Friday, January 25, 2008

Nothing like the WSJ to let you know what the wingnutty right is thinking

I was reading the Wall Street Journal (WSJ) this morning, basically for lack of anything else handy to read, and saw a lovely article on the editorial page (the main page I read to see what the nutcases that pass for the right are thinking today). The article was by Arthur Laffer and it was talking again about how tax revenue will magically go up by cutting taxes.

In addition to the little gem noted by Brendan Nyhan, where Laffer accuses ecnomists of some vast conspiracy to keep this quiet (probably because no sane economist actually claims cutting taxes now would increase revenue - for the simple fact that such a claim is bullshit), there is a much bigger pile of festering nonsense.

Laffer has the audacity to not only claim the totally bullshit claim that cutting taxes increases revenue, he's now claiming that this ONLY works if you cut the taxes of the richest people. He says if you cut the taxes of the middle and lower class, you do, indeed, lower revenue. Nice to see him finally admit at least half of the truth, I suppose, except for the fact that now he's basically advocating, to increase revenue, you tax the poor and middle class and cut taxes on the rich. Nice load of bullshit to justify the bullshit economic policy of the GOP - cutting taxes on only the wealthy and screwing everyone else.

I can't wait to see other people call him on this bullshit. Megan? Anyone with an audience?


hedera said...

There was a reason Laffer's ideas were called "voodoo economics" at one time... I always thought of them as "Laffable economics."

Mike said...

I think the guy who called it "voodoo economics was George H. W. Bush, and he was VP at the time.

But back then, the Laffer Curve actually made a certain degree of sense, although it probably didn't apply to the U.S. tax code. The theory was that there is an optimum tax rate at which revenue is maximized, that if the taxes are higher than that rate, a tax cut increases revenue.

If a country has a tax rate of 95% nobody has any money to start companies and stuff, so the economy suffers. There is also some nifty math at the extremes: cutting that rate to %90 doubles the amount of money you have to start companies and stuff, but only reduces revenue by 5.3%. So yeah, reducing that tax rate would probably increase revenues.

But the current idea, that tax cuts always increase revenues, is not so much voodoo (you'd have to sacrifice a chicken, and there would be some reason to hope it might work) as just plain goofy.

DBB said...

Yeah, it is rather trivial and almost meaningless, but the so-called 'Laffer curve' does exist at the extreme end of the taxation curve - where rates approach 100%. I wrote on this before in an older post. The problem is, there is no evidence that it exists anywhere outside of that extreme - and our tax system is nowhere near that high. So it is a huge load of bullshit that even Bush's own economic advisers don't claim - and yet we still see it spouted by people like Laffer. I think he must know it is bullshit and just says it to push the usual GOP agenda of cutting taxes on the rich - either that or he is batshit crazy.