Wednesday, January 04, 2006

Baaanaiaiaiaiaaiaaiain Gets a Reprieve

OK, so when the economic numbers are good, Jim Boyd and the Portland Avenue Short Bus Gang rely on analysis from a leftwing "Tax the Shit Out of 'Em" "think" tank to validate their worldview instead of interpreting the data themselves. Or, at the very least, an unbiased opiner would farm the raw data out to an independent analyst; say, a local economics professor.

But when an official government office says something Jimmy and the Retards like, weeeeellllllllll, they jump all over it.

The "Laffer Curve" became a hit among conservative intellectuals, helped President Ronald Reagan pass a big tax cut in 1981, and won an enduring place in public opinion about government finance.

So enduring, in fact, that no amount of historical experience and debunking by academic economists can dislodge it from the public's mind. President Bush embraced it while pushing a big tax cut through Congress in 2003, and his budget director, Joshua Bolten, has invoked it at least once.

So it's good to see that the Congressional Budget Office (CBO), the government's top arbiter of fiscal matters, has put the idea under a microscope and exposed its fallacies. It's time that members of Congress stopped selling tax cuts on the idea that they can be repaid with free money.

You can almost hear the high-fiving and back-slapping from here. I wonder if Steve Berg tongue-kissed Boyd at this terrific news. It's the end of that long national nightmare: supply-side economics! *smooch* *glurpy-glurp*

Laffer's theory really breaks down into two assertions. The first is that tax relief will stimulate the economy by encouraging people to spend more, work harder and save more, an idea accepted by most economists. In a new study, the CBO modeled a 10 percent cut in federal taxes on all individual income and found that it would raise the nation's economic output over a decade by up to 1 percent, or many billions of dollars.

BUZZZZZZZZZZZZZZZ! Wrong-a. But thanks for playing.

Actually, Laffer's theory posits that there is an optimal rate of taxation that would maximize tax revenue. Coming off the Carter, and later, the Bush Sr. / Clinton years of higher taxation, it would stand to reason that the appropriate high-revenue-generating tax rate might be a bit lower. But if you look at the curve, anybody with an IQ higher than a Nonmonkey can see that tax cuts aren't always the path:

If the tax rate is on the left side of the curve, you can see that a tax hike would be the way to maximize revenue. Jimmy-jam and the Funky Bunch's assertion that it's always "tax relief" (ie cuts) that would maximize revenue, makes it embarrassingly obvious that these fools have no clue what they're talking about.

But with liberals, we're always on the left side of the curve, aren't we?

Anyhoo, back to the text. I can't wait to see which facts and figures Jimbo and the Dumbtones point to in the CBO report that "debunks" Laffer's theory:

The second question is whether this spurt in economic activity would produce enough new taxes to replace the revenue lost in the original tax cut. The CBO modeled this question using nine different assumptions about individual behavior and government borrowing, and found that in no case did the tax cut replace more than 28 percent of the lost revenue over a decade.



That's it?

How about some facts? Oh, they try:

You don't need a Ph.D. to get the point. Just look at the data. During the era of Reaganomics in the 1980s the government ran massive budget deficits -- not because spending was higher than the president proposed but because revenues were lower than he predicted.

Yes, Reagan increased defense spending, but his one mistake was to leave balancing the budget to a liberal Congress. It was his compromise for getting his tax reforms passed. But let's look at the numbers. Take a look in the revenue column. In the 1980s tax revenue only decreased once. Every other year, there was substantial growth until...

The evil Bush tax cuts!

The same thing is happening today. Daniel Altman of the New York Times points out that, after Congress passed a big cut in the federal income tax in 2001, revenue from the federal income tax dropped from $994 billion to $809 billion in 2004, even though the economy was growing and President Bush had promised that the tax cut would pay for itself.

Sneaky. What they don't tell you is that 2004 revenues from income taxes are UP from 2003. With those same ill-advised neocon Halliburton culture of corruption tax cuts that supposedly caused the revenue to fall in those previous years in effect (See table 3, first column).

Oh, and overall revenues are up from 2003 too (table 1 first column).

And the rest, such as it is, I again leave to someone who actually knows what he is talking about.

NOTE TO GUY WHO KNOWS WHAT HE IS TALKING ABOUT: Try to put a little more ooomph in it this time. You last one was good, but would it really hurt to show a little visceral hostility.

If you have trouble with it, try this: present your fisking as a dialogue between you and Jimmy and the Turdbrains. End every sentence in which you refute one of their points with: "you moron." It feels good.

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