The ultimate vindication of Republican supply-side economics

[itfitzme]

I don't even understand what this argument is. One of you likes the rate to be annualised and the other doesn't? Is that it? Like, what's the actual substance of this conversation?

Yes, that is absolutely it. He likes the 6.7% rather than a 1.9% or a 1.6% because it is the number he knows. It has to be the number he knows, not an index or quarterly, because he's familiar with it. Which is all fine. So I gave in an did the work for him and used his numbers.

But it doesn't change the values relative to each other. Whatever it is, if it's the smaller number, the quarter before is still bigger or smaller by comparison. It all comes out the same, chained 2005, indexes, annualized, quarters. It's all relative to the before and after.

(God that makes me laugh when you simplify it like that. I'm tired now.)

 

[Toddsterpatriot]

I don't even understand what this argument is. One of you likes the rate to be annualised and the other doesn't? Is that it? Like, what's the actual substance of this conversation?

Trying to keep his numbers honest.

 

[Toddsterpatriot]

And I gave you the % change from the BEA table.

Here you go, the thing with your numbers, the ones you like better.

So point to it.

Do you think that Clinton '93 is in the right place?

Here you go, the thing with your numbers, the ones you like better.

Yeah, I like the correct numbers better.

That reminds me, what is your unemployment data based on?

 

[itfitzme]

I don't even understand what this argument is. One of you likes the rate to be annualised and the other doesn't? Is that it? Like, what's the actual substance of this conversation?

Trying to keep his numbers honest.

And now that he has the numbers he considers "honest", he won't point to the change in GDP and employment that occurs due to the change in tax rates. The graph, with his numbers is exactly that same .

He is pure bullshit.

 

[itfitzme]

And I gave you the % change from the BEA table.

Here you go, the thing with your numbers, the ones you like better.

So point to it.

Do you think that Clinton '93 is in the right place?

Here you go, the thing with your numbers, the ones you like better.

Yeah, I like the correct numbers better.

That reminds me, what is your unemployment data based on?

The graph looks exactly the same as it did before. You know how to look up the unemployment numbers.

So point to the change in employment and GDP as a result of Clintons and Bush's tax changes.

 

[Toddsterpatriot]

Here you go, the thing with your numbers, the ones you like better.

So point to it.

Do you think that Clinton '93 is in the right place?

Here you go, the thing with your numbers, the ones you like better.

Yeah, I like the correct numbers better.

That reminds me, what is your unemployment data based on?

The graph looks exactly the same as it did before. You know how to look up the unemployment numbers.

So point to the change in employment and GDP as a result of Clintons and Bush's tax changes.

I do know how to look up unemployment numbers.
Your graph shows about 4%.
I'd ask you how you calculated that, but I don't want to make you cry again.

 

[itfitzme]

And I gave you the % change from the BEA table.

Here you go, the thing with your numbers, the ones you like better.

So point to it.

Do you think that Clinton '93 is in the right place?

Here you go, the thing with your numbers, the ones you like better.

Yeah, I like the correct numbers better.

That reminds me, what is your unemployment data based on?

Straight out of the NIPA Handbook

CONCEPTS AND METHODS OF THE U.S. NATIONAL INCOME AND PRODUCT ACCOUNTS


"Annual rates
Quarterly and monthly NIPA estimates in current and chained dollars are
presented at annual rates, which show the value that would be registered if the level of
activity measured for a quarter or for a month were maintained for a full year. Annual
rates are used so that periods of different lengths—for example, quarters and years—may
be easily compared. These annual rates are determined simply by multiplying the
estimated rate of activity by 4 (for quarterly data) or by 12 (for monthly data)."

"Growth rates
Percent changes in the estimates are also expressed at annual rates, which show
the value that would be registered if the pace of activity measured for a quarter or for a
month were maintained for a full year. Calculating these changes requires a variant of the
compound interest formula,

r= ( (GDPt/GDP0)^(m/n)-1) * 100

where
r is the percent change at an annual rate;
GDPt is the level of activity in the later period;
GDP0 is the level of activity in the earlier period;
m is the periodicity of the data (for example, 1 for annual data, 4 for
quarterly, or 12 for monthly); and
n is the number of periods between the earlier and later periods (that is, t-0).
Thus, for example, if a component increases from $100 in the first quarter to $105 in the
second quarter (5 percent at a quarterly rate), the annual rate of increase is
(($105/$100)^4/1 – 1) x 100 = 21.6 percent."

So I can use quarterly non-seasonal data to get the quarterly % chg.

It doesn't matter, I get to the same place.

And the graph doesn't look any different, only the scale changes.

 

[Toddsterpatriot]

Here you go, the thing with your numbers, the ones you like better.

So point to it.

Do you think that Clinton '93 is in the right place?

Here you go, the thing with your numbers, the ones you like better.

Yeah, I like the correct numbers better.

That reminds me, what is your unemployment data based on?

Straight out of the NIPA Handbook

CONCEPTS AND METHODS OF THE U.S. NATIONAL INCOME AND PRODUCT ACCOUNTS


"Annual rates
Quarterly and monthly NIPA estimates in current and chained dollars are
presented at annual rates, which show the value that would be registered if the level of
activity measured for a quarter or for a month were maintained for a full year. Annual
rates are used so that periods of different lengths—for example, quarters and years—may
be easily compared. These annual rates are determined simply by multiplying the
estimated rate of activity by 4 (for quarterly data) or by 12 (for monthly data)."

"Growth rates
Percent changes in the estimates are also expressed at annual rates, which show
the value that would be registered if the pace of activity measured for a quarter or for a
month were maintained for a full year. Calculating these changes requires a variant of the
compound interest formula,

r= ( (GDPt/GDP0)^(m/n)-1) * 100

where
r is the percent change at an annual rate;
GDPt is the level of activity in the later period;
GDP0 is the level of activity in the earlier period;
m is the periodicity of the data (for example, 1 for annual data, 4 for
quarterly, or 12 for monthly); and
n is the number of periods between the earlier and later periods (that is, t-0).
Thus, for example, if a component increases from $100 in the first quarter to $105 in the
second quarter (5 percent at a quarterly rate), the annual rate of increase is
(($105/$100)^4/1 – 1) x 100 = 21.6 percent."

So I can use quarterly non-seasonal data to get the quarterly % chg.

It doesn't matter, I get to the same place.

And the graph doesn't look any different, only the scale changes.

Yeah, your numbers were right, except that they were wrong. Good job!

 

[itfitzme]

Here you go, the thing with your numbers, the ones you like better.

Yeah, I like the correct numbers better.

That reminds me, what is your unemployment data based on?

The graph looks exactly the same as it did before. You know how to look up the unemployment numbers.

So point to the change in employment and GDP as a result of Clintons and Bush's tax changes.

I do know how to look up unemployment numbers.
Your graph shows about 4%.
I'd ask you how you calculated that, but I don't want to make you cry again.

So here are the two compared, using the compound interest formula

Quarter Table 1.1.5. GDP SA Ann QuartData Table 1.1.1 Table 1.1.6 (Q3-Q2)/Q2 ((Q3-Q2)/Q2+1)^4-1
2001-4 10373.1 1.4 11370 ---
2002-1 10498.7 3.5 11467.1 0.85% 3.5%
2002-2 10601.9 2.1 11528.1 0.53% 2.1%
2002-3 10701.7 2 11586.6 0.51% 2.0%
2002-4 10766.9 0.1 11590.6 0.03% 0.1%
2003-1 10887.4 1.7 11638.9 0.42% 1.7%
2003-2 11011.6 3.4 11737.5 0.85% 3.4%
2003-3 11255.1 6.7 11930.7 1.65% 6.7%
2003-4 11414.8 3.7 12038.6 0.90% 3.7%
2004-1 11589.9 2.7 12117.9 0.66% 2.7%
2004-2 11762.9 2.6 12195.9 0.64% 2.6%
2004-3 11936.3 3 12286.7 0.74% 3.0%
2004-4 12123.9 3.3 12387.2 0.82% 3.3%
2005-1 12361.8 4.2 12515 1.03% 4.2%
2005-2 12500 1.8 12570.7 0.45% 1.8%
2005-3 12728.6 3.2 12670.5 0.79% 3.2%
2005-4 12901.4 2.1 12735.6 0.51% 2.1%
2006-1 13161.4 5.1 12896.4 1.26% 5.1%

Notice that the only difference between the value I used and the value from the table you like is [Annual%Chg] = (Qtrly+1)^4-1.

They are the. same thing. You've proven nothing.

So now, do some work and make the graph you like, then point to it. Or point to it on the one I made.

 

[itfitzme]

Here you go, the thing with your numbers, the ones you like better.

Yeah, I like the correct numbers better.

That reminds me, what is your unemployment data based on?

Straight out of the NIPA Handbook

CONCEPTS AND METHODS OF THE U.S. NATIONAL INCOME AND PRODUCT ACCOUNTS


"Annual rates
Quarterly and monthly NIPA estimates in current and chained dollars are
presented at annual rates, which show the value that would be registered if the level of
activity measured for a quarter or for a month were maintained for a full year. Annual
rates are used so that periods of different lengths—for example, quarters and years—may
be easily compared. These annual rates are determined simply by multiplying the
estimated rate of activity by 4 (for quarterly data) or by 12 (for monthly data)."

"Growth rates
Percent changes in the estimates are also expressed at annual rates, which show
the value that would be registered if the pace of activity measured for a quarter or for a
month were maintained for a full year. Calcucating these changes requires a variant of the
compound interest formula,

r= ( (GDPt/GDP0)^(m/n)-1) * 100


(($105/$100)^4/1 – 1) x 100 = 21.6 percent."

So I can use quarterly non-seasonal data to get the quarterly % chg.

It doesn't matter, I get to the same place.

And the graph doesn't look any different, only the scale changes.

Yeah, your numbers were right, except that they were wrong. Good job!

Like that makes sense....

Like inches are right and feet are wrong. Miles per hour are right and Kilometers per hour is wrong.

But what you won't do, what you will never do, is to just point to the changes on the graph. You don't like inches, so you insist on feet. Given feet, you find something else to whine about.

You only answers are questions, "it's a lie", "your a moron". And that was exactly what I had posted, in a response to someone else.

And the amount of information that you actually add is still about 1/10 per comment.

So stop your sniveling (Oh, I don't like that, I don't like that....) , do some work, or just point to the changes.

 

[Toddsterpatriot]

The graph looks exactly the same as it did before. You know how to look up the unemployment numbers.

So point to the change in employment and GDP as a result of Clintons and Bush's tax changes.

I do know how to look up unemployment numbers.
Your graph shows about 4%.
I'd ask you how you calculated that, but I don't want to make you cry again.

So here are the two compared, using the compound interest formula

Quarter Table 1.1.5. GDP SA Ann QuartData Table 1.1.1 Table 1.1.6 (Q3-Q2)/Q2 ((Q3-Q2)/Q2+1)^4-1
2001-4 10373.1 1.4 11370 ---
2002-1 10498.7 3.5 11467.1 0.85% 3.5%
2002-2 10601.9 2.1 11528.1 0.53% 2.1%
2002-3 10701.7 2 11586.6 0.51% 2.0%
2002-4 10766.9 0.1 11590.6 0.03% 0.1%
2003-1 10887.4 1.7 11638.9 0.42% 1.7%
2003-2 11011.6 3.4 11737.5 0.85% 3.4%
2003-3 11255.1 6.7 11930.7 1.65% 6.7%
2003-4 11414.8 3.7 12038.6 0.90% 3.7%
2004-1 11589.9 2.7 12117.9 0.66% 2.7%
2004-2 11762.9 2.6 12195.9 0.64% 2.6%
2004-3 11936.3 3 12286.7 0.74% 3.0%
2004-4 12123.9 3.3 12387.2 0.82% 3.3%
2005-1 12361.8 4.2 12515 1.03% 4.2%
2005-2 12500 1.8 12570.7 0.45% 1.8%
2005-3 12728.6 3.2 12670.5 0.79% 3.2%
2005-4 12901.4 2.1 12735.6 0.51% 2.1%
2006-1 13161.4 5.1 12896.4 1.26% 5.1%

Notice that the only difference between the value I used and the value from the table you like is [Annual%Chg] = (Qtrly+1)^4-1.

They are the. same thing. You've proven nothing.

So now, do some work and make the graph you like, then point to it. Or point to it on the one I made.

Yeah, all you had to do was take your numbers and multiply by 4.
Glad you can see your error now.

 

[Toddsterpatriot]

Straight out of the NIPA Handbook

CONCEPTS AND METHODS OF THE U.S. NATIONAL INCOME AND PRODUCT ACCOUNTS


"Annual rates
Quarterly and monthly NIPA estimates in current and chained dollars are
presented at annual rates, which show the value that would be registered if the level of
activity measured for a quarter or for a month were maintained for a full year. Annual
rates are used so that periods of different lengths—for example, quarters and years—may
be easily compared. These annual rates are determined simply by multiplying the
estimated rate of activity by 4 (for quarterly data) or by 12 (for monthly data)."

"Growth rates
Percent changes in the estimates are also expressed at annual rates, which show
the value that would be registered if the pace of activity measured for a quarter or for a
month were maintained for a full year. Calcucating these changes requires a variant of the
compound interest formula,

r= ( (GDPt/GDP0)^(m/n)-1) * 100


(($105/$100)^4/1 – 1) x 100 = 21.6 percent."

So I can use quarterly non-seasonal data to get the quarterly % chg.

It doesn't matter, I get to the same place.

And the graph doesn't look any different, only the scale changes.

Yeah, your numbers were right, except that they were wrong. Good job!

Like that makes sense....

Like inches are right and feet are wrong. Miles per hour are right and Kilometers per hour is wrong.

But what you won't do, what you will never do, is to just point to the changes on the graph. You don't like inches, so you insist on feet. Given feet, you find something else to whine about.

You only answers are questions, "it's a lie", "your a moron". And that was exactly what I had posted, in a response to someone else.

And the amount of information that you actually add is still about 1/10 per comment.

So stop your sniveling (Oh, I don't like that, I don't like that....) , do some work, or just point to the changes.

Notice your unemployment errors yet?

 

[itfitzme]

I do know how to look up unemployment numbers.
Your graph shows about 4%.
I'd ask you how you calculated that, but I don't want to make you cry again.

So here are the two compared, using the compound interest formula

Quarter Table 1.1.5. GDP SA Ann QuartData Table 1.1.1 Table 1.1.6 (Q3-Q2)/Q2 ((Q3-Q2)/Q2+1)^4-1
2001-4 10373.1 1.4 11370 ---
2002-1 10498.7 3.5 11467.1 0.85% 3.5%
2002-2 10601.9 2.1 11528.1 0.53% 2.1%
2002-3 10701.7 2 11586.6 0.51% 2.0%
2002-4 10766.9 0.1 11590.6 0.03% 0.1%
2003-1 10887.4 1.7 11638.9 0.42% 1.7%
2003-2 11011.6 3.4 11737.5 0.85% 3.4%
2003-3 11255.1 6.7 11930.7 1.65% 6.7%
2003-4 11414.8 3.7 12038.6 0.90% 3.7%
2004-1 11589.9 2.7 12117.9 0.66% 2.7%
2004-2 11762.9 2.6 12195.9 0.64% 2.6%
2004-3 11936.3 3 12286.7 0.74% 3.0%
2004-4 12123.9 3.3 12387.2 0.82% 3.3%
2005-1 12361.8 4.2 12515 1.03% 4.2%
2005-2 12500 1.8 12570.7 0.45% 1.8%
2005-3 12728.6 3.2 12670.5 0.79% 3.2%
2005-4 12901.4 2.1 12735.6 0.51% 2.1%
2006-1 13161.4 5.1 12896.4 1.26% 5.1%

Notice that the only difference between the value I used and the value from the table you like is [Annual%Chg] = (Qtrly+1)^4-1.

They are the. same thing. You've proven nothing.

So now, do some work and make the graph you like, then point to it. Or point to it on the one I made.

Yeah, all you had to do was take your numbers and multiply by 4.
Glad you can see your error now.

It's not "multiply by 4". Can you not read? It says, [Annual%Chg] = (Qtrly+1)^4-1.

 

[Toddsterpatriot]

So here are the two compared, using the compound interest formula

Quarter Table 1.1.5. GDP SA Ann QuartData Table 1.1.1 Table 1.1.6 (Q3-Q2)/Q2 ((Q3-Q2)/Q2+1)^4-1
2001-4 10373.1 1.4 11370 ---
2002-1 10498.7 3.5 11467.1 0.85% 3.5%
2002-2 10601.9 2.1 11528.1 0.53% 2.1%
2002-3 10701.7 2 11586.6 0.51% 2.0%
2002-4 10766.9 0.1 11590.6 0.03% 0.1%
2003-1 10887.4 1.7 11638.9 0.42% 1.7%
2003-2 11011.6 3.4 11737.5 0.85% 3.4%
2003-3 11255.1 6.7 11930.7 1.65% 6.7%
2003-4 11414.8 3.7 12038.6 0.90% 3.7%
2004-1 11589.9 2.7 12117.9 0.66% 2.7%
2004-2 11762.9 2.6 12195.9 0.64% 2.6%
2004-3 11936.3 3 12286.7 0.74% 3.0%
2004-4 12123.9 3.3 12387.2 0.82% 3.3%
2005-1 12361.8 4.2 12515 1.03% 4.2%
2005-2 12500 1.8 12570.7 0.45% 1.8%
2005-3 12728.6 3.2 12670.5 0.79% 3.2%
2005-4 12901.4 2.1 12735.6 0.51% 2.1%
2006-1 13161.4 5.1 12896.4 1.26% 5.1%

Notice that the only difference between the value I used and the value from the table you like is [Annual%Chg] = (Qtrly+1)^4-1.

They are the. same thing. You've proven nothing.

So now, do some work and make the graph you like, then point to it. Or point to it on the one I made.

Yeah, all you had to do was take your numbers and multiply by 4.
Glad you can see your error now.

It's not "multiply by 4". Can you not read? It says, [Annual%Chg] = (Qtrly+1)^4-1.

Yes, I can read. Multiply by 4 is close enough for government work.
Fix your unemployment error yet?

 

[itfitzme]

Yeah, all you had to do was take your numbers and multiply by 4.
Glad you can see your error now.

It's not "multiply by 4". Can you not read? It says, [Annual%Chg] = (Qtrly+1)^4-1.

Yes, I can read. Multiply by 4 is close enough for government work.
Fix your unemployment error yet?

Like you say, it's close enough for government work. It was perfect at 1.63% and now "less" correct at 6.7%. But as you say, close enough for gov't work.

And the scaled unemployment rate is good enough. But I just cannot prove a significant change in GDP or unemployment due to a change in tax rates.

I've tried two ways so far, this and a linear regression against top marginal rate. So far, I've got nothing. And the Heritage Foundation's method didn't work.

It's gotta be there. It only make sense. If you punish business owners for making money, they aren't going to be motivated.

Perhaps you can do better. Any suggestions as to how to prove it?

 

[Foxfyre]

Gentlemen, I've been watching this battle of the cut and paste with some interest and I while I applaud the detail in the debate, I think you may be spinning your wheels or comparing apples to oranges or pick your metaphor.

There are so many factors involved such as dropping large numbers of people off the rolls entirely when the rates were reduced as happened in the Bush Administration to the phenomenon of the rise of the S Corp and LLCs as American business has tried to cope with the tax code--the number of C Corps have been declining for some time now--as well to the changing formulas for how the GDP is calculated.

And different kinds of taxes will not have the same effect as other kinds of taxes. Reducing payroll taxes for employees, for instance, has almost negligible effect on the GDP while reducing capital gains taxes with a guarantee of the rate for a reasonable period could show a considerable surge in economic activity that would likely show up in the GDP.

To really assess cause and effect of taxes, you almost have to look at each separate income generating group and their specific activity. There is a good discussion here with the summary posted:

• The U.S. has a low average effective corporate rate when measured incorrectly as a share of GDP, as Bruce does. The low rate results from the relative decline in C corporation business activity, the high U.S. statutory rate driving profits offshore, and the high U.S. marginal effective rate suppressing real investment.

• The U.S. has one of the highest statutory corporate tax rates in the world. The high statutory rate drives reported income offshore, and it is also an important component of the marginal effective tax rate faced by companies.

• The U.S. has one of the highest marginal effective corporate tax rates in the world according to some calculations, which likely reduces U.S. capital investment substantially. After all, “corporate taxes are the most harmful type of tax for economic growth,” according to the OECD.
Are U.S. Corporate Taxes Low? | Cato @ Liberty

 

[Toddsterpatriot]

It's not "multiply by 4". Can you not read? It says, [Annual%Chg] = (Qtrly+1)^4-1.

Yes, I can read. Multiply by 4 is close enough for government work.
Fix your unemployment error yet?

Like you say, it's close enough for government work. It was perfect at 1.63% and now "less" correct at 6.7%. But as you say, close enough for gov't work.

And the scaled unemployment rate is good enough. But I just cannot prove a significant change in GDP or unemployment due to a change in tax rates.

I've tried two ways so far, this and a linear regression against top marginal rate. So far, I've got nothing. And the Heritage Foundation's method didn't work.

It's gotta be there. It only make sense. If you punish business owners for making money, they aren't going to be motivated.

Perhaps you can do better. Any suggestions as to how to prove it?

No one talks about GDP growth without annualizing the numbers.
Scaled unemployment? Your chart shows about 4%.
How is that accurate in any way?

 

[itfitzme]

Gentlemen, I've been watching this battle of the cut and paste with some interest and I while I applaud the detail in the debate, I think you may be spinning your wheels or comparing apples to oranges or pick your metaphor.

There are so many factors involved such as dropping large numbers of people off the rolls entirely when the rates were reduced as happened in the Bush Administration to the phenomenon of the rise of the S Corp and LLCs as American business has tried to cope with the tax code--the number of C Corps have been declining for some time now--as well to the changing formulas for how the GDP is calculated.

And different kinds of taxes will not have the same effect as other kinds of taxes. Reducing payroll taxes for employees, for instance, has almost negligible effect on the GDP while reducing capital gains taxes with a guarantee of the rate for a reasonable period could show a considerable surge in economic activity that would likely show up in the GDP.

To really assess cause and effect of taxes, you almost have to look at each separate income generating group and their specific activity. There is a good discussion here with the summary posted:

• The U.S. has a low average effective corporate rate when measured incorrectly as a share of GDP, as Bruce does. The low rate results from the relative decline in C corporation business activity, the high U.S. statutory rate driving profits offshore, and the high U.S. marginal effective rate suppressing real investment.

• The U.S. has one of the highest statutory corporate tax rates in the world. The high statutory rate drives reported income offshore, and it is also an important component of the marginal effective tax rate faced by companies.

• The U.S. has one of the highest marginal effective corporate tax rates in the world according to some calculations, which likely reduces U.S. capital investment substantially. After all, “corporate taxes are the most harmful type of tax for economic growth,” according to the OECD.
Are U.S. Corporate Taxes Low? | Cato @ Liberty

Thanks for the info.

Somewhere back a billion posts ago, someone suggested that the Bush Tax Cuts "saved us from a recession". So I did the first basic thing, plotted GDP and recessions with the tax cuts show. And I figured, what the heck, might as well put in the unemployment rate as well. Then someone mentioned the tax changes made during the Bush administration, so I put that it there. Originally it had both real dollar and current dollar GDP.

And in looking at just GDP and unemployment with the recessions and tax changes, it's no so clear that they did anything.

I am not terribly surprised. It's just not likely that simple. On one side there are tax changes, on the other side there is spending. And if they both have an effect, then the single measures of unemployment and GDP will reflect both simultaneously.

And simply looking at top marginal rates isn't going to be enough, though it seems 99.9% of the data on corporate taxes only lists the top marginal rate. I have found, so far, details for the tax schedules up through 2002. That's not far enough. I need through 2007, at least. The income tax schedules are much more complete.

And, as you point out there are a host of other issues like types of businesses. Then being a global economy in which the US cannot be simply separated, it isn't necessarily the absolute tax level but the tax level relative to other countries. As well, there are a host of deductions and subsidies that that apply to a variety of different companies and markets.

And changes may be simply an impulse, having an effect in the immediately following period until the market adjusts accordingly. There is not doubt that, when the minimum wage goes up or after a COLA adjustment to SSI, those groups will have a little more money to spend until inflation catches up with it again. The same effect may very well be the case with changes in government spending or tax rates which cause a temporary change until the market adjusts again.

As time goes on, I'll find more info to roll into some refined examinations. And, I might even find the effects of changes in taxes and spending. In the mean time, I do with the info I got and it shows what it shows.

 

[itfitzme]

Yes, I can read. Multiply by 4 is close enough for government work.
Fix your unemployment error yet?

Like you say, it's close enough for government work. It was perfect at 1.63% and now "less" correct at 6.7%. But as you say, close enough for gov't work.

And the scaled unemployment rate is good enough. But I just cannot prove a significant change in GDP or unemployment due to a change in tax rates.

I've tried two ways so far, this and a linear regression against top marginal rate. So far, I've got nothing. And the Heritage Foundation's method didn't work.

It's gotta be there. It only make sense. If you punish business owners for making money, they aren't going to be motivated.

Perhaps you can do better. Any suggestions as to how to prove it?

No one talks about GDP growth without annualizing the numbers.
Scaled unemployment? Your chart shows about 4%.
How is that accurate in any way?

It puts the two curve on top of each other so that they can be more easily compared. When I had the graph with quarterly change, one was 1.6 and the other was 9. They weren't even close to each other.

There are a few ways to do it. One is to have two different scales on each side of the graph. I find it a pain in the ass to make graphs with multiple scales. Another is to subtract some constant from each data point which shifts the curve up or down. The third is to just multiply or divide by some constant. And none of it changes the meaning as its all just scaling.

The scale can be shifted or stretched and it doesn't change anything. It's no less accurate or precise when shifted or stretched. The values, relative to each other, are still the same. With a lot of data, the scale is changed to a log scale, it compresses really big numbers. And really big numbers are still bigger then just big numbers. The scale and the absolute numbers are arbitrarily chosen for some matter of convenience. At one time, the King's foot was the standard measure so now we have a rulers and yard sticks in feet. The King was the ruler. It's an arbitrary number created for reason of convenience.

If it's important to compare the quarterly GDP to the annual GDP, then expressing it in annual terms is useful. Then, if you really want to know if the quarter output is pretty good or not, you don't have to multiply by four in your head. Someone considered it important sometime. It was probably some president that didn't like to have to multiply by four. So that's what the BEA does. The "king" didn't like to have to multiply. It's the government, they do all sorts of things for some precedence that was set decades, even over a hundred years ago.

I happen to have the quarterly data in a database and find that a quarterly rate of 1.6% makes more sense then expressing it in an effective annual rate of 6.7% because that's what it really is.

And, as you point out, the GDP isn't 11+ Trillion in a quarter, it's more like 2-3 Trillion in a quarter. And I really haven't been interested in if the quarter is particularly high or low by comparison to the year.

Somewhere back about five years ago, that's what I decided to use. And why not, if I was going to do some fancy math thing like a regression, it wouldn't make sense to use the annualized number. And frankly, I'd rather set it up so I don't have to worry about adding one, taking the fourth root, then subtracting one again.

I downloaded the BEA xls file because they were nice enough to present a flat file. I don't care about all the individual accounts of the NIPA data that are included in the larger tables. And the Excel file link is right on the first BEA National page, not buried three pages deep. It's faster and can be automated, that's why they put it there.

And if you look at a graph of just the unemployment rate or a graph of just the GDP, the way the line wiggles up and down is exactly the same as the one I made, regardless of the scale. Look at one with the "correct scale" then compare it to the one I did, it wiggles the same. All you gotta do is look at the period of time of the Dec 2007 recession, and you know it's the right data set.

That's the important part, if they wiggle up and down together or not, not the what number we call it. The two have been stretched and shifted so the lines are on top of each other. It's easier to see if they wiggle at the same time or not. The scale is set up for the convenience. That is how it's done. That is how "everybody" does it.

What I really should have done was multiply the unemployment by three then subtract 20% to really expand it and put them on top of each other. That way the wiggle is really obvious. I should also move the horizontal scale to the bottom. But then, it's not like I'm getting paid or going to publish it in a scientific journal.

If the 4% really bothers you, multiply by two. And, while you're at it, you can white out the number "9" on the legend and write in "2" because, oops, I made a "mistake" and didn't change the legend. Like you said, it's close enough for government work.

 

[Foxfyre]

Gentlemen, I've been watching this battle of the cut and paste with some interest and I while I applaud the detail in the debate, I think you may be spinning your wheels or comparing apples to oranges or pick your metaphor.

There are so many factors involved such as dropping large numbers of people off the rolls entirely when the rates were reduced as happened in the Bush Administration to the phenomenon of the rise of the S Corp and LLCs as American business has tried to cope with the tax code--the number of C Corps have been declining for some time now--as well to the changing formulas for how the GDP is calculated.

And different kinds of taxes will not have the same effect as other kinds of taxes. Reducing payroll taxes for employees, for instance, has almost negligible effect on the GDP while reducing capital gains taxes with a guarantee of the rate for a reasonable period could show a considerable surge in economic activity that would likely show up in the GDP.


To really assess cause and effect of taxes, you almost have to look at each separate income generating group and their specific activity. There is a good discussion here with the summary posted:

• The U.S. has a low average effective corporate rate when measured incorrectly as a share of GDP, as Bruce does. The low rate results from the relative decline in C corporation business activity, the high U.S. statutory rate driving profits offshore, and the high U.S. marginal effective rate suppressing real investment.

• The U.S. has one of the highest statutory corporate tax rates in the world. The high statutory rate drives reported income offshore, and it is also an important component of the marginal effective tax rate faced by companies.

• The U.S. has one of the highest marginal effective corporate tax rates in the world according to some calculations, which likely reduces U.S. capital investment substantially. After all, “corporate taxes are the most harmful type of tax for economic growth,” according to the OECD.
Are U.S. Corporate Taxes Low? | Cato @ Liberty

Thanks for the info.

Somewhere back a billion posts ago, someone suggested that the Bush Tax Cuts "saved us from a recession". So I did the first basic thing, plotted GDP and recessions with the tax cuts show. And I figured, what the heck, might as well put in the unemployment rate as well. Then someone mentioned the tax changes made during the Bush administration, so I put that it there. Originally it had both real dollar and current dollar GDP.

And in looking at just GDP and unemployment with the recessions and tax changes, it's no so clear that they did anything.

I am not terribly surprised. It's just not likely that simple. On one side there are tax changes, on the other side there is spending. And if they both have an effect, then the single measures of unemployment and GDP will reflect both simultaneously.

And simply looking at top marginal rates isn't going to be enough, though it seems 99.9% of the data on corporate taxes only lists the top marginal rate. I have found, so far, details for the tax schedules up through 2002. That's not far enough. I need through 2007, at least. The income tax schedules are much more complete.

And, as you point out there are a host of other issues like types of businesses. Then being a global economy in which the US cannot be simply separated, it isn't necessarily the absolute tax level but the tax level relative to other countries. As well, there are a host of deductions and subsidies that that apply to a variety of different companies and markets.

And changes may be simply an impulse, having an effect in the immediately following period until the market adjusts accordingly. There is not doubt that, when the minimum wage goes up or after a COLA adjustment to SSI, those groups will have a little more money to spend until inflation catches up with it again. The same effect may very well be the case with changes in government spending or tax rates which cause a temporary change until the market adjusts again.

As time goes on, I'll find more info to roll into some refined examinations. And, I might even find the effects of changes in taxes and spending. In the mean time, I do with the info I got and it shows what it shows.

The Bush tax cuts did not save us from a recession. Of that I am certain. We were in the beginnings of a mild recession when President Bush took office and neither increased spending or a tax cut had any effect in that first year up until 9/11 that, among the other targets, struck at the heart of the nation's financial centers. And that DID send us reeling into a recession. The Bush administration merits a lot of credit for steering us through that terrible time with a steady and common sense hand and they didn't do anything stupid to make it worse.

The 2003 tax cuts put into place for 10 years did generate a huge amount of economic activity and unemployment rapidly recovered from a downturn in the wake of 9/11 and capital poured into the markets because of the lower capital gains rates. The U.S. treasury was benefitting mightily, the market recovered, and things returned to normal more quickly than anybody thought. This was NOT due to anything the government did other than that tax rate change but was rather due to the government not getting in the way.

Though the Bush adminisration and Congress did spend more money than we fiscal conservatives could ever approve, most of the serious excessive spending was due mostly to Afghanistan and Iraq. Nevertheless, at the same time, the vigorous influx of tax revenues into the treasury were bringing the deficit down and we were on a path back to a balanced budget within a year or two had the housing bubble not burst in 2008. And all the job losses attributed to the Bush years can be traced directly to 9/11, Katrina, and that housing bubble collapse. I think we never would have had an unbalanced budget through the Bush years had it not been for 9/11, the military actions that followed, and Katrina has to be factored into that too.

Any economist worth his salt however will tell you that increased tax revenues/GDP resulting from a tax policy will level out after a year or two with no further increase happening. But. . . it will generally level out at a higher level that when the economic activity was first generated.

But, you're unlikely to be able to fit the U.S. economy, unemployment, or any other macro economic factors into one simple one-size-fits-all graph. Most Presidents don't have a 9/11, a Katrina, and a housing bubble collapse to contend with and tracking back, most Presidents don't have an Andrew or a cold war or a Korea or a Great Depression or a WWII etc. Unless you have a way to factor in all such variables, just tracking spending/taxes against unemployment and GDP won't be too useful in obtaining the answers.