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It's called the Laffer Curve.
Who isn't? But, I think it's important to separate the two. Otherwise, you end up like exstatic who thinks the tax cuts resulted in a bigger debt.
That works up to a point. You revenues do not approach infinity as your tax rate approaches zero. There is an optimal tax rate that maximizes revenue.
And I was complaining primarily about the spending.
It's called the Laffer Curve.
Who isn't? But, I think it's important to separate the two. Otherwise, you end up like exstatic who thinks the tax cuts resulted in a bigger debt.
In the spring of 2003, ahead of the Bush tax cuts, Nancy Pelosi said:
Larry Kudlow dissects this wonderfully wrong comment and provides plenty of data to refute it.
Good stuff.Actually, since the passage of Bush’s tax cuts, over 5 million jobs have been created in the U.S. Unemployment dropped from 6.3 percent to 4.6 percent. Simply put, Americans are working.
Wrong. The economy has grown at a 4.0 percent annualized rate, way above historical averages. $13 trillion of new wealth has been created during this time.
Wrong again. Amid a surge in tax collections, the Bush administration cut its estimate of this year's budget deficit today by 30 percent to $296 billion. The projected shortfall is down from the $423 billion deficit the White House forecast five months ago and represents 2.3 percent of gross domestic product, according to the OMB. Government revenue has risen 13 percent so far this year, driven by higher than expected tax receipts as the economy grew at an annual rate of 5.6 percent in the first quarter, the fastest in almost three years (when the tax cuts were introduced). Individual tax receipts were almost $60 billion higher than expected because of the rise in personal income. Corporate tax receipts were over $50 billion higher than expected.
Despite stubborn naysayers like Mrs. Pelosi, the pro-growth, supply-side tax cut formula is a winner. It has been proven right, yet again.
The numbers tell it all. American workers thrive and businesses flourish when they’re able to keep more of their income. Treasury Secretary Hank Paulson was absolutely right in his confirmation hearings, low taxes really do change behavior. And, as the New York Sun pointed out yesterday, “It’s official – Arthur Laffer wins.”
I pay the same tax rate on my first million and he pays on his too.
You're a in idiot dude, you brought up taxes to begin with.
Durrrr yooooni's weeee toddddd ittttt
Maybe I misinterpreted this illiterate statement of yours. I've never been very good at divining the idiot mind.
I actually like that idea and link you provided.
I am no economist by any stretch though, so take that for what its worth.
Sign the pe ion! Let's get this party started.
This is where I depart from a lot of fiscal conservatives.
If this were true, how does one explain the poor performance of countries like Somalia that have NO formal taxes whatsoever?
I think that a fairly robust central/federal government is needed to provide basic services and a framework for a healthy complex economy, much like bones provide a framework for everything else to work with and within.
Those who would completely gut the federal government have only to look at the failed Articles of Confederation experiment to see why such a gutting would cripple the US economy, rather than "free" it of "overregulation".
Your logic (as mine used to) is missing a component.
I believe in as low of taxes in possible, and am all in favor of a flat tax.
But the deficit spending is one of the reasons the economy appears so strong right now. Not that it's bad, but the spending makes it appear better.
What you fail to acknowledge is that the majority of that govt. over-spending is ALSO put right back into our own economy; providing jobs, profits, and addl. tax revenues. Essentially it's like buying a house in a neighborhood that is above your means. You can keep up with the Jones's for a while with a second mortgage, maxing out your credit cards, etc...you appear to have as much income as everyone around you, by deficit spending. Can't go on forever, though. Eventually you have to cut your spending, or increase your income w/o increasing spending to catch up (which is against human nature).
Nothing wrong with cutting taxes; it IS good for the economy; as is spending money not earned (in the short run) - the combination supercharges the economy, but at some point the debt has to be dealt with.
Deficit spending, at $400 billion revised to $296 billion, is a drop in the bucket of a $12 trillion dollar GDP.
Source? I seem to remember a GAO study that indicated otherwise. I will try to find it.
What percentage of new business start-ups fail?Why don't you do something smart with your excess money. Invest it in a start up business so those who would normally only get about 30% of the government handout, processed through Welfare, can put 100% of your money to work.
The tax cuts did result in a bigger debt. They increased federal deficits over a period of time and added to that debt.
Wonderful things. Really.
Tell me:
What is "income"?
Neither 2.5% OR $300 Billion is a drop in the bucket.
Nor is it the reason the economy "looks so strong" as was asserted in the post to which I was responding. In that sense, I believe it is a drop in the proverbial bucket.
When the health of the economy is measured in %'s that appear insignificant, when in fact they are not; those numbers consitute quite more than a drop in the bucket, Yoni.
4.5% unemployment is great - 2.5% more is 7% - almost catastrophic.
Economic growth of 2% is really good; 4.5% and the fed is hiking interest rates out of sight, and -.5% has ALL of us dangling from shower rods!
2.5% is huge.
You're not listening...this isn't some "delicate balance" argument.
The poster said that deficit spending was a reason the economy looked so good right now.
Take away that $300 billion and you still have a GDP of $11.7 trillion. Still phenomenal. In other words, the deficit spending is a drop in the GDP bucket.
Strawman.
That's one year's deficit. What's the ac ulated deficit (i.e., what's the total Federal Government's debt?). I'm sure it's not a drop in the bucket.
That's one year's GDP too.
So, tell me where this editorial errs:
http://www.opinionjournal.com/editor...l?id=110008640
No editorial error.
I'm just stating that deficits are financed with debt, which ac ulates year over year. At the end of the day, it does not really matter what your GDP is against one year's deficit but what is the repayment capacity of your debt vis a vis the revenues you generate (your tax reciepts) and what your GDP is against your total debt (ac ulated deficits).
That tells me I have to move to Argentina.
Id be rich, !
How so?
The argument goes that government needs to do/be less, i.e. "small enough to drown in the bathtub"
Somalia is an example of government that does nothing.
The Articles of Confederation is a somewhat less drastic example of this.
If one wants a different tack in support of federalism, take insurance regulation for example.
There is no mean old central bureaucracy in Washinton that provides regulation of insurance. Instead you have each and every state (some with very little resources) ins uting 50 sets of laws and with 50 sets of smaller state agencies that enforce (or not) insurance regulation. It is a nightmare for larger companies to have to deal with licensing, regulation, and reporting.
I really dislike "strawman" arguments and wasn't attempting to make one. I was merely pointing out what happens in the absence of a government as some libertarians call for.
No, he doesn't.
It doesn't ac ulate. Federal debt generally takes the form of Treasury bonds held by the public. These are bought, sold, traded, redeemed, etc...but, they have value and are important to the economy. U.S. debt is an investment. How cool is that?
Since 1965, publicly held debt has averaged 31.1 percent of gross domestic product (the low was 18.3 percent in 1974; the high, 44.4 percent in 1993 -- I don't recall the screams for Clinton to do something about the debt then, nor do I recall any hand-wringing). This year, working from government projections, it will be around 32 percent—hardly a problem.
And its drop from the 1993 peak to 28 percent of GDP eight years later shows that, with a little less spending and a little more economic growth -- just tweaking, nothing dramatic, it can quickly plummet (even, conceivably, to levels that might create problems for the capital markets, where U.S. government bonds play a vital role in sophisticated portfolio strategies).
But, in fact, there is a real debt problem. A major and potentially crushing one. It turns on what Washington is committed to spending in the future on Social Security and (especially) Medicare, beyond what the taxes dedicated to those programs are expected to bring in.
A 2003 study from the American Enterprise Ins ute translated the unfunded liabilities of Medicare and Social Security into easy-to-understand terms. What, the authors asked, is the present-value equivalent in bonded debt not covered by current reserves or taxes of the government’s future obligations under Social Security and Medicare? Their answer? $7 trillion for Social Security, $36.6 trillion for Medicare. [There may be better numbers out there but, this was the first I came across and I'm confident, if anything, they're more ominous]
That’s almost 10 times the size of the current “federal debt."
That's why conservatives believe the privitization of Social Security and meaningful reform of en lement programs are vital to the continued economic health of this country.
It's not about the current debt, that's within norms; it's about the over-promised future we won't be able to afford...even in a healthy economy.
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