Robert Sturgeon has a helpful site for the confused amongst us.

Some of you may share the mistaken belief that the Laffer Curve, named for
Dr. Arthur Laffer, was tested and found wanting during the Reagan
Administration. Nothing could be farther from the truth.

So Sturgeon is a Reagan apologist. That ought to make him acceptable to the Maximum Leader. Now, I’d argue for the fact that Reagan’s economic growth was fueled by the multiplier affect of massive government spending, but outside factors don’t figure in to the Laffer Curve. Rather than defending the Laffer Curve theory, I would argue that the Reagan years are inconclusive - or even supportive of the Keynesian model (god forbid!)

There are two possible causes for your error. The first is that you may simply
not know what the Laffer Curve is. This, combined with a natural tendency to
agree with the “conventional wisdom,” may lead you to just mindlessly nod your
head in agreement every time you hear some T.V. network reporter blithely
dismiss the “discredited Laffer Curve.”
The second possible cause for your
error may be that you do not understand what results the Laffer Curve promises.
This is really a part of the greater problem mentioned above, so let us begin
there.

Bold by Smallholder. Which is it Mike? Is ya ign’nt or is ya ign’nt?

For us to gain a rudimentary understanding of the ideas incorporated into
the Laffer Curve, we must understand a tiny bit about economics. Economics is
really just basic human psychology as applied to money and business affairs. We
assume that people will react to the realities of the world of money and
business more or less like they react to any other set of stimuli. They tend to
act in their own and their family and friends’ best interests, as they se them.
The Laffer Curve results from our assumptions about how people will react to
varying rates of income taxation.

On this we can all agree. Is everybody still with us? Excellent. Let’s go on:

Now we must put our understanding of human nature to work. We must ask
ourselves two questions, the answer to the first being obvious, and the answer
to the second being not so obvious, but just as certain. The first question is,
“If the income tax rate is zero %, how much income tax revenue will be raised?”
The answer is, of course, “None.”

Now, here is where it gets a bit tougher.

The second question is, “If the income tax rate is 100%, how much income tax
revenue will be raised?” To answer this question, we must place ourselves in the
position of an income earner who faces a tax rate of 100% on every extra dollar
he earns. Will he have any reason whatsoever to earn any more money? The answer
is, “No, he won’t.” He will refrain from any activities likely to result in
taxable income. So the income tax revenue from a 100% income tax will be zero,
or nearly zero. There will always be a few suckers who go ahead and earn some
money, only to have it taxed away. But the number of people willing to do so
must be exceedingly small. For all practical purposes, the number is zero.
Okay, now we get to the nub of the “infamous” Laffer Curve. We must
take the ideas discussed above and reach some conclusions. The reasoning goes
like this: If a zero % income tax rate brings in zero revenue, and if a 100%
income tax rate brings in zero revenue, the tax rate which will bring in the
most revenue must be somewhere between zero % and 100%. It necessarily follows
that in a given economy, there is some optimal income tax rate which will bring
in the most revenue possible. In that economy, a lower than optimal rate will
bring less revenue, and a higher than optimal rate also will bring in less
revenue. Are we all still together here? Did you get that? If not, go back and
do it again. Keep doing it until you get it.

Dang! Even Sturgeon is mocking the Maximum Leader!

Okay, that is all the Laffer Curve claims. Let’s all say this together, “In
any given economy, it is possible that the income tax rates are already too
high, and if the authorities wish to bring in more income tax revenue, they must
lower the tax rates.” Do we all understand that? Even the Democrats amongst
us?

That bit must be for Rob. Actually, I agree with this. Tax rates CAN be too high. Where I and the Maximum Leader part company is on whether they actually are too high.

The Laffer Curve does not claim that lowering income tax rates will
always bring in more revenue. It only claims that a lower income tax rate may
bring in more revenue. If the tax rates are already very low, lowering
the rates may not bring in more revenue. But if the rates are too high,
lowering the rates will bring in more revenue.

Pretty simple. Scroll down a couple of posts and check out the numbers. They show pretty clearly that we were on the left side of the curve.

The problem people tend to have regarding the Laffer Curve is that they
confuse economics with their political considerations. Many people have
political reasons to desire high income tax rates on the earnings of the rich.
They wish to prevent the rich from earning more money, even if the resulting tax
revenue is smaller than it would otherwise be, and the economy less productive
than it would otherwise be. These people do not believe that the income tax on
the rich can ever be “too high.” They are willing to deprive the government of
revenue and deprive the economy of the productivity of the rich, all for the
sake of their politics. There really is no arguing this point, as it is merely
the outward manifestation of envy.
The Laffer Curve does not address
questions of envy and redistributionist politics. It onlyaddresses the question
of how to have the healthiest economy producing the highest income tax revenue.

The Laffer Curve does not claim to know exactly what tax rate is the
“right” tax rate. In fact, the only way to know if the current tax rates
are too high is to lower them, and see whether revenues increase or not. If the
revenues increase, the rates were too high. If the revenues decrease, the rates
were too low. Of course, it would be equally valid to run the experiment the
other way around: raise the tax rates and observe the results. The
choice is the politicians’ to make, based upon whether the current rates “seem”
to be high or low. In 1981, the rates seemed rather high. The Laffer Curve
experiment showed that the rates were, indeed, too high.
Now, let us
consider whether the Laffer Curve “failed” to deliver on its promises during the
Reagan administration. Remember, the Laffer Curve does not promise to balance
the budget. The Laffer Curve does not promise to solve social problems. The
Laffer Curve does not promise to force elected representatives to propose and
enact lower spending programs. The Laffer Curve only promises that, if the tax
rates are too high and they get lowered, revenues will increase. Income taxes
were lowered (and “flattened”) during the Reagan administration. Income tax
revenues increased. In fact, they increased a great deal. Unfortunately, neither
the Republican Reagan administration nor the Democrat-controlled Congress were
interested in lowering the rate of growth in federal spending. While the income
tax revenues increased substantially, federal spending increased even more. The
result was that the federal government ran up a staggering national debt. But
please, let’s not blame it on the Laffer Curve!

So let’s review. Bush raised taxes and the revenue went down. Left side of the Laffer curve. Smallholder is right.

Clinton raised taxes. Revenue went up. Left side of the Laffer curve. Smallholder is right.

Only a tap-dancing Fred Astaire could continue to deny this.

Nicely done, my friend.

Your argument mught even work if people didn’t recall that Bush’s tax cuts were not introduced as a result of the downturn. His intial argument was that since we had a surplus, we oguht to return money to the pople. Plus, supply side, supply side, supply side.

Supply side economics is pretty simple. If we are on the right side of the Laffer curve, tax cuts will generate economic growth, resulting in higher taxes collected from lower rates since their is more economic activity to tax.

Arguing that a recession invalidates measurement of the Laffer curve is just silly. If we were on the right side of the curve, tax cuts we bring us out of the recession.

The Maximum Leader makes my point with his citing of the Kennedy years. Kennedy raised taxes. The economy grew. According to supply side economics, the economy WOULD HAVE tanked if we pushed farther to the right. That didn’t happen.

This was also shown by the Clinton tax raises. Clinton raised taxes and still presided over a massive economic expansion.

Arguing that things are more complex is also arguing about the validity of supply side economics as a whole. The economy is complex. Part of the Clinton boom was the result of Reagan’s loosening of government oversight of business - a policy maintained by the very centrist Clinton. Supply side economics makes a very clear prediction. Tax raises to the right of the curve will always result in a retardation of the economy. This simply hasn’t happened.

So either supply side economics is just plain wrong as a theory.

Or, we are on the left side of the curve. In which case tax raises, not cuts, are called for.

The Laffer curve is simple (See here for a two paragraph explanation and the graph itself). I’m not being a hayseed here. But don’t let the Maximum Leader fool you with his fluff.

(Smallholder dons a blindfold, takes a drag on his cigarette, and prepares himself for the fate of all dissidents in the Mike World Order.)

Greetings, loyal minions. Your Maximum Leader would suggest to his manure spattered friend that he stick to slopping pigs and shearing sheep and give the innacurate ecoomic analysis a rest. In his most recent post the Smallholder would like you to accept that if federal tax reciepts in 2004 were less than federal tax reciepts in 2000 then this once and for all proves we are on the left side of the Laffer Curve.

If only it could be explained so easily. You see, the Smallholder is happy to regale you (dear minion) with complex analysis and detailed lists of causes for all sorts of happenings in the world. But when it comes to economics, he is happy to put tax figures in a vaccum and declare in a Will Rodgers-esque way that he is a simple man and even he can see that things don’t add up. Your Maximum Leader will nod in acknowledgement of our squishy-prosperous farmer’s rhetorical flourish. But let us recap a few items for you all.

First off, the article quoted previously by both the Smallholder and your Maximum Leader (alas not active on the WaPo’s website but excerpted heavily here) clearly states that the projected deficit is going to be lower this year because tax reciepts are increasing. So, this means that this year (2005) the federal government will collect more money in taxes than it did in 2004. What does this show?

It shows that the amount of taxable economic activity increased from 2003-2004 (since taxes are paid in the year after income is earned). That taxable activity grew in that period is an indication that the economy grew. And economic growth is why the hapless Smallholder’s presentation of two numbers doesn’t hold up to examination.

Your Maximum Leader would be happy to conceed the point about tax reciepts in 2000 vs 2004 if the Smallholder would like to assert that the economy grew in the period from 1999 to 2003. Your Maximum Leader doesn’t think he would like to (or can) do that. The economic downturn which began in 2000 caused the economy to shrink. A shrinking economy would result in less tax receipts as taxable economic activity is diminished. The shrinking economy was the impetus behind the Bush Tax cuts. The thought (ie: supply side theory) being that tax cuts would stimulate the economy and cause growth. Growth would then reverse the downward slid of the economy and produce a recovery. The recovery could in turn be measured by more taxable economic activity, and increasing tax revenue.

So where does that leave us?

Your Maximum Leader will submit to you a fine spreadsheet showing federal receipts and outlays from 1940 to the present. You can review it and see the effects of tax cuts and consequent economic growth by reading the center columns showing receipts and outlays in constant (2000) dollars. John Kennedy’s tax cuts in 1961 were followed by increased federal reciepts. And the economy was not experiencing a downturn at the time of his tax cut. The Reagan tax cuts of 1982 halted the recession that began in the late 70s and reached it nadir in 1983. George Bush (Elder’s) tax increase in 1989 caused the blip that can be seen between 1990-1991. And your Maximum Leader will argue that the George Bush (Younger) tax cuts in 2001 are leading to the increases we see this year and projected for future years.

So dear minions, do not let the Smallholder’s presentation to two figures with an “aw-shucks-hayseed” grin fool you. There is more to this issue than he would like you to believe.

Carry on.

Tax revenues in 2000: $2,420,026,000,000

Tax revenues in 2004: $2,350,290,000,000

If we assume a 2% average annual inflation rate (it varied between 1 and 3%), the 2000 figure should be bumped to $2,568,151,000,000 in 2004 dollars.

The answer to the Great Laffer Curve debate is at hand!

We only have to compare the two figures to see which is higher! Did revenues actually increase or decrease as a result of the tax cut? Is $2.568 trillion greater to or less than $2.350 trillion?

I can’t seem to figure it out. After all, as a farmer and history teacher, my math skills are rather poor*. Perhaps the Maximum Leader can tell us which is higher.

We may have to wait for him to put on his tap-dancing shoes.

* But I can still get a job as a voodoo economist.

Because he posted two serious commentaries in a row, I just want to link us again to this portrait of my dear friend, sheep lover, and sometime ally in all things political.

Believe.

The Maximum Leader and I have been bashing each other with Laffer Curve shillelaghs recently.

To catch you up:

The Maximum Leader hails the recent unexpected reduction of the deficit as evidence that we are on the right side of the curve.

I shot back with this.

Mike claimed that I was actually making his point here.

Mike and I wereboth off-track in the second and third posts. The real determination of where we are on the Laffer Curve isn’t based on a reduction of the predicted shortfall. The acid test is whether or not total tax receipts have increased or decreased as a result of the Bush tax cuts. The deficit may not be as bad as predicted, but this does not tell us whether or not the total collected taxes have risen or fallen. The deficit is somewhat independent of the amount of taxes collected. If our congress, to mix metaphors, dipsenses pork sandwiches like a bunch of drunken sailors, they can drown any amount of tax receipts in a flood of red ink.

So let’s set aside the budgetary proclivities of our duly elected representatives for a moment.

If we are to settle, once and for all, where we are on the Laffer curve, we have to look at whether tax cuts have generated an economic surge sufficient to actually increase revenues even though the total tax burden is a smaller percentage of the GDP. (Of course, we’d have to adjust a bit for inflation, but that’s been pretty mild of late.)

If 2004 tax receipts are greater than the 2001 tax receipts, Mike is right. We were on the right side of the Laffer Curve and Smallholder will have to confess his error.

If 2004 tax receipts are less than the 2004 tax, I’m right. We were, and still are, on the left side of the curve and the Maximum Leader will have to confess his error*.

I’m not very good at finding numbers stuff on the internet. Can anyone find a site that shows the total taxes collected by the IRS on an annual basis? Please let us know.

* Actually, the Maximum Leader will just ignore evidence contrary to his world view and sing “la-la-la.”

My dear friend the Minister of Propaganda is sorely distressed. He, like I, is disappointed in the direction the country seems to be heading. We may have different reasons for this distress, but we both, like the rest of the Ministers here at Naked Villainy, are patriots who want what is best for the country.

Rob is not concerned about the Fundies’ twisting of Jesus’ teachings - he, after, all, believes that we Christians are chumps - but we both are concerned about where their intolerance leads the civil society.

(As slightly connected aside, let me congratulate the Maximum Leader for acknowledging that discrimination on the basis of sexual orientation is wrong. He’s on the right road. Eventually he will do some soul searching and discover that his blase acceptance of existing discrimination is also wrong. It troubles me that he downplays the importance of fighting for basic civil equality while at the same time sending dough to an organization dedicated to the unregistered ownership of rocket launchers, but I try to look at the bright side: at least he is a Packers fan)

The good Ally has commented on Rob’s stridency. And, truth be told, I wish he would go easier on my pal Greg. But his anger is real. If you love your country and see it being hijacked, you are bound to get testy. And I’d remind Ally that there have been demagouges on both sides. Remember when the Republicans - with straight faces, mind you - claimed that the Clinton administration was the most corrupt in history?

If Smallholder agrees with Rob’s general negative assessment of the religious right, you may be asking yourself, why is Smallholder weeping and gnashing his teeth: “Self, given that Smallholder and Rob both agree that the fundie movement is dangerous, why isn’t Smallholder weeping and gnashing his teeth?”

I’m glad you asked.

The answer is simple: I’m a historian.

Well, honestly, I’m a historian given to trodding the halls of the academy with manure-spattered boots, but I think that still counts.

Culture wars are cyclical. We have seen backlashes before.

The Great Awakening was a backlash against the secularism symbolized by the halfway covenant.

The 1820s saw a backlash against the hardening of the North’s industrial system and the South’s peculiar institution.

Know-Nothing Nativism was a backlash against the New Immigrants.

The Scopes Trial was emblematic of middle America’s concern over the secularization of society.

The conformity ethic of the fifties was partially an attempt to restore a sense of order destroyed by the agony of the World War.

The late sixties gave us the backlash against conformity.

Nixon’s appeal to the “Silent Majority” wasn’t all race-baiting “Southern Strategy” - though I’ll admit that was a big part. It was also about a backlash against “dem dirty hippies.”

So, to quote the Bare Naked Ladies, “it’s all been done.”

So, I’m not particularly concerned about the fundies. They will overreach and the pendulum will swing back in the other direction. I think, as I have already posted, that the Schiavo case may have already been the high-water mark. Time will tell if the tide is indeed going out.

Many modern commentators have predicted doom and gloom for the Dems. The Republicans have become so arrogant that they are going to abolish the filibuster for short-term goals. They will be in the minority again.

Remember when Johnson’s decisive defeat of Goldwater signaled the end of conservatism? How did that turn out.

So, my dear Minister of Propaganda: It will be okay. America, in the long term, has always moved to expand the circle of protected rights. Short term blips like the Gentleman’s Agreement and Prohibition aside, our system does work.

The DOI’s white property-holding males over the age of 25 “all men” has morphed into all people over the age of 18. The march of progress will go on.

Small “l” liberalism has always triumphed. In fifty years, my Hollywood liberal friend, you’ll be a conservative. Not because you will change - this is the mistake made by all those “it only takes a mugging” folks. We do become more conservative when we get older - because our youthful liberal goals have been achieved and must now be conserved against a new generation’s youthful goals.

The Republicans are hypocrites on the issue of judicial appointments. The nominated individuals are activist judges that cater to the reactionary views of the religious right. The fight now is really about the next Supreme Court vacancy. I don’t want another conservative serving a lifetime appointment on the Supreme Court, particularly given this administration’s stated legal views concerning the designation of U.S. citizens as enemy combatants, the Patriot Act’s disregard for civil liberties, the Geneva Conventions and the use of torture, the slow criminalization of dissent, and a general disregard for the rule of law. I hope the Republicans lose now, on general principle. As a bonus, it will be a mortal wound for Frist, and that’s something I would love to see.

Of course the country elected these assholes, and we all have to live with the growing influence of the religious right. I just imagine a better country than that, even though I expect it to remain imaginary.

Believe.

Greetings, loyal minions. Your Maximum Leader is watching in rapt attention the goings-on in the Senate today. Since that august body has taken up debate on Bush judges.

Your Maximum Leader has not weighed in on this subject in this forum, but has privately to some. This fight, fascinating as it is, leaves your Maximum Leader torn in a number of different ways.

On the one hand, your Maximum Leader is disgusted by Democrats in the Senate. They can’t stop the Republicans through winning elections, so they are now resorting to parliamentary tactics. Now don’t get your Maximum Leader wrong on this, he LOVES parliamentary tactics. Indeed, should he need to occupy the post of Vice-President of the US in the establishment of the MWO he will make it his life’s work to stop that body from considering new laws through every parliamentary trick imaginable. And as frequent readers of this space know, your Maximum Leader is fond of gridlock in government - because it means that the government is governing less and that is generally good.

But on the other hand we are a nation of laws. And, since petitioning the emperor has had no place in our legal system, we need judges to see to it that the business of litigation and prosecution is done throughout the land. Generally speaking, your Maximum Leader thinks it IS a good idea for the Senate to move in a speedy fashion to confirm judicial appointments. (Cabinet appointments are another matter all together.)

So, in the fight over Bush appointees, your Maximum Leader is torn. Your Maximum Leader is all in favour of the filibuster in the Senate. (Which is the most undemocratic tradition in our republic - BTW.) The general idea of a body with rules that support unlimited debate is a sound one. But on the other hand, tradition also (generally) supports the timely confirmation by the Senate of judicial appointments.

While he thinks that the Republicans will win this fight and end judicial nomine filibusters; he thinks that it would be better in the long run to not fight this battle. But now that the battle is joined, you have to win the fight. The best outcome would have been for Democrats to just confirm the judges and do their best to take control of the Senate and White House so that they could, in turn, confirm their own people. (NB: There is a difference between killing a nomination in Committee and filibustering it on the floor of the Senate after the nomination has been discharged. Your Maximum Leader doesn’t - and to his knowledge no one in Washington ever has - objected to nominations dying in Committee.)

How this will affect the judiciary is a subject for another post all together.

Carry on.

Greetings, loyal minions. Your Maximum Leader wanted to comment on British MP George Galloway testifying in front of a Senate panel investigating the Oil for Food Scandal. But he couldn’t quite figure out from what angle he wanted to approach the story. Then he read this:

I must admit I have been smiling over the Galloway hearing.

Don’t get me wrong: Galloway is a piece of offal, who used a sick-kids charity as a cover for enriching himself, and smooched with one of the world’s nastiest dictators for the same purpose.

Galloway came up through the UK parliamentary system, though, where you have to be fierce and clever in debate, and need to be able to think fast on your feet. The US Senate is full of pompous bores, stuffed up to the nose holes with a conviction of their own terrific importance, whose idea of debate is to drone their way through a speech some minimum-wage staffer has written up for them. This was like watching an alley mongrel let loose in a room full of pampered, overfed lap dogs.

To judge from Galloway’s name, appearance, and style, this was also a vivid illustration of the good old Scotch-Irish scrapper from the Borders taking on a smug establishment. I wouldn’t want Galloway at my dinner table, but I must confess, this was fun to watch.

Thank you John Derbyshire for putting it just as your Maximum Leader would have.

Carry on.

I think the Foreign Minister’s suggestion (stated first here and then repeated) that Sexy Sadie accompany/supervise me in regards to this July’s Jackfest gathering is a most excellent suggestion, indeed.

A most excellent suggestion that will understandably remain an amusing blogosphere innuendo, as I am neither Irish nor the Lad. Plus our dear but spurned host, Mr. Smallholder, would claw his eyes out.

Smallholder’s reaction, of course, might prove temptingly storyworthy. Hmmm. . .

Believe.

. . . although, like our Maximum Leader before, I have little to say about this one:

You scored as Cultural Creative. Cultural Creatives are probably the newest group to enter this realm. You are a modern thinker who tends to shy away from organized religion but still feels as if there is something greater than ourselves. You are very spiritual, even if you are not religious. Life has a meanin outside of the rational. Cultural Creative 94% Existentialist 81% Postmodernist 75% Idealist 69% Modernist 50% Materialist 50% Fundamentalist 31% Romanticist 19% What is Your World View? (corrected…hopefully) created with QuizFarm.com

I’m amused to see that, once again, ML and I are showing some world view similarities. There’s probably some analysis to be made of the various percentages (therein lies our differences), but I was working a night shoot yesterday and, tired as I am today, it’s much easier to simply make jokes about the Maximum Leader’s villainous appendage.

Believe.

I disagree that my earrings make me look stupid. Presently I’m wearing two black wire hoops, discreet and close to the lobe, but I’ve also got studs and slightly larger hoops in both black and cobalt blue that I’ve worn on occasion. I’d like to petition for a ‘film industry’ exception. I do not presently belong to a rock band (though I always thought I’d be a great drummer).

I was additionally surprised to see that our Maximum Leader made no mention of his own Prince Albert piercing; probably he considers it ‘practical’ rather than ‘ornamental.’

Believe.

Greetings, loyal minions. Your Maximum Leader reads from the news wire that a Parachutist dies jumping from Eiffel Tower.

Deservedly so. Why on earth would you want to jump off the Eiffel Tower? (Unless of course you are MayDay being pursued by James Bond.) Everyone knows that the Eiffel Tower is for proposing to your loved one and/or jumping to your death when you just can’t take it anymore.

Okay… Perhaps the Eiffel Tower has more uses than just those two. But those are the big ones…

Carry on.

I will correct Max on several points.

First, rings. A man can pull off two rings (assuming the first is a wedding band) if

1. the second one is a class ring from a Military Acadamy that the wearer attended. From someone who works in an industry where I come in contact with many military folks, I think it’s perfectly acceptable for a Naval Acadamy graduate to wear that ring longer than Max’s three year limit. Same for the other Acadamies, of course.

2. the second one is a championship ring from a major league pro sports team, and the wearer played on that team. (i.e. SuperBowl ring. For example, Brett Farve could wear his SuperBowl ring, along with his wedding ring until he’s 99 if he wants. I’m aware that some franchises buy rings for all employees. If you work n the ticket office, take the damn thing off. You look stupid.)

Also, pinky rings ALWAYS look stupid on a man.

As do gold chains.

As do earrings, unless the wearer is in a rock band… a good rock band.

Lastly, what about tie tacks/pins/etc. Are these not considered Jewelry because they are functional and not ornamental?

UPDATE FROM YOUR MAXIMUM LEADER: Your Maximum Leader stands corrected. He completely agrees that graduates from a military academy are permitted (and in many cases expected) to wear their class rings for many years after they graduate. And while he agrees on this point, there is probably a case to be made that this habit ought to be eschewed as it sometimes promotes a sometimes undeserved feeling of superiority by military academy graduates over other non-academy graduate officers.

And generally tie tacks, tie pins, collar bars, or tie chains fall into the “practical” category and aren’t jewelry. But it is certainly possible that they too can fall into the “Rolex” category…