Beck's "Plan" is based on discredited Laffer Curve
Laying out his economic "Plan," Glenn Beck hosted former Reagan administration economist Art Laffer to promote Laffer's theory that increases to current federal tax rates would decrease federal revenues. But Laffer's theory is widely discredited, with Bush administration economist N. Gregory Mankiw calling it not "credible," and numerous Bush administration officials acknowledging that tax cuts produce a net decrease in revenue.
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From the April 12 edition of Fox News' Glenn Beck:
BECK: Show me the Laffer Curve here. I said earlier this -- we're not talking about raising taxes, we're talking about tax revenues.
LAFFER: Exactly. No, that's exactly right.
BECK: We don't need to raise taxes, we need to raise tax revenue. We need more dollars in.
LAFFER: That's right.
BECK: Explain this.
LAFFER: Well, you know what this is is these are tax rates here, tax rates on this level, all right? And this is tax revenues down here -- tax revenues. And the thing is fairly simple. If I taxed you at 120 percent of everything you earned so every time you came in the studio, instead of getting a check you got a bill. How much would you work?
BECK: I wouldn't work at all.
LAFFER: Obviously, it's zero if you get nothing. You have zero output at 100 percent tax rates, and you therefore have zero revenue. Obviously, the zero tax rate, you'll have lots of output, but there will be no taxes so you'll have zero revenue. As you start raising the tax rate, you can see the revenue starts rising because even though there's a little less output, you'll be taxing at more rates, and likewise, if you start lower tax rates here, people will start coming back to work and there will be revenue. This maps out the relationship between tax rates and tax revenues. And this whole range here, which we call the prohibitive range -- here, if you raise tax rates you actually get less money. And in my view, in a number of the taxes that we face in the U.S., we are literally in this range.
BECK: We were talking today, there was a study out, 77 percent income tax, that's what they're talking about.
LAFFER: Yeah, but that would clearly be in this range, I mean, and especially on upper income people. The more you raise their tax rates, they move abroad, they shift the types of income they get, they go out of business, they defer the income. They do all sorts of stuff, and you just aren't going to get their money. You just plain aren't. So if you raise tax rates on the rich, I will guarantee you you're going to get less revenue.
Laffer spoke in front of a blackboard drawing of his Laffer Curve:
Bush economist Mankiw says idea that increasing tax rates reduces revenues is not "credible"
Mankiw: "[M]ost economists" agree "supply-sider" claims are not "credible." In a May 2006 Wall Street Journal op-ed, N. Gregory Mankiw, Harvard University economics professor and former chairman of President Bush's Council of Economic Advisers, wrote: "Some supply-siders like to claim that the distortionary effect of taxes is so large that increasing tax rates reduces tax revenue. Like most economists, I don't find that conclusion credible for most tax hikes, and I doubt [then-Treasury Secretary Hank] Paulson does either." Further, in a 2005 paper, Mankiw writes: "Most economists ... believe that taxes influence national income but doubt that the growth effects are large enough to make tax cuts self-financing."
Bush administration officials acknowledged cutting taxes decreases net revenue
Paulson: "I don't believe that tax cuts pay for themselves." During his June 2006 confirmation hearing, then-Treasury Secretary Hank Paulson said, "As a general rule, I don't believe that tax cuts pay for themselves." The financial information website MarketWatch reported this statement as "echoing the opinion of most economists."
Nussle: Tax cuts do not "totally pay for themselves." According to a November 15, 2007, Washington Post editorial, Jim Nussle, then the director of the Office of Management and Budget, told reporters, "Some say that [the tax cut] was a total loss. Some say they totally pay for themselves. It's neither extreme."
Viard: "No dispute" revenues lower than they would have been without Bush tax cuts. In an October 17, 2006, article, the Post quoted Alan D. Viard, a former Council of Economic Advisers senior economist under Bush, saying that "[f]ederal revenue is lower today than it would have been without the [Bush] tax cuts. There's really no dispute among economists about that."
Lazear: "[W]e do not think tax cuts pay for themselves." During his testimony to the Senate Budget Committee in 2006, Edward Lazear, then-chairman of Bush's Council of Economic Advisers, stated: "Will the tax cuts pay for themselves? As a general rule, we do not think tax cuts pay for themselves. Certainly, the data presented above do not support this claim."
Samwick: "You know that tax cuts have not fueled record revenues." In a January 2007 New Year's Plea," to "anyone in the [Bush] Administration who may read this blog," Andrew Samwick, an economics professor at Dartmouth College and former chief economist to the Council of Economic Advisers during the Bush administration, wrote:
You are smart people. You know that the tax cuts have not fueled record revenues. You know what it takes to establish causality. You know that the first order effect of cutting taxes is to lower tax revenues. We all agree that the ultimate reduction in tax revenues can be less than this first order effect, because lower tax rates encourage greater economic activity and thus expand the tax base. No thoughtful person believes that this possible offset more than compensated for the first effect for these tax cuts. Not a single one.
Other conservative economists make same acknowledgement
Bernanke: "I don't think that as a general rule tax cuts pay for themselves." In his April 27, 2006, testimony before the Joint Economic Committee, Federal Reserve chairman Ben Bernanke asserted "I don't think that as a general rule tax cuts pay for themselves," adding that "to the extent the tax cuts produce greater efficiency or greater growth, they will partially offset the losses in revenues"
Holtz-Eakin: "You are not going to get tax cuts to pay for themselves." As director of the Congressional Budget Office in 2005, Douglas Holtz-Eakin, who later became senior policy adviser on Sen. John McCain's presidential campaign, released a study of a 10-percent federal income tax cut, which concluded that "the budgetary impact of the economic changes was estimated to offset between 1 percent and 22 percent of the revenue loss from the tax cut over the first five years and add as much as 5 percent to that loss or offset as much as 32 percent of it over the second five years." In other words, during the first five years of a 10-percent tax cut, the resulting economic impact on the budget would offset at most 22 percent of the federal revenues lost and during the second five years would offset at most 32 percent of the revenues lost. Holtz-Eakin also reportedly told Boston Globe columnist Scot Lehigh, "You are not going to get tax cuts to pay for themselves."
Has anyone told Doris Day?!
Though we probably shouldn't be laughing too hard as Laffer has started making his rounds on FOX News. This morning he had an appearance with the pandering F&F hosts. His points of view were not challenged. Expect to see him on other FOX News shows too.
That's how they convince working class people to support policies that only benefit the top 2%.
(Everyone else has won the genetic lottery and inherited their wealth already)
I think that might explain why so many of them vote repuglican as their disconnect from truth and logic is already so extreme that they don't understand the numbers. That it is like actually winning a lottery.
but wait...
Conservatives don't want to leave a better nation for our children. They want to keep everything for themselves and let those with less suffer. By keeping people suffering, they make sure they have future voters.
As usual, they like to use others (in this case, children) to make their point. I can't begin to count the number of times I've heard wingnuts say (paraphrased) "we are leaving our children with this big debt", yet, it's not their children who are paying the debt, it is the super rich. It's not like their children will be sitting there at home, 10-years-old filling out tax forms, getting calls from collection agencies and having their homes raided by the IRS. It's just the typical fear mongering by the right. They love to use the weak to make their point stronger... and with that, they influence the weak minded.
It just doesn't work! If, like Laffer says, upper income people will do anything to avoid high taxes, then wouldn't logic follow that if they are given extra money in tax cuts they would want to hang on to this too? The argument is that they are job creators and stimulate the economy by spending but please: extra money in your hands doesn't automatically compel you to hire extra staff unless it's needed, and likely not even then if they are so greedy they would emigrate to avoid taxes! Also, trading in a big spacious house for a big spacious mansion doesn't stimulate the economy and provide jobs; the amount saved once spread out would not be such a stimulant that new jobs would be necessary. It has never happened this way and likely never will.
Human nature is what makes unrestrained capitalism unsustainable. This Beckian ideal should be as much a target of scorn as what he himself ridicules: the left's idea of utopia.
I can't fathom why it hasn't been used before - it's so obvious and it will solve all of our problems with those pesky f'r'nnah types who keep hiding our oil and shut those climate people up.
I think that Mr. Laugher could prove just about any hypothesis when he gets to set the assumptions in this manner. We can only hope that Mr. Coward does get taxed at this rate and decides to stay home!
"If I made no money for going to work, I wouldn't work at all. Of course! Makes perfect sense."
This is a sad commentary on the level of intellect on the far right.
It's one thing for Beck the Uneducated Demagogue to vilify the political opposition (democrats) with such inflammatory rhetoric, it's not acceptable but he's been doing it and getting away with it in any case. But a US Congressman who will engage with Beck in anti-democratic rhetoric?
Beck and Paul Ryan and Fox and Murdoch and Ailes and Rush and the whole lot of republican propagandists can not, with any legitimacy, claim to be practicing democracy in the US any more. Democracy requires at least two parties, and further requires that the side that loses elections to not throw a two-year-long baby fit upon losing.
I admit that I believed in 2000, and continue to believe, that the 2000 Bush victory by 5 votes in the SCOTUS was a presidency stolen from Gore, but at least my unwillingness to embrace Bush was based on facts and not lies and inflammatory rhetoric. And I never blasted Bush until it became clear there were no WMD in Iraq. That's all on him, btw, the republicans can claim all they like that the democrats voted for the war too: the Bush administration controlled the intel given to congress and the public.
These right wing propagandists, Beck and the rest of the Fox propagandists and radio haters, are trying hard to poison the well of public opinion against democrats, in advance of the 2010 midterms. Bottom line: these propagandists have no respect for our democratic form of government.
However, it appears now to be going bilaterally from the actual Republican Party supporting Fox News. That is not acceptable. It is very worrying time. We need at least a two party system. The Republican Party is risking becoming no better than Fox News - all rhetoric, scare tactics and sensationalism. Fox does it for ratings and profits - good for them (as bad as it is - shame on us for watching). The Republican Party has a far greater responsibility and is now crossing that line. I support Obama and his team. I also support a strong two party system - it is part of the checks and balances throughout the US government system.
The Kennedy tax cut set the example that President Ronald Reagan would follow some 17 years later. By increasing incentives to work, produce, and invest, real GDP growth increased in the years following the tax cuts: More people worked, and the tax base expanded. Additionally, the expenditure side of the budget benefited as well because the unemployment rate was significantly reduced.
Using the Congressional Budget Office's revenue forecasts (made with the full knowledge of the future tax cuts), revenues came in much higher than had been anticipated, even after the "cost" of the tax cut had been taken into account.
The laffer curve has worked your info is wrong.
That's a helluva good idea...less money for the federal govt.
Pity about those tires - and now the rims are ruined as well.
Assuming that the feds can't maintain highways if their revenue is cut is the ultimate fantasy of the liberal agenda...meaning no amount of govt. spending is too much.
But I love MMfA, they will hunt down anyone that supports their love of taxes too no matter how they have historically trashed them in the past. lol.
If they don't have the money they just borrow it and spend it anyway...proving that the fed.govt. is completely out of control when it comes to spending.
And I agree...it has made little difference who was in office, republican or democrat.
Yeah and conservatives have never seen corporate knob they wouldn't bob.
It's just the sort of low-wattage thought that used to keep America stupid. The reductio ad absurdum is a logical fallacy. Or rather, it's the retreat of children.
The wreckage they leave is as obvious as the G.F.C. that is exacerbated in the U.S. because of dopey attitudes towards revenue raising. Concomitant with this objection to revenue raising there is a general insistence that spending be maintained on big ticket items like defence, law enforcement and prisons (we all like to feel secure).
Keep a check on how and where money is spent, ensure appropriate priorities, but don't starve your government of the funds it needs to fulfill its obligations to the people - incliding ensuring that the workforce stays healthy and capable of actually working.
And don't come the "States Rights" bulldust. That died at Appomattox.
That is all I have ever wanted. If we could trust our lawmakers to start there, the rest would be far less contentious.
Who's advocating "starving" the govt.?
A functioning govt. needs funds...I'm just opposed to the massive overspending on every thing under the sun.
And, i'll agree that black-and-whitism is wrong whoever does it.
A bill that promises to spend a trillion dollars and generate/save a trillion dollars. A bill that is thousands of pages long and with the ink barely dry we find that it doesn't control rate increases on premiums:
-- "It is a very big loophole in health reform," Sen. Dianne Feinstein (D-Calif.) said...
Insurance industry officials say that talk of more regulation is misguided and have urged federal officials to focus instead on containing rising medical costs, which help drive up premiums... --
And if you're talking about bloated spending, look no further than the Pentagon. There have been numerous studies showing that so many of their expenses are over-the-top. Look at the wars, costing us billions--it's almost to the trillions, according to costofwar.com. Take a look at the trade-offs...and for nothing. 2 wars that we simply can't win.
Too many ultra-micro economic theories are being applied to macro situations - penny wise pound foolish. Just because something seems logical at the household level doesn't mean it will work at the national level.
There's a problem with the bill not costing? And how does the length affect its effectiveness?
Insurance industry officials say
Insurance industry officials say whatever it suits their bank accounts to say; frankly, i'd sooner trust somebody who depends on my vote than somebody who's in it for the money.
It never was intended to promise to eliminate premium increases - just hold them down, and it IS going to do that! It's a lie to say that it isn't - a lie the rightwing is currently pushing, and so that's why Wesley the Weasel is pushing that talking point, per his employers.
And the CBO, the very best predictors of future costs, says that HCR WILL save money. You're a serial liar on this subject, Wesley, and as a result you deserve no credibility on this subject.
As for reducing spending in general, you have to cut programs in order to cut spending. The tax collection simply pays for those things the government has put into law as products and services that it will provide. Programs that are not effective, services that do not serve their intended purpose any longer, etc... these must be trimmed or cut altogether to reduce the revenue requirements of the government. Write your congressperson and complain about this aspect of spending before compaining about how much your taxes are.
I can't speak for everyone, but I think that profile is generally saved for those who decry the term "socialism" as if it were inherently evil. See BJ, unknown, hilighter, etc.
(Sorry, couldn't resist it)
And, a flat tax is just unfair. 11% of $32 million is spit in a bucket; 11% of $20,000 is a painful imposition.
I think you need a new day job Mr. Laffer.
One reason is that people would rather reinvest in their business rather than give the money to the gov't.
So you agree with Laffer then who says > "The more you raise their tax rates, they move abroad, they shift the types of income they get, they go out of business, they defer the income. They do all sorts of stuff, and you just aren't going to get their money. You just plain aren't. So if you raise tax rates on the rich, I will guarantee you you're going to get less revenue"
Why do they hate America?
There used to be a segment of the right-wing that was focused on deficit control. Have those guys have gone away?
I bet MM could also find economists that agree with the Laffer Curve.
I think cutting spending along with taxes are what Beck and Laffer were discussing and actually, I believe it would work.
Personally, I've been cutting my own spending while trying to generate more revenue, funny, but, my bank account has been growing over the past number of months.
Most people have, because they don't have a well of rich people at their disposal that they can soak more money out of to pay for, as Wesley put it, everything under the sun.
Taxes are like any other financial exchange, it just changes who gets to spend the money next. Either way the money is going to be spent. The spending is what creates jobs, not who is spending it. Whether government or the private sector is spending the money jobs will be created.
There are only two way I know of to increase tax revenues. First, increase tax rates. Second, increase the supply of taxable incomes.
Bush's mistake, he lowered taxes when the unemployment rate was already at historic lows. Basically everyone that could work was working. Impossible to increase the supply of taxable incomes if the supply is already operating at peak performance.
Obama's mistake, raising taxes when the supply of taxable incomes could increase. With the supply of taxable incomes far from optimal a lowering taxes could potentially increase government revenues. This would obviously have to be coupled with quantatative easing policies to ensure that the money is available to create new jobs.
With that in mind, the real long term financial goals of the U.S shouldn't be based on tax rates as much as it should be based on a strong dollar policy. Low inflation, and a strong dollar should be our long term goals, and the best way to strengthen the dollar is to reduce our debt load.
You claim that it doesnt matter who spends the money as long as money is being spent, it will create jobs. Precisely, but when we are in a recession the companies stop spending money and reduce their expenses. In addition to this Banks stopped lending to small business. So the Gov. stepped in to increase spending and stimulate the economy. They created projects that would require hiring businesses.
As I am sure you have read, we have rebounded out of the recession because of the stimulus. Hours worked are increasing and new jobs are being created. Both private and public sector jobs.
"Obama's mistake, raising taxes when the supply of taxable incomes could increase."poproxx
What you fail to realize is that there is also supply and demand for employment. Companies were so scared in 08-09 that they became ultra efficient and extremely profitable(hence the 70% rebound in the stock market). The companies are not doing this through top line growth but rather cutting expense. They will need to hire to keep up with demand for services.
Let me pose a question. As a business owner would you make a hiring decision based on taxes? Would you fire me if I net you $50000 just because your taxes went up. It doesn't make sense and you will find the dirty little secret is that business men do not make their decisions based on tax consequences. They also do not make their investment decisions based solely on taxes. If they did every one would invest in MUNIs.
This simplistic view that the answer is to cut taxes is just absurd.
Neither do I disagree with the idea that the government can help create jobs and stabalize a failing economy. Like I said, if nobody else is hiring then the government should.
I fully realize there is a supply and demand of employment, and that companies have become 'ultra efficient'. They have cut expenses to conserve cash and reduce costs, but now as the economy turns around they will be looking to expand gross revenues. As those revenues grow, unemployment will go down. As more people go back to work, and more people start paying taxes, tax revenue will also increase.
The problem as I stated earlier is that eventually you reach an optimal rate of employment and no matter how low you lower the tax rate, new jobs will never make up for lost revenue.
I am not naive enough to think that we will ever pay back our current debt by slashing taxes. Neither am I naive enough to beleive that we can tax our way out, raising taxes on the rich will never raise enough revenue to pay the debt. The only way to control debt is to control spending, unfortunately our government has yet to learn that lesson. Eventually you have to spend less than you make in order to pay debt off.
As to your question, I would not make a hiring decesion on taxes. If my taxes go up I pass the costs along. I don't make less money because taxes go up. Their is a threshold of how much customers are willing to pay though. As a business person, what I ask first and foremost is that taxes are consistent, simple, and understandable. If i can plan what my costs will be, I can adjust accordingly. I think most businesses would feel the same way.
I'll say it again. What is hard to adjust for is inflation. I have done business in Africa for about ten years, and inflation is one of the most difficult variables to track and to stay on top of. That is why I think the government should take a strong dollar stance on economic policy. Pay down the debt, make sure people trust the dollar.
Beck has jumped on a theory that supports his point without any evidence, facts, or logical connections.
Here's a question... if your taxes were raised 10% would you quit your job?
I think you'd have to be a fool to quit your job. How would you live?
BTW take a look at the attached chart. Cigarette tax revenues seem to be climbing. http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=403