is on the middle class Trump voter -- you're getting more of the same. You're getting screwed again, just harder. Obama never rolled back Bush cuts. Wealth will continue to trickle UPWARD and OUT of this country.

The tax cuts for middle classes are always part of the deal -- but they are bread crumbs. They are meaningless. The real cuts are always buried in the coded language for expensive accountants to decipher.


The best stimulus would be to have the middle class pay almost nothing and have the rich and super-rich carry the whole load. Sure the markets would slow and they'd see less capital gains income, but that's the Market Economy (the middle and lower classes barely participate in it) the Real Economy is a consumer driven economy -- and all the extra money would be spent on goods and services.

 

[whitehall]

Why wouldn't Obama roll back Bush's tax cuts if they didn't work? Either Obama was an incompetent fool or the tax cuts worked.

 

[edthecynic]

Why wouldn't Obama roll back Bush's tax cuts if they didn't work? Either Obama was an incompetent fool or the tax cuts worked.

The GOP controlled Congress enough to block anything Obama could do regarding tax reform.

 

[2aguy]

Cutting taxes does work...that is why the democrats are so against them.....if cutting taxes makes more people wealthy, they will stop voting for democrats......and the democrats won't be able to squeeze businesses for tax breaks....

For a left winger...people keeping their own money gives them a heart attack....

 

[2aguy]

The politicians spent 20 trillion dollars more than we had.....for this we have nothing.....now, you post this....you think it is a good idea to increase taxes, giving more money to the very same political class that created 20 trillion dollars in debt...for a gain of nothing....

Tell us, if you had a financial planner that put you in so much debt you could never pay it back....would you give that financial planner more of your money to plan?

 

[TroglocratsRdumb]

Left Wing economics is deadly. The Venezuelans have ran-out of zoo animals to eat so now they are eating their pet dogs, cats and birds.

 

[2aguy]

Left Wing economics is deadly. The Venezuelans have ran-out of zoo animals to eat so now they are eating their pet dogs, cats and birds.

Well.....since they have nothing to eat, they don't have to worry about not having toilet paper.....see, that is a left wing win win situation......

 

[TroglocratsRdumb]

In North Korea everyone is equal and everything is free, there are no rich people, no white people and there are no Christians.
It's a SJW Snowflake paradise!!

 

[Toddsterpatriot]

Almost everything Republicans get wrong about the economy started with a cocktail napkin

The problem is, this tidy arc of cause and consequence doesn’t exist in the real world. Sure, extremely high tax rates douse economic activity. But there’s no reason to assume the relationship between tax revenue and tax rates is perfectly U-shaped. And the equilibrium point at which a government collects the most revenue possible without dragging down the economy is impossible to know—and varies by country. There was no reason in 1974—or, for that matter, now—to think the US was on the curve’s “prohibitive” half (many economists put the inflection point for the highest marginal tax rate at around 70%). In fact, without detailed data, you can’t tell where on Laffer’s curve (or non-curve) you are at all.

Laffer’s general idea of supply-side stimulus can sometimes work. Cutting tax rates that primarily benefit rich people shifts wealth from the middle classes to the rich. That might sound unfair, but in developing countries where there’s not enough money to fund the investment needed to spur growth, a Laffer-style policy could (temporarily) help stimulate economic expansion by channelling wealth to potential investors.

But this scenario is not applicable to the US. Private investment tends to ebb and flow with the business cycle; when demand is feeble, so is investment. Cutting taxes on America’s rich isn’t going to encourage them to invest more—they already have plenty to spend and aren’t spending it. Worse, by shifting wealth from middle class families to the moneyed few—a group that is able to consume far less than the working masses—this sort of policy suppresses consumption, which in turn discourages investment in productive businesses. Slowing demand drags on growth, causing debt and unemployment to rise.

I don't think Trump, if he really understood economics at all, would buy supply side at all. He just wants the breaks for himself.

The joke is on the middle class Trump voter -- you're getting more of the same. You're getting screwed again, just harder. Obama never rolled back Bush cuts. Wealth will continue to trickle UPWARD and OUT of this country.

The tax cuts for middle classes are always part of the deal -- but they are bread crumbs. They are meaningless. The real cuts are always buried in the coded language for expensive accountants to decipher.


The best stimulus would be to have the middle class pay almost nothing and have the rich and super-rich carry the whole load. Sure the markets would slow and they'd see less capital gains income, but that's the Market Economy (the middle and lower classes barely participate in it) the Real Economy is a consumer driven economy -- and all the extra money would be spent on goods and services.

The problem is, this tidy arc of cause and consequence doesn’t exist in the real world. Sure, extremely high tax rates douse economic activity. But there’s no reason to assume the relationship between tax revenue and tax rates is perfectly U-shaped.

It doesn't need to be perfectly U-shaped to be useful.

And the equilibrium point at which a government collects the most revenue possible without dragging down the economy is impossible to know—and varies by country.

I agree. So what?

There was no reason in 1974—...—to think the US was on the curve’s “prohibitive” half

LOL!

But many old-school Republicans scoffed at Laffer’s trickle-down theories.

That's funny. He didn't have any trickle-down theories.

Shortly after taking office, Reagan and Congress macheted the US tax code, bringing the top marginal tax rate to 28%, down from 70%, and slashing corporate and capital gains taxes. Higher growth was supposed to expand the tax base, compensating the federal government for the revenues lost by the lower rate.

It worked! Economic growth exploded, inflation was crushed, federal revenues nearly doubled by the time Reagan left office.

Instead, public debt exploded—and continued to grow throughout Reagan’s tenure. The Laffer curve had just failed its first big test.

DERP!

 

[imawhosure]

Almost everything Republicans get wrong about the economy started with a cocktail napkin

The problem is, this tidy arc of cause and consequence doesn’t exist in the real world. Sure, extremely high tax rates douse economic activity. But there’s no reason to assume the relationship between tax revenue and tax rates is perfectly U-shaped. And the equilibrium point at which a government collects the most revenue possible without dragging down the economy is impossible to know—and varies by country. There was no reason in 1974—or, for that matter, now—to think the US was on the curve’s “prohibitive” half (many economists put the inflection point for the highest marginal tax rate at around 70%). In fact, without detailed data, you can’t tell where on Laffer’s curve (or non-curve) you are at all.

Laffer’s general idea of supply-side stimulus can sometimes work. Cutting tax rates that primarily benefit rich people shifts wealth from the middle classes to the rich. That might sound unfair, but in developing countries where there’s not enough money to fund the investment needed to spur growth, a Laffer-style policy could (temporarily) help stimulate economic expansion by channelling wealth to potential investors.

But this scenario is not applicable to the US. Private investment tends to ebb and flow with the business cycle; when demand is feeble, so is investment. Cutting taxes on America’s rich isn’t going to encourage them to invest more—they already have plenty to spend and aren’t spending it. Worse, by shifting wealth from middle class families to the moneyed few—a group that is able to consume far less than the working masses—this sort of policy suppresses consumption, which in turn discourages investment in productive businesses. Slowing demand drags on growth, causing debt and unemployment to rise.

I don't think Trump, if he really understood economics at all, would buy supply side at all. He just wants the breaks for himself.

The joke is on the middle class Trump voter -- you're getting more of the same. You're getting screwed again, just harder. Obama never rolled back Bush cuts. Wealth will continue to trickle UPWARD and OUT of this country.

The tax cuts for middle classes are always part of the deal -- but they are bread crumbs. They are meaningless. The real cuts are always buried in the coded language for expensive accountants to decipher.


The best stimulus would be to have the middle class pay almost nothing and have the rich and super-rich carry the whole load. Sure the markets would slow and they'd see less capital gains income, but that's the Market Economy (the middle and lower classes barely participate in it) the Real Economy is a consumer driven economy -- and all the extra money would be spent on goods and services.

The politicians spent 20 trillion dollars more than we had.....for this we have nothing.....now, you post this....you think it is a good idea to increase taxes, giving more money to the very same political class that created 20 trillion dollars in debt...for a gain of nothing....

Tell us, if you had a financial planner that put you in so much debt you could never pay it back....would you give that financial planner more of your money to plan?

Left Wing economics is deadly. The Venezuelans have ran-out of zoo animals to eat so now they are eating their pet dogs, cats and birds.

Hazy hasn't a clue, lol. The left seen what happened under Reagan, and they are scared to death it will happen again.

The left has repeatedly tried to convince everyone Reagan messed everything up. And yet he won massive landslides, and Democrats voted for him, helllllllllooooooo! They see a repeat with Trump, and are making poopy in their lefty diapers; not that Trump is Reagan, but rather Democrats voted for him.

Do we understand how arrogant the left really is?!?!?!?!?! They must convince people that someone keeping MORE of their own money if they make a buck more than you, is somehow baaaaaaad for you, and the economy. Think about that for a second. Somehow, them taking money from someone, and spending it the way THEY want, in their world view......is MORE likely to help increase wages, and YOUR standard of living, lolol. How? Because they have lefty brilliance!

That is correct, that is how arrogant they are........that they can actually get people to believe this, lolololol. And, if ANYBODY gets to keep more of their own money, it is terrible. Why? Because it adds to the deficit, thus the national debt! OK folks, I got a pertinent question--------> if your country is going to run up debt, who do you want spending the money, YOU.......or the government? Because, lets be honest here...........I haven't seen anyone say lets cut SPENDING, have you? And so, if they won't cut spending, at least let us spend our own money. You think it is a good idea to pay MORE intaxes lefties? Then may I suggest you send in more voluntarily. How much extra did YOU send in, lol!

That is what I thought, you are just demanding WE pay more, not you-)

 

[Toddsterpatriot]

Why wouldn't Obama roll back Bush's tax cuts if they didn't work? Either Obama was an incompetent fool or the tax cuts worked.

The GOP controlled Congress enough to block anything Obama could do regarding tax reform.

Obama had 58 seats in the Senate and 257 in the House.

 

[Peach]

It varies by nation, areas within a nation, world events, and many other factors. "Trickle down" worked to increase consumption, thus output; yet debt skyrocketed. Carter kept debt down, which did -0- for the economy. There is no one paragraph cure all for the US economy, we will go through ups and downs.

 

[2aguy]

It varies by nation, areas within a nation, world events, and many other factors. "Trickle down" worked to increase consumption, thus output; yet debt skyrocketed. Carter kept debt down, which did -0- for the economy. There is no one paragraph cure all for the US economy, we will go through ups and downs.

No....the debt skyrocketed because the democrats broke their deal with Reagan.....they agreed to cut spending, then spent all of the money his tax cuts brought into the government.....and they kept spending till all that money was gone.....and kept spending.....

There is no way to lower the debt if the democrats will not stop spending......

 

[edthecynic]

Why wouldn't Obama roll back Bush's tax cuts if they didn't work? Either Obama was an incompetent fool or the tax cuts worked.

The GOP controlled Congress enough to block anything Obama could do regarding tax reform.

Obama had 58 seats in the Senate and 257 in the House.

For a short time, and you need 60 in the Senate.

 

[edthecynic]

No....the debt skyrocketed because the democrats broke their deal with Reagan.....they agreed to cut spending, then spent all of the money his tax cuts brought into the government.....and they kept spending till all that money was gone.....and kept spending.....

Actually, as you well know, it was St Ronnie who broke the deal agreed to by Senate majority leader Dole and House majority leader O'Neil because the cuts included Reagan's Star Wars boondoggle.

 

[TroglocratsRdumb]

How come the Democrats have 100% of the ghettos if they know what they are doing in economics?

 

[2aguy]

No....the debt skyrocketed because the democrats broke their deal with Reagan.....they agreed to cut spending, then spent all of the money his tax cuts brought into the government.....and they kept spending till all that money was gone.....and kept spending.....

Actually, as you well know, it was St Ronnie who broke the deal agreed to by Senate majority leader Dole and House majority leader O'Neil because the cuts included Reagan's Star Wars boondoggle.

Nope......o'neil broke the deal...he took the tax increase, then didn't deliver on the spending cuts..that is why the debt went up.

 

[2aguy]

How come the Democrats have 100% of the ghettos if they know what they are doing in economics?

That is because they do know about economics...which is why they fight tax cuts..if they allowed taxes to be cut, those ghettos would slowly go away as the people in them became wealthier and better educated...the democrats can't have that....

 

[Toddsterpatriot]

Why wouldn't Obama roll back Bush's tax cuts if they didn't work? Either Obama was an incompetent fool or the tax cuts worked.

The GOP controlled Congress enough to block anything Obama could do regarding tax reform.

Obama had 58 seats in the Senate and 257 in the House.

For a short time, and you need 60 in the Senate.

Obama needed 60 votes to hike taxes?

 

[edthecynic]

No....the debt skyrocketed because the democrats broke their deal with Reagan.....they agreed to cut spending, then spent all of the money his tax cuts brought into the government.....and they kept spending till all that money was gone.....and kept spending.....

Actually, as you well know, it was St Ronnie who broke the deal agreed to by Senate majority leader Dole and House majority leader O'Neil because the cuts included Reagan's Star Wars boondoggle.

Nope......o'neil broke the deal...he took the tax increase, then didn't deliver on the spending cuts..that is why the debt went up.

LIAR!
Not only did Reagan break the deal, Dole chewed Reagan's lying ass out over it.
The debt went up because Reagan pissed the tax money away on the worthless Star Wars slush fund.