Paul Krugman, June 18, 2019

  
Via:  bob-nelson  •  4 months ago  •  15 comments

 Paul Krugman, June 18, 2019
Laffer’s medal, like the appointment of the fundamentally ludicrous Larry Kudlow as chief economist and the attempt to install Stephen Moore at the Fed, is like putting up a sign saying “Only charlatans and cranks need apply.”

S E E D E D   C O N T E N T


original More than 20 years ago , Harvard’s N. Gregory Mankiw, who would later serve as George W. Bush’s chief economic adviser, published the first edition of his best-selling Economics 101 textbook. Early in the book, trying to explain why economists are often perceived as disagreeing about everything, he wrote about the role of “ charlatans and cranks .” When economists appear to be at odds, he wrote, you should be aware that sometimes the apparent dissent is coming from “some snake-oil salesman who is trying to sell a miracle cure.”

He was referring to the people who told Ronald Reagan that cutting taxes would pay for itself, above all a guy named Art Laffer. As Mankiw noted, the charlatans and cranks were wrong: Reagan’s tax cuts sharply reduced revenue. And the same thing has been true every time tax-cut proponents have promised a miracle. Most recently, the 2017 Trump tax cut has led to a precipitous  collapse in corporate tax receipts , twice as much as projected.

Yet decades of being wrong again and again has done nothing to reduce the influence of tax-cut cranks on the G.O.P. On the contrary, their grip has gotten ever tighter. Even supposed Republican moderates like Maine’s Susan Collins  justified their support for the 2017 bill by saying that it would pay for itself.

And on Wednesday, Laffer will receive the Presidential Medal of Freedom.

To be fair, Laffer is known for other things besides his utter faith in the miraculous power of tax cuts. He’s also known for  warning  about the dire effects of the Federal Reserve’s efforts to fight the financial crisis: “Get ready for inflation and higher interest rates,” he thundered a decade ago. Actually, no: Inflation has stayed low, and interest rates are close to their lowest levels in history.

Now, anyone with a long career of making economic pronouncements will have made some bad calls. God knows  I have . But what makes Laffer and others like them so special is both the utter consistency of their wrongness and the fact that their influence just keeps rising despite that wrongness.

Or maybe I should say that their influence grows because of their wrongness. Constantly predicting great results from tax cuts for the rich and catastrophe should top tax rates go up is a bad way to devise economic policy but a very good way to ingratiate yourself with wealthy political donors. Attacking any policy that might have helped the economy while a Democrat was president was a pretty good career strategy too.

What’s striking is that at this point the G.O.P. apparently has no use for economists who aren’t snake-oil salesmen. There are serious economists ­— like Mankiw — who happen to be conservatives, out of some combination of personal values and judgements about the proper role of government. I can respect their positions, even when I disagree. But they have no political home. Laffer’s medal, like the appointment of the fundamentally ludicrous Larry Kudlow as chief economist and the attempt to install Stephen Moore at the Fed, is like putting up a sign saying “Only charlatans and cranks need apply.”

Initial image: A Trump campaign rally at an amphitheater in Panama City Beach, Fla., in May.    Doug Mills/The New York Times

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Bob Nelson
1  seeder  Bob Nelson    4 months ago

The Congressional Medal of Honor has been abused for a long time - Trump isn't the first.

It should be retired in favor of something else... with much stricter criteria.

 
 
 
Tacos!
1.1  Tacos!  replied to  Bob Nelson @1    4 months ago
It should be retired in favor of something else... with much stricter criteria.

Nah, let's not make it so serious. These things are for fun. It's like when the governor hands out those paddle ball toys in lieu of pay.

 
 
 
WallyW
2  WallyW    4 months ago

Didn't 0bama get some kind of medal for some reason.

 
 
 
Tacos!
2.1  Tacos!  replied to  WallyW @2    4 months ago
Didn't 0bama get some kind of medal for some reason.

Yes. For being dreamy.

 
 
 
Sparty On
3  Sparty On    4 months ago

So i take it you're not a big "Laffer Curve" fan?

 
 
 
Bob Nelson
3.1  seeder  Bob Nelson  replied to  Sparty On @3    4 months ago

How do you figure? I didn't write the seed.

 
 
 
Sparty On
3.1.1  Sparty On  replied to  Bob Nelson @3.1    4 months ago

I didn't say you did.  

I simply asked you a question.

 
 
 
Bob Nelson
3.1.2  seeder  Bob Nelson  replied to  Sparty On @3.1.1    4 months ago

Why don't you prime this pump with your own opinion of Art Laffer and his curve?

 
 
 
Sparty On
3.1.3  Sparty On  replied to  Bob Nelson @3.1.2    4 months ago

Because i asked you the question.

 
 
 
†hε pε⊕pレε'š ƒïšh
4  †hε pε⊕pレε'š ƒïšh    4 months ago

A little bit on the Laffer curve for those that don't understand it and those that support it while still not understanding it.

Myth #9

An income tax cut helps everyone because not only the taxpayer but also the government will benefit, since tax revenues will rise when the rate is cut.

This is the so-called "Laffer curve; set forth by California economist Arthur Laffer. It was advanced as a means of allowing politicians to square the circle; to come out for tax cuts, keeping spending at the current level, and balance the budget all at the same time. In that way, the public would enjoy their tax cuts, be happy at the balanced budget, and still receive the same level of subsidies from the government.

It is true that if tax rates are 99 percent, and they are cut to 95 percent, tax revenue will go up. But there is no reason to assume such simple connections at any other time. In fact, this relationship works much better for a local excise tax than for a national income tax. A few years ago, the government of the District of Columbia decided to procure some revenue by sharply raising the District's gasoline tax. But, then, drivers could simply nip over the border to Virginia or Maryland and fill up at a much cheaper price. D.C. gasoline tax revenues fell, and much to their chagrin and confusion, they had to repeal the tax.

But this is not likely to happen with the income tax. People are not going to stop working or leave the country because of a relatively small tax hike, or do the reverse because of a tax cut.

There are some problems with the Laffer curve. The amount of time it is supposed to take for the Laffer effect to work is never specified. But still more important: Laffer assumes that what all of us want is to maximize tax revenue to the government. If — a big if — we are really at the upper half of the Laffer Curve, we should then all want to set tax rates at that "optimum" point. But why? Why should it be the objective of every one of us to maximize government revenue? To push to the maximum, in short, the share of private product that gets siphoned off to the activities of government? I should think we would be more interested in minimizing government revenue by pushing tax rates far, far below whatever the Laffer Optimum might happen to be.

 
 
 
The Magic Eight Ball
4.1  The Magic Eight Ball  replied to  †hε pε⊕pレε'š ƒïšh @4    4 months ago
Why should it be the objective of every one of us to maximize government revenue?

LOL exactly.

we do not live to be taxed.  I'm not thinking that is a goal. but, it is the govts goal.. LOL

the day obamacare became law..... I left the workforce.  no income = no income tax

at the time, I called it the laugher curve :)

 
 
 
Sparty On
4.2  Sparty On  replied to  †hε pε⊕pレε'š ƒïšh @4    4 months ago

The debate on reducing the size of government not withstanding, the best way i've heard it explained is:

If people pay zero tax, no revenue is coming in from taxes.   If people pay 100% tax, no revenue is coming in from taxes as who is going to work for nothing?   People will stop working.   The "sweet spot" of the curve is somewhere in-between 0% & 100%.   A tax rate high enough to maximize tax revenues and to minimize tax rate.

 
 
 
Freedom Warrior
4.3  Freedom Warrior  replied to  †hε pε⊕pレε'š ƒïšh @4    4 months ago

I am currently engaged in multiple transactions designed to avoid paying several million dollars to the IRS, the FTB and you can throw in San Diego County as well.   If the tax rates were sufficiently lower we might opt to pay some of those taxes instead.  It wouldn't require a marginal rate reduction at the levels you suggest. However, given the current state of affairs of these taxing agencies we intend to avoid them like the plague. 

Another regressive tax increase will occur again here on July 1 courtesy of the D-Bags in Sacto.   Of course they won't spend those dollars on what they claim they would when they passed the legislation.  Governor says let's give free health care to foreigners instead.

 
 
 
Tacos!
4.4  Tacos!  replied to  †hε pε⊕pレε'š ƒïšh @4    4 months ago
People are not going to stop working or leave the country because of a relatively small tax hike, or do the reverse because of a tax cut.

People definitely move over this kind of thing, but the question of what constitutes a significant enough change in the tax rate will be different for each individual. 

 
 
 
Tacos!
5  Tacos!    4 months ago

67670210.jpg

It's not like anybody is paying attention to the Medal of Freedom. Well, I guess somebody is. Now.

 
 
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