Hetr0n: Why believe something that's not true?

Hetr0n,


I am truly curious as to


1) What you think the Laffer Curve is, and


2) What you think is wrong with it.


I know you weren't put on this Earth to do me favors. But I would be honored if you would participate in my study of why people choose to believe things which are nonsense, by telling us your beliefs about the Laffer Curve.


eLROY

I can tell you right now that all the equations and all the formulas and all the graphs do not make us the masters of our destinies by much, if at all. The enormity of the task, a task getting more and more out of hand, as we get more and more "sophisticated" in our thinking (and we get more and more "sophisticated" tools to play with), defeats the purpose.


..As a Hollywood producer, who was considered very successful in picking out winner movies, once confided, "Truth of the matter is, nobody knows anything".


--Cyrus

Well, since you have pretty much decided that what I am going to say is stupid and misguided anyway, here goes:


The problem is not really with the Laffer curve, which as Cyrus's website explains is the curve graphing the relationship between tax rates and tax revenues. It is the ridiculous theory (that Reagan purportedly believed) that based on the Laffer curve, you could cut taxes to an extreme point and not decrease revenues because you would have spurred the economy to such a great extent that revenues would be increased. This is of course, nonsense. If you cut tax rates but do not decrease spending you will incur a deficit even when the economy is growing. This is exactly what happened in the 80's, and exactly why supply side economics was dismissed as a crank theory by economics academia.

"ridiculous theory (that Reagan purportedly believed) that based on the Laffer curve, you could cut taxes to an extreme point and not decrease revenues"


First, the Laffer curve says that if you cut tax rates to an extreme point - say zero - that revenues will go down! So far as "extreme" that is just an inaccurate characterization of the Reagan-era rate changes.


"ridiculous theory (that Reagan purportedly believed) that... you would have spurred the economy to such a great extent that revenues would be increased"


Second, extreme or not, revenues DID increase after the Reagan-era tx cuts, thanks to economic growth! There is no evidence this theory is ridiculous!


"This is of course, nonsense. If you cut tax rates but do not decrease spending you will incur a deficit even when the economy is growing."


Well, of course, there is NO AMOUNT OF MONEY that you can't spend more than. What this simple fact has to do with the Laffer Curve is beyond me. Democrats in Congress, using the current-services baseline, insisted on increasing spending at the old inflation rate, and specifically because the economy was growing! Then, when the civil rights people released the mentally ill from hospitals, they blamed homeless crazies - and AIDS - on Reagan "budget cuts," despite the fact that as you point out, social spending rose, even though the job market and low inflation was taking care of more people!


"you will incur a deficit even when the economy is growing. This is exactly what happened in the 80's, and exactly why supply side economics was dismissed as a crank theory by economics academia."


Nowhere does "supply-side economics" state that it will ever become magically impossible to spend more money than you have! Can you concede, your whole pitch is nonsense, hetr0n??


eLROY

....the p.c. a-holes always look to a conservatives as the scape goat for their own overspending. Hence, Reagan's economic policy is no good. The elitist, pompous democratic demagogues are NEVER to blame - always conservatives.


IMO, it's like arguing religion with towel-heads. Common sense tells you suicide bombing doesn't work - but they keep blowing themselves up day after day. They won't be happy until they turn our great country into "Taliban-Land II" Then they'll blame it on Bush.

Sorry, I wrote this in a rush. I meant to say that you "could cut taxes to an extreme point and not decrease SPENDING because..."


Now elRoy, I am pretty sure you know what I meant. Though the Republicans were not interested in increasing spending on social programs, they had no problem increasing the defense budget. They thought that they would incur budget surpluses as a result of all the increased revenues, and that spending would not have to be cut appreciably. However, instead of surpluses we ran up a 3.5 trillion dollar deficit. Yes, revenues went up, but NOT up to the amounts projected in order to prevent this huge debt from accumulating. Much of the extra money that the rich had from decreased tax rates did not go back into economic development. It went into speculative purchasing of real estate and stocks (leading to crashes of both markets in the late 1980's) and also purchasing of expensive foreign goods (leading to a huge trade deficit).


The real laugher in your post is the part about civil rights leaders releasing mentally ill people from medical institutions. Much of the depopulation mental institutions has to do with 2 factors: a. psychotropic drugs that allow previously institutionalized people to lead somewhat normal lives and b. cuts in health care spending leading to shrinking or closing of many mental health institutions.


As far as I know, no one has ever blamed the advent of AIDS on politicians. However, many in this country were quick to jump on AIDS as "gay only disease" and were reluctant to spend any money on education, care or research for it.

....the p.c. a-holes always look to a conservatives as the scape goat for their own overspending. Hence, Reagan's economic policy is no good. The elitist, pompous democratic demagogues are NEVER to blame - always conservatives.


So you are only foolishly spending if you spend on education and social programs, but not on silly defense programs. Ok, gotcha.


IMO, it's like arguing religion with towel-heads. Common sense tells you suicide bombing doesn't work - but they keep blowing themselves up day after day. They won't be happy until they turn our great country into "Taliban-Land II" Then they'll blame it on Bush.


You sound like Rush Limbaugh on crack. You are confusing the Taliban with the Palestinians. I know they are all "towel heads" to you, but maybe if you opened up a book and read a little about the history of these regions, you would find out what the difference is.

Reagan's own vice president called it, accurately, voodoo economics. David Stockman admitted that the numbers didn't pencil out and that, therefore, they had to be doctored. And when Stockman admitted his doubts publicly, Reagan, as had always been his policy, simply lied. He said Stockman had been misquoted, a claim Stockman himself never made. He compared the press "assassination" of Stockman to John Hinckley's attempted assassination on his own life.


In 1982, unemployment hit 10.7%, the highest it had been since the Great Depression. Stockman said that unemployment was "part of the cure, not the problem." Indeed it was.


Let's also remember the impact of the so-called "safe harbor leasing" provision of The Economic Recovery Tax Act of 1981, which allowed corporations that could not use the act's extravagant depreciation allowances and investment tax credits to sell them to other corporations. General Electric, for example, wiped out most of the company's 1981 tax liability and also picked up over one hundred million dollars in refunds for previous years. The sum of corporate-claimed depreciation for 1982-1987 totaled $1,650,000,000,000. So it wasn't just uncontrolled Congressional spending that brought about the deficits, which added as much to the national debt in Reagan's first four years as had been accumulated since the country began.

. . .eloquently expressed.

during reagan era new bull market developed which led to much better employment picture than ever existed. today fed is worried about unemployment rate of 6% when back then they would have thought 6% unemployment rate is full employment. also there was this thing called runaway inflation in the 70s which fed policy of the early eighties eradicated. former fed chairman volcker said he would break the back of inflation and he did. carter appointed volcker as fed chairman late in his administration albeit reluctantly. volckers policies were carried out in the early eighties. we should have a debate about corporate taxes and their effectiveness but it seems obvious to me that excessive corporate taxes is a hinderance to economic growth that thing that helps create jobs.

the unemployment was carter's fault not reagan's. reagan's first budget was not enacted until the fiscal year 1981 so unless you think that 10% unemployment can occur in one year it is clear that it is the lingering effect from the wonderful carter years.


Pat

The Reagan people admitted that they deliberately chose policies that would raise the unemployment rate as "part of the cure, not the problem." Choosing the supply side cure yielded high rates of unemployment. The unemployment rate was 9.6% in 1983 and remained over 7% for the next three years.


Carter's mistake was having a bad economy in an election year. Inflation was incredibly high when he ran for reelection. The Reagan people knew that they could get away with a bad economy at the beginning of their term provided a recovery occurred in time for the next election, which is precisely what happened.

Please explain.


Thank you.