Thursday, May 13, 2010

Quote of the Day

"Higher tax rates don't produce prosperity or balanced budgets—as we can see in New Jersey and New York, or Greece and Portugal."

~
WSJ Editorial

82 Comments:

At 5/13/2010 9:23 AM, Blogger PeakTrader said...

Conventional wisdom seems to be raise taxes and cut spending to balance the budget.

However, cutting taxes will increase economic growth and tax revenues.

So, to balance the budget, we need to cut taxes and cut spending.

However, we've been on a path of slower economic growth and bigger government rather than faster economic growth and smaller government.

 
At 5/13/2010 9:29 AM, Blogger juandos said...

How about this for the quote of the day from Sweetness & Light?

"Isn’t it funny how often the unemployment claims numbers seem to get quietly "revised up" a week later?"...

 
At 5/13/2010 9:42 AM, Anonymous Anonymous said...

Neither do lower tax rates.

 
At 5/13/2010 10:12 AM, Blogger PeakTrader said...

One of the greatest periods of U.S. prosperity was 1995-00. We had a Democrat president and a GOP Congress, a "peace dividend" (after the Cold War), oil prices fell below $12 a barrel, national health care was rejected, accommodative monetary policy (the Greenspan Fed believed inflation wasn't a problem), strong demographics (Baby-Boomers in their peak productive years), a tax cut (in '97 after the tax hike in '93), increases in real wages, and a steep rise in the stock market (including the Nasdaq "bubble").

In 1997, the Republican-led Congress passed a tax-relief and deficit-reduction bill that was resisted but ultimately signed by President Clinton:

Lowered the top capital gains tax rate from 28 percent to 20 percent.

Created a new $500 child tax credit.

Tax credits to reduce the after tax costs of higher education.

Extended the air transportation excise taxes.

Phased in an increase in the estate tax exemption from $600,000 to $1 million.

Established Roth IRAs and increased the income limits for deductible IRAs.

Established education IRAs.

Conformed AMT depreciation lives to regular tax lives.

Phased in a 15 cent-per-pack increase in the cigarette tax.

Conclusion:

"The Clinton years present two consecutive periods as experiments of the effects of tax policy. The first period, from 1993 to 1996, began with a significant tax increase as the economy was accelerating out of recession. The second period, from 1997 to 2000, began with a modest tax cut as the economy should have settled into a normal growth period. The economy was decidedly stronger following the tax cut than it was following the tax increase."

However, I believe, taxes should've been cut further before 2000. Contractionary fiscal policy (and the Alternative Minimum Tax paid a year later after the stock market peaked), or budget surpluses, drained too much money out of the economy causing the recession.

 
At 5/13/2010 10:14 AM, Blogger juandos said...

anon @ 5/13/2010 9:42 AM makes the following bizzare statement: "Neither do lower tax rates"...

Really?

 
At 5/13/2010 10:17 AM, Anonymous Anonymous said...

Following up anon 9:42, income taxes are pretty damn low and unemployment is pretty damn high.

Are Taxes at 60 year lows?

 
At 5/13/2010 10:32 AM, Anonymous morganovich said...

anon-

no, they aren't. it's not an apples to apples comparison. there used to be far more and easier shelters for income.

nominal rate and effective rate are not the same thing.

you cannot seriously think the robber barons were really paying out 90% of income, can you?

 
At 5/13/2010 10:47 AM, Blogger PeakTrader said...

I stated before, the government rather than squandering trillions of dollars on ineffective progams, should've cut taxes substantially in late '08 or early '09, e.g. a $5,000 tax cut for the 150 million workers (at the time) or $750 billion.

Households would've paid-down or paid-off high interest rate debt, increasing their monthly incomes, to spur demand and increase production, while strengthening banks. The recession would've been shallow and the recovery stronger.

Government instead cut and raised taxes simultaneously, while throwing money at every problem. So, we now have a mountain of government debt with the mountain of household debt.

 
At 5/13/2010 11:09 AM, Anonymous Anonymous said...

Well morganovich, you ostensibly subscribe to "private" data apples in your capacity as an "investment advisor". I'll stick with official oranges.

Total federal revenues as a percent of GDP was 14.8% in 2009. This excel sheet says I need to go back to 1949 to find a lower percentage number.

What were you yammering about again?

 
At 5/13/2010 11:28 AM, Blogger PeakTrader said...

Of course, federal revenues are low. A lot of Americans are unemployed or underemployed.

 
At 5/13/2010 11:31 AM, Anonymous Anonymous said...

"Americans are more likely to speak of a golden past than of a golden future, of capitalism's glories than of socialism's greatness. The story is a sad but also a chastening one for those who, more than half a century after socialism's decline, still wish to change America. American radicals cannot afford to become their own worst enemies. In unity lies their only hope." - Elena Kagan, Preisdent Obama's nominee for the Supreme Court of the United States

 
At 5/13/2010 11:49 AM, Anonymous Anonymous said...

... income taxes are pretty damn low and unemployment is pretty damn high.

First, the article you linked to talks about "average" taxes paid, and since almost 50% of Americans pay nothing in federal taxes the data is necessarily skewed. Second, there is a difference between taxes paid (revenue) and tax rates. Even so, the picture would be much different if the discussion were limited to Americans who actually pay taxes. Yes, if we continue down the road that the Democrats are leading us all down, then income taxes paid (revenue) will continue to fall as unemployment continues to rise. Wow, how insightful. Are you arguing that an increase in tax rates would result in lower unemployment? If so, you may have a future as budget advisor in the Democrat party.

 
At 5/13/2010 12:07 PM, Anonymous Anonymous said...

Juandos:

REALLY?


http://www.businesspundit.com/12-countries-with-the-highest-lowest-tax-rates/


High or low tax rates are not the only factor.

Back your arguments with something besides agenda driven drivel.

 
At 5/13/2010 12:08 PM, Anonymous Anonymous said...

Mexico has low taxes.

 
At 5/13/2010 12:10 PM, Anonymous Anonymous said...

On the other hand there are tax havens that only exist because of low taxes. If you call that prosperity.

 
At 5/13/2010 12:21 PM, Blogger Ron H. said...

>"Neither do lower tax rates."

So, neither higher tax rates nor lower tax rates will produce prosperity and balanced budgets.

Current tax rates certainly aren't producing prosperity and balanced budgets, so I guess we are screwed no matter what.

 
At 5/13/2010 12:52 PM, Anonymous Anonymous said...

Well, isn't your position that we as responsible individuals cannot expect prosperity due to ANY government activity?

I just thought the quote was ridiculous. Might as well say that cockroaches don't create properity.

The implication is that [conversely low tax rate DO cause prosperity], which is neither proven nor supported by the statement.

It is an [implied] false dichotomy.

There is probably more than one near optimal solution (prosperity) to how much we support government vs how much it supports us, and the answer depends on lots of variables.

 
At 5/13/2010 1:22 PM, Anonymous Benny The Man said...

America was a great place in the 1950s and 1960s. Incomes booming, jobs for the asking, low inflation. Low crime.

Top federal income tax rate was 90 percent.

Detroit became De-toilet since then, of interest only to urban proctologists. Top tax rates are much lower.

Just sayin'

 
At 5/13/2010 1:27 PM, Anonymous Anonymous said...

Well, isn't your position that we as responsible individuals cannot expect prosperity due to ANY government activity?

Outside of those activities provided for under the origianl interpretation of the constitution, what government activities have produced prosperity?

There is probably more than one near optimal solution (prosperity) to how much we support government vs how much it supports us, and the answer depends on lots of variables.

Governments function is not to "support us", it can only "support" one individual at the expense of another. This is called slavery. Government has a very limited number of legitimate functions, such as providing for the common defense. Taxes used to sustain programs that create dependent political constituencies are both immoral and unjust. "Support" of that sort is more about the lust for political power than alleviating suffering, which is the province of charity.

 
At 5/13/2010 1:29 PM, Anonymous Anonymous said...

America was a great place in the 1950s and 1960s ... Top federal income tax rate was 90 percent. Just sayin'

Just stupid.

 
At 5/13/2010 1:44 PM, Blogger Ron H. said...

>"Are Taxes at 60 year lows?"

Did you actually read the article you linked to? It discusses a "USA Today" article, and concludes that it doesn't mean much. you may want to find better support for your argument, because this doesn't do it.

>"This excel sheet says..."

That's it? This spreadsheet from the White House is what you want to use? Without more context and explanation it's hard to draw much meaning from it.

You point out 1949 as a year with a low percentage of tax receipts, but you should be aware that 1949 was in a period of tremendous post war prosperity and growth. So, what point are you trying to make by comparing it to 2009?


>"you ostensibly subscribe to "private" data apples in your capacity as an "investment advisor". I'll stick with official oranges."

You should ask yourself why people who need meaningful and accurate data are willing to spend good money to get it, when they could get something like it free from the feds. I believe the answer is that those "official oranges" aren't good enough, and may, in fact, be false or misleading. Those who use them frequently, tend to get dizzy from the spin.

Just a suggestion: when you post multiple comments on a thread such as this one, you could just as easily choose a name instead of Anonymous. That way you wouldn't be confused with all the other Anons here.

 
At 5/13/2010 1:47 PM, Anonymous morganovich said...

anon 11.09-

cherry picking 2009 and pretending it's normal is awfully misleading. 2009 receipts were low because the market and real estate crashes gave everyone huge losses to use as tax offsets. it was an aberrant year.

the three years before show no real alteration from the levels since the 70's as they average just over 18%.

and isn't it interesting that the highest levels came during the 90's tax cuts? congrats, you just disproved your own argument.

are you careless, stupid, or a liar? (as well as being uncivil?)

and pick a name would you? what is it about what you're saying that prevents you from wanting your name attached to it?

 
At 5/13/2010 2:13 PM, Anonymous grant said...

How can a debauched country with a debauched currency and a series of governments that were all Idiorts expect not to pay higher payments [taxes]to pay off their past fiscal folly.
Will other countries or their firms and citizens continue to financially prop up this rabble of consumption driven dreaming parasites who have no Idea of how bad the current situation is.
The US is still tethering on the edge of the cliff of collapse and without foreign support and their money you will go over it.
The US economy has to be restructured away from consumption and become much more self centered away from imports.

 
At 5/13/2010 2:16 PM, Blogger PeakTrader said...

Don't worry, Obama has it under control:

Text of President Obama's remarks at Industrial Support, Inc.
May 13, 2010

"Having just inherited a $1.3 trillion deficit from the last administration, the last thing I wanted to do was spend money on a recovery package.

But I can say this beyond a shadow of a doubt: Today, we are heading in the right direction. Those tough steps we took - they're working. Despite all the naysayers - who were predicting failure a year ago - our economy is growing again."

 
At 5/13/2010 2:23 PM, Anonymous morganovich said...

benny-

the boom of the 50's and 60's was a unique time. the industrial base of the rest of the world was destroyed and we got to rebuild it.

that massive demand to our limited supply was sufficient to cover a multitude of sins and bad policy.

pretending that was normal and trying to use lessons from that period now is going to lead you astray.

tax receipts as a % of gdp were lower in the 50-60's that they are now.

look at anon's spreadsheet.

so clearly, that 90% rate did not drive outsized collections.

the data here is VERY clear - tax collections as % of gdp go up during booms, and drop during recession.

now which tax policy drives booms?

governments do not create prosperity.

 
At 5/13/2010 2:32 PM, Blogger OA said...

PeakTrader said...
Of course, federal revenues are low. A lot of Americans are unemployed or underemployed.



Not to mention all the capital losses that people had that reduced income, and business operating losses used to offset prior year's profits and get refunds.

Going back to your summary of the Clinton era, you left out the 1997 change in capital gains taxes on primary residences. The "once in a lifetime" capital gains exemption for primary residences was turned into an every couple years tax exemption.

This is conveniently left out of the list of causes for the housing boom. Also think how much capital gains taxes would have flowed into the Treasury during the housing boom if this hadn't been changed, just like the capital gains taxes during the dot com bust was the main reason for the budget surplus back then.


@ Anon 5/13/2010 12:52 PM

The quote isn't really about prosperity, it's about balanced budgets. And it should be absolutely clear that it wouldn't matter how much money comes in, politicians find ways to spend it, and more.

But people are right. It's not all about taxes. We'll be seeing ever less prosperity as regulation and government interference burden companies and individuals.

 
At 5/13/2010 2:36 PM, Blogger PeakTrader said...

I'm glad the hog wild spending spree and 2.4% contraction in GDP in 2009 raised the budget deficit only from $1.3 trillion to $1.4 trillion.

 
At 5/13/2010 2:39 PM, Anonymous grant said...

"THERE IS NO FREE LUNCH"
milton freedman

 
At 5/13/2010 2:39 PM, Blogger PeakTrader said...

OA, yes, it seems the housing boom was from 1995-06.

 
At 5/13/2010 3:13 PM, Anonymous grant said...

"Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone".
JOHN MAYNARD KEYNES

 
At 5/13/2010 4:01 PM, Anonymous Lyle said...

With British taxes going up (top rate is 50% there and cap gains will go to 50% under the new austerity program) and the high taxes in the Rest of the EU as well as Japan, the only low tax places are the tax havens who let the US and the UK pay to defend them. Unless you want to move to Hong Kong or Singapore. So even if the bush tax cuts are repealed above 250k the rates will be lower in the US than the UK.

The argument made really relates to relative tax rates between countries, if all are high its the same for economic purposes in terms of driving people around as if all are low.

 
At 5/13/2010 4:07 PM, Anonymous Anonymous said...

The quote isn't really about prosperity, it's about balanced budgets.


Oh good. Now you can explain how lower taxes balance the budget.

There is next to no relation between either prosperity or balanced budgets with regard to the amount of taxes collected.


So, to balance the budget, we need to cut taxes and cut spending.

We've been around on that before. You are right asumming that we are on the far side of the peak on the Laffer curve, if there is one.

Your statement includes the unstated premise that this is the case, with no evidence that the premise is true.


Ever seen a Laffer curve illustrated where the Peak is to the left of 32% ???

 
At 5/13/2010 4:18 PM, Anonymous Anonymous said...

...., what government activities have produced prosperity?

Then raising and lowering taxes are government activities that don't produce prosperity.

 
At 5/13/2010 4:22 PM, Anonymous Anonymous said...

However, cutting taxes will increase economic growth and tax revenues.

Not always, otherwise we would set taxes at zero.

At what lower bound would you say revenues ar no longer increased by lowering taxes?

If we got below that bound, would you still be happier to se yet lower taxes, with a corresponding reduction in governmnet?

You want less government, yet you argue that lowering taxes will increase revenue. What would we do with that revenue that would not be considered government interference?

Assuming yu had that increased revenue the next argument would be that it is excess, and we need to cut taxes.

At what lower bound would you say revenues ar no longer increased by lowering taxes?

 
At 5/13/2010 4:29 PM, Anonymous Anonymous said...

--relocate to Nassau, for Bahamians and resident aliens there are no taxes on personal income, capital gains, inheritance or gifts. Or how about Manaco or Bermuda? Costa Rica? San Juan de Allende?

 
At 5/13/2010 4:33 PM, Anonymous Anonymous said...

I like confusion.

You never know who you are negotiating with. Common sales tactic.

My blog file is broken, when I get around to it I'll try to get a new one and transfer the old.

 
At 5/13/2010 4:36 PM, Anonymous morganovich said...

anon 4.18-

you misunderstand my point.

cutting taxes does drive prosperity (at least to levels considerably below those currently prevailing). more money in the hands of the private sector drive more investment and more growth.

beyond the bare minimum of "keep the bandits off the highways and enforce contracts" government reduces prosperity. it works like friction.

we can chose to have it play social roles that we deem important enough to put up with this defect (and there is a great deal or room for intelligent people to disagree about where the optimal trade off resides, so let's not open that can of worms) but the fact that dollars taxed from businesses reduce their growth is undeniable.

don't fall into the trap of zero sum thinking. a government will collect more taxes over a time by dropping tax rates and driving growth. a smaller slice of a bigger pie can still be bigger than a big slice of a little one.

 
At 5/13/2010 4:42 PM, Anonymous Anonymous said...

Governments function is not to "support us", it can only "support" one individual at the expense of another.

Nonsense. We form corporations because they provide better support by virtue of collaboration than an individual can provide on his own.

Government also [can, but often doesn't] gains from economy of scale etc. to "Promote the general welfare" which is certainly a government function.

The problem is not that government is not capable of providing a positive return on investment, it is that we are too busy in partisan destruction to let it.

 
At 5/13/2010 4:49 PM, Anonymous Anonymous said...

"Promote the general welfare" which is certainly a government function.

Oh it is called corruption.

 
At 5/13/2010 4:50 PM, Anonymous morganovich said...

anon 4.22-

that's a nonsensical argument. clearly at zero taxes, no money is raised. and at 100% taxes, there's be no economy. neither boundary condition is instructive. the key issue is what's happening at the margin.

leaving aside issues of how big a government we want, any government with a long term view ought to seek to maximize long term revenues and the welfare of it's citizens.

% of GDP collected as taxes is not the whole story. you also have to factor in how quickly GDP is growing. 18% of 100 is less than 17% of 110 and while percentages collected are rough and stifling to move, % of growth compound and become a bigger and bigger deal over time.

consider 2 cases:

each economy starts at 100 and grows for 10 years, one at 3% and one at 4%.

the size of the first economy is 134 after 10 years, the second 148.

if the first economy collects 18% of gdp as taxes, it gets 24.12 in year 10. to get the same money, economy 2 would only need a 16.3% tax rate.

alternately at 17% taxes, economy 2 collects 4.3% more revenue than economy 1.

now you just need to figure out what the effects of tax cuts are on growth. if a 9.4% tax cut leads to 1% or better growth (a pretty reasonable assumption) you're better off in the long run doing it.

if not (assuming you like current government spending and services) then no need to cut taxes, but ramping them up in a case where a 9% tax hike slows growth by more than 1% is equivalent to burning the walls to heat your house.

 
At 5/13/2010 4:57 PM, Anonymous morganovich said...

"Nonsense. We form corporations because they provide better support by virtue of collaboration than an individual can provide on his own."

that's utterly wrong. corporations are not for support, they are for the pooling of risk capital and the limiting of risk to investors. that's all a corporation is, a clever way to allow collaboration in risky activities.

"The problem is not that government is not capable of providing a positive return on investment, it is that we are too busy in partisan destruction to let it."

this is also dead wrong. government is not like other business. it does not generate revenues except by taxing other businesses. every dollar spent is a dollar taken from private industry with concomitant degradation of growth.

for this to be efficient, government has to allocate capital BETTER than private industry, and without the flexibility of the private sector and a profit motive, this will just never happen.

and will you guys pick some names? it takes 2 seconds and does not require a valid e-mail. just pick something. it's nice to know who is saying what instead of seeing a sea of anons.

 
At 5/13/2010 5:05 PM, Anonymous Anonymous said...

more money in the hands of the private sector drive more investment and more growth.

I understand the theory, I just think its crap.

Lower taxes
More cash on hand
More spending or more investment
Bigger economy
More tax revenue
Excuse for lower taxes

Eventually taxes get to zero and no revenue.

At what level of taxes would you finally be happy and STFU?


the fact that dollars taxed from businesses reduce their growth is undeniable.

I don't deny that. It's a long way from the original quote.

What is the differnce though, when business has the money and needs to use it to clean up some mess that government could have done better or prevented?

It is exactly that can of worms that we need most to resolve. Instead we are taking up armed positions over no government vs nanny state.

Where is the market where we barter for best value in government services? If we had a market that looked like that, wouldn't you agree that it would discover the "best price to value"?

Didn't the Republicans come up with a gimmick where each taxpayer can "allocate" their own tax dollars. I think it is a great idea, I've been advocating it for years.

Put a simplifed budget on the back of yur tax form and have each taxpayer allocate by percentage.
Publish the [nonbinding] results.

Any politican can request or vote different spending, but he won't be able to make false claims about "what the people really want".

Unlike voting, filling out the tax form is mandatory. Totals less than 100 % indicate a desire for lower taxes and those over 100% want higher taxes.

And now, a lobbyist who want more for his deal has to advertise to the people instead of just buying politicians.

 
At 5/13/2010 5:08 PM, Anonymous Anonymous said...

High or low taxes have next to nothing to do with properity or balancing the budget, in the greater scheme of things.

Lets stop looking for simple answers that are wrong.

 
At 5/13/2010 5:17 PM, Blogger OA said...

Anonymous said...
The quote isn't really about prosperity, it's about balanced budgets.


Oh good. Now you can explain how lower taxes balance the budget.



I assume you're mixing lower taxe receipts and lower tax rates.

What exactly happened after the Bush tax cuts? How about the Clinton tax cuts?

Did tax receipts fall as seems to be the common belief? There were many economists saying the 2003 tax cuts were going to cause tax receipts to fall off. No one ever goes back and asks them why they were so wrong. Because it's easier politically to focus on deficits rather than spending.

The reality is tax receipts went up. Note the humps in the Federal tax receipts graph. Do they occur after tax rate increases or decreases?

http://www.usgovernmentrevenue.com/downchart_gr.php?year=1970_2009&view=1&expand=&units=b&fy=fy11&chart=F0-fed&bar=0&stack=0&size=m&title=&state=US&color=c&local=s

If tax rate increases lead to increased tax receipts, we'll be seeing a jump in the coming years. Save the 2011 budget now and compare the actual tax receipts. I think expecting $2.9 trillion in tax receipts in 2012 and $3.2 trillion in 2013 is crazy optimistic.

If you have proof that tax rate increases lead to increased tax receipts, feel free to post it.

 
At 5/13/2010 5:17 PM, Anonymous Anonymous said...

it does not generate revenues except by taxing other businesses.,

If your business sends my business a bill for repainting the stripes on my parking lot, it is a tax on my business.

I do it to improve productivity and morale among my workers by giving them enough indicated space so they don;t get door dings.

But I still have to pay the bill for what I get. How is that any different from paying governmnet to paint lines on the road which increase productivity and reduce accidents.

We like to poke fun at government and thinkit is terrible at what it does. We disagree on what services we should even be buying.

But I don't swallow the argument that government is always, without exception, a drain on profits, which private enterprise in ITS infinite wisdom would have spent better - like more lifeboats on the Titanic.

Realistically speaking, private enterprise is often just the same kind of bonehead as government is.

 
At 5/13/2010 5:21 PM, Blogger PeakTrader said...

Anon, tax rates, both on production and consumption, are far from zero. Tax revenues are low, because economic growth is slow.

So, you want faster economic growth to increase tax revenues. When there's an economic boom, then tax revenues will rise.

The tax revenues will be needed to pay down the mountain of government debt and the ongoing government spending.

When a strong expansion is underway, then tax rates can increase, to slow the expansion and build-up revenues for the next recession.

The mountain of household debt is a constraint on demand. Without substantial tax cuts, it'll take households longer to pay-down debt to increase demand.

Unfortunately, we squandered almost all our fuel quickly, mostly spinning the economy's wheels. So, now we have a mountain of government debt, along with the mountain of household debt. The future has been spent and we're in a weak position.

 
At 5/13/2010 5:32 PM, Anonymous Anonymous said...

So far, no one has said how lower tax rates guarantee prosperity and balanced budgets anymore than higher ones do.

It seems to me that is not a tax matter, but something people have to do, whether the taxes are high or low.

===================================

Lets see. I have a certain desire to put another $100 in my pocket. I'm comfortablein the hammock, but I decide I want good bourbon not cheap bourbon this weekend.

If taxes are low its easier for me to get that $100 and blow it, so I don't need as much incentive to get to work.

If taxes are high I have to work harder to get that bourbon and I have to contribute to government which uses some of the money on alcohol research and alcohol sniffing flashlights to [try] to keep me safer from all the other drunks out there.

My brother works in the plant that builds alcohol sniffing flashlights. He would be unemployed without government spending.

Anyway, I still want that hundred bucks.

 
At 5/13/2010 5:39 PM, Anonymous Anonymous said...

tax rates, both on production and consumption, are far from zero.

I know what the tax rate are. I asked a simple question. What is the lowest we can go before we get declining revenue?

If we lower taxes and get more revenue we get more government, who wants that?


Tax revenues are low, because economic growth is slow.

What has revenue got to do with growth? It's a freaking percentage either way.

If the economy grows and I keep the rate the same I get more revenue. I've also got more economy to manage and that means more government required.

 
At 5/13/2010 5:43 PM, Blogger PeakTrader said...

Anon, it seems, you're not listening. I stated before:

We have a mountain of household debt, and the government's solution to deal with that debt is creating an even bigger mountain of government debt, through massive spending, while households mostly fend for themselves.

If we had a $5,000 per worker tax cut a year ago (or $750 billion for 150 million workers), high interest rate debt would be paid down, or paid off, increasing monthly income. Banks would be stronger, and demand would clear the market of excess assets and goods quickly, to increase production.

Fiscal policy should be helping monetary policy smooth-out business cycles by cutting taxes in a contraction and raising taxes in an expansion.

 
At 5/13/2010 5:55 PM, Anonymous morganovich said...

"If your business sends my business a bill for repainting the stripes on my parking lot, it is a tax on my business."

that's absurd. no it isn't. it's a transaction, freely entered into by both sides out of self interest.

a tax is more like the government painting your lot whether you want it or not then sending you a bill you'll be jailed if you don't pay.

and that's a best case scenario. more likely, they'll paint your neighbor's lot and send you the bill.

"But I don't swallow the argument that government is always, without exception, a drain on profits, which private enterprise in ITS infinite wisdom would have spent better - like more lifeboats on the Titanic.

Realistically speaking, private enterprise is often just the same kind of bonehead as government is."

this misses the key distinction between public and private. private business that do dumb thing go away (barring stupid government decisions). government doesn't. they just keep expanding. the lack of discipline from fear of failure will always make government programs less efficient to private ones.

name one thing that is not a monopoly that government does more effectively than the private sector.

 
At 5/13/2010 6:00 PM, Anonymous Anonymous said...

Anonymous said...
If we lower taxes and get more revenue we get more government, who wants that?


Now you're just getting ridiculous. It's entirely possible to grow government without any tax revenue tied to that growth. And it's perfectly possible to shrink government in spite of growing tax revenue.

Unfortunately your ridiculous points of view are shared by people who are actually in a position to waste money they don't have and tax as if it were their money to spend.

 
At 5/13/2010 6:02 PM, Blogger PeakTrader said...

Anon, you're not going to be lying in your hammock thinking about buying more expensive bourbon. You'll be thinking about your chances of getting a government job or a job at taco bell, because you're overdrawn on your bank account, behind on your rent and auto payments, etc.

And when you get that job at taco bell, you'll find that your taxes are too high, just like the taxes on cheap bourbon.

 
At 5/13/2010 6:14 PM, Anonymous morganovich said...

"understand the theory, I just think its crap.

Lower taxes
More cash on hand
More spending or more investment
Bigger economy
More tax revenue
Excuse for lower taxes

Eventually taxes get to zero and no revenue.

At what level of taxes would you finally be happy and STFU?"

are you really this stupid?

what is it that you see as the problem with lower taxes, more growth, and the same level of government service? go back and read my 2 economy 10 year example.

you make it sound like it is the job of the people to serve the government. it's not. it's the job of the government to serve the people and to do so with as little interference in our lives as possible.

you make an absurdist argument to cover that fact that right now at current tax levels, you are wrong.

unquestionably, increased economic growth from reduced taxes has diminishing returns. at some point, it stops working where that precise point resides is not possible to determine a priori. you have to dial things like that in.

if you think high taxes won't destroy revenue through lost growth, also consider this: the top 1% of US taxpayers pay 40% or taxes. the top 10% pay 70%.

we will leave. just as high taxes in new jersey and new york drove the wealth out, so to will they do so in the US. capital has never been more mobile. if 10% of the top 1% get pissed and leave or all of them work 10% less hard due to reduced incentives, you have a totally avoidable 4% structural deficit on your hands from bad policy choices.

and if you think people aren't getting ready, you haven't seen the huge uptick in dual citizenship. suddenly an awful lot of people are packing parachutes. if they jump out of the plane, good luck to you, you just lost the pilots.

enjoy the rest of your flight.

ps. i'm not responding to you again until you start using a name. if you're going to post, sign it.

 
At 5/13/2010 6:15 PM, Blogger PeakTrader said...

Yes, you'll be maxed-out on borrowing, behind on your bills, and wondering how you'll come up with that $300 co-payment, if you have dental insurance, for that root canal, and pay the $400 for registration renewal on your vehicle.

 
At 5/13/2010 6:19 PM, Anonymous morganovich said...

peak-

"When a strong expansion is underway, then tax rates can increase, to slow the expansion and build-up revenues for the next recession."

no. that's disruptive and unneeded.

disruptive because constantly moving tax rates are difficult to plan around and because i don't trust government to have any idea how to do this.

unneeded because in a boom, taxes held at a constant rate go up anyway and disproportionately to GDP growth because taxes are on profits, not gdp.

 
At 5/13/2010 6:42 PM, Anonymous Anonymous said...

"If taxes are low its easier for me to get that $100 and blow it, so I don't need as much incentive to get to work.

If taxes are high I have to work harder to get that bourbon and I have to contribute to government which uses some of the money on alcohol research and alcohol sniffing flashlights to [try] to keep me safer from all the other drunks out there."

OH YEAH. EVERYONE KNOWS THAT PEOPLE WORK HARDER IF YOU CUT THEIR WAGES. THAT'S THE DUMBEST STATEMENT YOU HAVE MADE YET.

 
At 5/13/2010 7:08 PM, Anonymous Anonymous said...

anon 5:32
your posting name should be
BATMAN
because your rubbish would make a good movie plot.

 
At 5/13/2010 7:46 PM, Anonymous grant said...

Morganovich 6:14
"it's the job of the job of the government to serve the people and to do so with as little interference in our lives as possible"
This is utter crap invented on the spot by you.
The job of the of the government is to carry out functions that the private sector abandons because it is not profitable for them to provide a service but it is still desired by the community,Or the government competes to provide a service or lower the cost of it.
There is government interference with total disregard for changing an individual person life or fortune or prospects.
Look at previous mp's postings on this site.
The drug raid!
Amish!

 
At 5/13/2010 9:12 PM, Blogger juandos said...

anon @ 5/13/2010 12:07 PM whines: "High or low tax rates are not the only factor"...

No one said it was the 'only' factor until you brought it up...

"Back your arguments with something besides agenda driven drivel"...

Speaking of drivel your link I thought was rather a humerous way you're trying to defend excessive taxation...

You think comparing this country to the countries in Euro-Weasel land filled with socialist fools is somehow an intelligent argument?

Unemployment is Finland's biggest problem -poll

Re Belgium: Public debt is nearly 100% of GDP. On the positive side, income distribution is relatively equal and the government succeeded in balancing its budget during the 2000-2008 period. In 2009 Belgian GDP contracted by 3.4%, the unemployment rate rose slightly, and the budget deficit worsened because of large-scale bail-outs in the financial sector

Weise: German unemployment will peak in 2010

Three countries with higher taxes have some real problems... High taxes aint helping...

 
At 5/13/2010 9:15 PM, Blogger juandos said...

grant says: "This is utter crap invented on the spot by you.
The job of the of the government is to carry out functions that the private sector abandons because it is not profitable for them to provide a service but it is still desired by the community,Or the government competes to provide a service or lower the cost of it
"...

Hmmm, hey grant can you show me what part of the Constitution that mandates federal extortion of the productive so as to pander to the parasitic?

 
At 5/13/2010 9:40 PM, Anonymous morganovich said...

grant-

are you joking?

"The job of the of the government is to carry out functions that the private sector abandons because it is not profitable for them to provide a service but it is still desired by the community,Or the government competes to provide a service or lower the cost of it."

where on earth did you get that? certainly not from our constitution. it sounds like Venezuela.

which part do you take issue with, that government serves the people or that it should do so with as little interference as possible?

i'm going to guess the latter, as if you don't believe government exists to serve the people, then your some sort of totalitarian.

i'm not saying no interference is needed, some is necessary, but my point is it should be kept to the minimum sufficient to do the job.

yours is a shockingly statist view, one contrary to individual liberty, and utterly contrary to good economic sense. that's sure not what i want from a government. sounds expensive, useless, and intrusive.

great, let's tax our citizens and businesses to plow into every failed business that no one is willing to pay for and drive down prices in the rest to hurt our industries with unfair competition. sounds like a recipe for a sink hole, stagnation, and piles of useless stuff.

by your logic, the government should be making rc cola and keeping drive ins running.

name one service the government provides non monopolisticly that is not done better by the private sector.

 
At 5/13/2010 10:18 PM, Anonymous grant said...

Morganivich: your last poast
I'm saying that there should not be government interference into anything except where absolutely no private entity can do the job.
There is currently far too much gov interference everywhere just take a look at the UK and that ideiot mr brownee has done to yhat country. I'see your point more now that you have re posted and I can see that we agree.

 
At 5/13/2010 10:49 PM, Anonymous grant said...

Juando's"
There isn't any. The British welfare state has crept into all the xanglo countries.
I was involved in a large civil court case some years ago and government interference came up in it. No one was the slightest bit interested.The commies were there to enforce their vue and have their way and it wasn't hard to see who the judge worked for. I think you will find the same everywhere on the planet.
Look at the amount of money that has been pumped into economys worldwide without a thought to how it is going to be contained in the long run. Truth is politicians don't care what bad happens as long as it doesen't happen while they are in office and they are left squeaky clean.

 
At 5/14/2010 12:01 AM, Anonymous grant said...

Morganavich:
I forgot to say that the difference between current earnings between the government and private sectors is that government salarys are about 20% higher than private. So an immediate reduction in government costs could be gained by contracting work to the private sector with suitably qualified people to handle the job.

 
At 5/14/2010 8:31 AM, Anonymous morganovich said...

grant-

then i'm not sure what you are trying to say.

you seem to be arguing that the role of government is to tax citizens to provide services they demand, but are not willing to pay for themselves.

if they were willing to pay more than the services cost, that would attract businesses who would provide them.

if they are not, then are the services valuable enough to be worth providing?

having the government provide such services is a recipe for deadweight loss where a service valued at $1 is provided at a cost of $1.50.

this is why these fanciful notions that government can be as good as private industry never pan out: if it's profitable, private industry does it better and takes the market.

if it's not, then the government is giving you dollars that cost $1.50.

look at public schools for a perfect example. voucher systems and and groups like the harlem charter schools have shown time and time again that they can get much better results with much less money despite having to pay for their own real estate.

casting the government is the role of provider of service in every losing market is the road to financial ruin.

 
At 5/14/2010 1:48 PM, Anonymous grant said...

Morganovich:
I agree with you.

 
At 5/14/2010 2:16 PM, Blogger juandos said...

"Truth is politicians don't care what bad happens as long as it doesen't happen while they are in office and they are left squeaky clean"....

Thanks grant for fleshing out your previous comment...

BTW I do believe that on occassion we're both singing from the same hymnal...

 
At 5/15/2010 12:04 AM, Anonymous Anonymous said...

Gee guys. I didn't mean to cause allthis angst and conservative economic drivel.

My only initial obsrvation wa that yes, the argument was ridiculous.

It is still ridiculous if thou change the modifier from high taxes to low taxes because the argumetn is both structurally and logically deficient.

Turning it on its head is one way to show the logical deficiency.

I'm a conservative economist with a scientific background, and I still think this is stupid.

Forget the name calling, I'm not impressed.

 
At 5/15/2010 12:09 AM, Anonymous Anonymous said...

OH YEAH. EVERYONE KNOWS THAT PEOPLE WORK HARDER IF YOU CUT THEIR WAGES. THAT'S THE DUMBEST STATEMENT YOU HAVE MADE YET.

I'm surprised that a little irony leads to such shouting.

You have a problem with differing viewpoints? Or do you believe in Liberty?

You say it is stupid, but you don't say why. Ineed to learn, dear master.

 
At 5/15/2010 12:17 AM, Anonymous Anonymous said...

Private Enterprise is JEALOUS of government.

Government has attributes that private enterprise cannot compete with.

Government can look beyond the quartgerly report. Government has more economy of scale and more borrowing power. Government has a captive market. Government takes its money from private enterprise just like any other private enterprise would, only more inexorably.

Government serves markets that private enterprise is not "efficient" enough to serve.

Government sometimes hobbles private enterprise and sometimes feeds it.

Private enterprise isn't smart enough to know the difference. At least, conservative private eneterprise isn't, not that this stops them from sucking on the teat if it smacks them in the face.

 
At 5/15/2010 12:19 AM, Anonymous Anonymous said...

"Promote the general welfare" which is certainly a government function.

Oh it is called corruption.


No, it is called the preamble to the constitution.

 
At 5/15/2010 12:23 AM, Anonymous Anonymous said...

that's a nonsensical argument. clearly at zero taxes, no money is raised. and at 100% taxes, there's be no economy. neither boundary condition is instructive.

So you deny the basis for tht Laffer curve?

Right now the margin is around 32%, not counitng cheaters.

Simple question reprated. at what margin would your own argumetn no longer hold?

You agree that it does not hod at zero, so it mus be somewhere betweent zero and 32%.

What say you?

 
At 5/15/2010 12:40 AM, Anonymous Anonymous said...

any government with a long term view ought to seek to maximize long term revenues and the welfare of it's citizens.

Agreed.

You cannot ahve long term profits without short term profits.

You cannot make long term investments without making them from short term profits.

If youdo not borrow enough, your business cannot grow as fast as it might.

If you borrow too much you risk the business.

In between time, business conditions change. You would hat to be Hovnanaina and haveinvested huge sums in land acquisition for development three years ago.

I'm doing quite well on my land holdings, but I'm not Hovnanian. And I have th unwitting and stupid help of my local government which has taken subdivision out of the equation.

If I (only) could subdivide, I would have several fortunes. But if everyone could subdivide, I would be worse off than now.

Between zero subdivision and maximum subdivsion, how does government maximise its revenue?

Same problem as the Laffer curve.

And, given tha government maximises its revenue, how does it distribute its new found welth betgween those who wer allowed to subdivide and those that were prevented?

Should not those who took their profits first pay rent to those who waited, or were forced to?

Suppose we have a sudden desire to save open space and farms, so we slap restictions on subdivision. Those restrictions mean nothing to those that have already built, indesd, it enhances their value.

But for those that have been most successfulo at preserving their farms and forest and other open space the longest, to preserve what we now say we want, they are the ones punished the most.


So, absent short term taxes, how do we esatblish what long term criteria we are working for?

 
At 5/15/2010 12:44 AM, Anonymous Anonymous said...

"We have a mountain of household debt, "

Why is that the governments fault? Yougot yourself in, get yourself out. What the hell happened to personal responsibility?

I don't have a mountain of debt. But I live without air conditioning, too.

Youare the one not listneing. The original argument was deficient. It is deficient in either direction. It is a logioc problem not an economic one, and particularly not a conservative economic drivel problem.

 
At 5/15/2010 12:48 AM, Anonymous Anonymous said...

This is utter crap invented on the spot by you.
The job of the of the government is to carry out functions that the private sector abandons because it is not profitable for them to provide a service


It seems to me that Grant is at least correct in stating that not ALL governmet spending is stealing and n affront to liberty.

 
At 5/15/2010 12:53 AM, Anonymous Anonymous said...

No one said it was the 'only' factor until you brought it up...

Are you always so hyperdefensive. no wonder your logo is a gun.

Grow up and look around.

The original statement merely said that high taxes do not gurantee prosperity or a balanced budget.

Clearly, the [faulty] inference is that low taxes do.

In five words, I said that is not so, and seventy five overheated comments followed.

Get a grip.

I'm sure glad I don;t have to actuallybuild anything that works with you guys as the committee on success.

No wonder US manufacturing is fleeing.

 
At 5/15/2010 12:59 AM, Anonymous Anonymous said...

don't fall into the trap of zero sum thinking. a government will collect more taxes over a time by dropping tax rates and driving growth.

AlWAYS?

What happens whn taxes begin to start to approach zero?

Sorry This makes no sense to me, and it MUST have some lower bound.

I'm looking for a conservative who will first admit there is a lower bound, and then devise an experiment to find out what it is.

I already have one, but you won't like the answer,and I'mnot giving it up yet.

I'm betting that when you stop arguing a predefined position and star looking for an answer, that it will look more like my answer than one that says flatly that a government will collect more taxes over a time by dropping tax rates.

 
At 5/15/2010 1:02 AM, Anonymous Anonymous said...

anon 5:32
your posting name should be
BATMAN
because your rubbish would make a good movie plot.

5/13/2010 7:08 PM



Nice lucid argument. Let me know the next time you are in front of the Supreme Court.

 
At 5/15/2010 1:04 AM, Anonymous Anonymous said...

Lets try to eliminate inflammatory words like statist from our discussions.

I know that will leave Juandos at a disadvantage,,,,,,

 
At 5/15/2010 1:06 AM, Anonymous Anonymous said...

having the government provide such services is a recipe for deadweight loss where a service valued at $1 is provided at a cost of $1.50.

Well yes.

But not as much of a loss as iff a service valued at $1.00 is not provided at all.

 
At 5/15/2010 1:18 AM, Anonymous Anonymous said...

government salarys are about 20% higher than private.

On the one hand, I don't believe it. Every time I thought about applying for a government job I thught was equivalnet to my own, I would have had to take a 20 to 30% cut to get it.

On tho other hand, I Coulc not actually answer the knowledge and skills sets they [seemed] to require.

End result, I make a lot more money than my counterparts in government who have more educatiopn and experience.

I have a coulple of masters and i make a lot more than a PhD in government doing my oppoiste job [overseeing me].

They are lot more pmpous, though.

That is a common argument, but I don't think it is correct. Ask the government workers that rent from me.

Ok benfits are another issue, but still.....

 
At 5/16/2010 12:04 AM, Anonymous grant said...

HERES THE LINK TO President Obama's speech on nuclear power.
http://blogs.suntimes.com
Obama wants to in vest in nucelar energy [Chicargo Sun Times]
Transcript here of his speech in full.

 

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