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Thread started 07/25/03 1:54pm

teller

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A reminder about the LAFFER CURVE - and isn't it curious how it makes some people squirm?

I've posted about this in the past, but I see some new faces, and I've been called technocratic by an elder who must have missed this, so here's an encore presentation.

This is one of those things I always thought was self-evident, but there are lots of economists out there who reject the whole idea of the Laffer Curve. Myself, I think it's one of those things everybody ought to be exposed to. We don't have a lot of economic models that actually work or make sense, and I believe this is one of them.

The following principle was illustrated by the famous economist, Arthur Laffer:



If you set taxes at 0% you get $0 in tax revenue. Likewise, if you set taxes at 100% you get $0 in tax revenue. This much should be obvious. But in between those two extremes is where things get interesting:

There are always TWO tax rates which generate the same exact level of revenue (such as points A & B or points C & D)--except for point E which is the maximum revenue you can possibly get.

If a government selects something above point E, such as A or C, their economy will be smaller than it's full potential, and they'll likely have to raise taxes the following year in order to maintain the same level of revenue--and the negative cycle will repeat. The wrong side of the Laffer Curve is a slippery slope of doom!

Not that I advocate point E...I prefer something closer to point D. But that's beside the point--Point D is DEFINITELY better than Point C. That much should be obvious even to a revenue-hungry liberal, no?

.Made my own laffer graphic edit
teller]
[This message was edited Sat Jul 26 19:02:05 PDT 2003 by teller]

Fear is the mind-killer.
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Reply #1 posted 07/25/03 2:05pm

savoirfaire

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teller said:

I've posted about this in the past, but I see some new faces, and I've been called technocratic by an elder who must have missed this, so here's an encore presentation.

This is one of those things I always thought was self-evident, but there are lots of economists out there who reject the whole idea of the Laffer Curve. Myself, I think it's one of those things everybody ought to be exposed to. We don't have a lot of economic models that actually work or make sense, and I believe this is one of them.

The following principle was illustrated by the famous economist, Arthur Laffer:



If you set taxes at 0% you get $0 in tax revenue. Likewise, if you set taxes at 100% you get $0 in tax revenue. This much should be obvious. But in between those two extremes is where things get interesting:

There are always TWO tax rates which generate the same exact level of revenue (such as points A & B or points C & D)--except for point E which is the maximum revenue you can possibly get.

If a government selects something above point E, such as A or C, their economy will be smaller than it's full potential, and they'll likely have to raise taxes the following year in order to maintain the same level of revenue--and the negative cycle will repeat. The wrong side of the Laffer Curve is a slippery slope of doom!

Not that I advocate point E...I prefer something closer to point D. But that's beside the point--Point D is DEFINITELY better than Point C. That much should be obvious even to a revenue-hungry liberal, no?


Now, I have actually only briefly seen this curve, and have never really bothered to understand it. You explained it very well.

However, I would like to ask you, how did Laffer come up with this, how can this be backed up?

You say it is self-evident, but I fail to see the logic of this curve. Please explain for me. Thanks.

"We are all atheists about most of the gods that humanity has ever believed in. Some of us just go one god further." - Richard Dawkins
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Reply #2 posted 07/25/03 2:22pm

SupaFunkyOrgan
grinderSexy

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As if liberal and revenue hungry go hand in hand...

2009: Mermaids and Dolphins...
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Reply #3 posted 07/25/03 2:26pm

savoirfaire

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Actually, I think I understand.

If there was a 100% tax rate, individuals would have no money, so could not survive on their own. At the same time, a 0% tax rate would see the economy going forever into debt, which also would not work.

Similarly 1 and 99 would have less than ideal results, 2 and 98, etc.

However, point E has not been determined, and the curve outlined is just an example. You really can't say you would like something closer to point D, because Point D's value is not determined. Because we can't assume Point E is 50%, for all we know, point E Could be 5% or 95%. And assuming that, point E could actually be any percent, besides the absolute whole or zero of the sum total.

BUT, this is where I see the Laffer Curve falling apart. The curve seems to represent an equal distribution that can be predicted as having any two points on the graph along the horizontal axis equidistant from point E. Because taxation is based in percentage, we would either have to assume that Point E equaled 50%, which would balance everything out, but I'm sure you would not agree to, or we would get negative percentages still gaining the government tax revenue.

For example:

If Point E = 40%

And we were to assign Point A as adding 50%, then we would see that 90% tax would still provide some, though not very much revenue. However, To follow the rule of equidistance that seems to be outlined in the curve, Point B would have to be 50% less than 40%, which would be a negative percentage. How can a negative percentage give revenues? That doesn't make sense.

The error in your perspective of this theory lies in the illustration. I think Laffer's curve can be broken down as being a compromise between two extremes, but that compromise is not determined. But, a socialist's tax numbers vs. a libertarian's tax numbers are both compromises. This does not suggest that less tax is always better than more tax, it only suggests that less tax than the Hypothetical point E (which is unknown) is better than tax above the hypothetical point E.

"We are all atheists about most of the gods that humanity has ever believed in. Some of us just go one god further." - Richard Dawkins
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Reply #4 posted 07/25/03 2:51pm

Aerogram

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savoirfaire said:

Actually, I think I understand.

If there was a 100% tax rate, individuals would have no money, so could not survive on their own. At the same time, a 0% tax rate would see the economy going forever into debt, which also would not work.

Similarly 1 and 99 would have less than ideal results, 2 and 98, etc.

However, point E has not been determined, and the curve outlined is just an example. You really can't say you would like something closer to point D, because Point D's value is not determined. Because we can't assume Point E is 50%, for all we know, point E Could be 5% or 95%. And assuming that, point E could actually be any percent, besides the absolute whole or zero of the sum total.

BUT, this is where I see the Laffer Curve falling apart. The curve seems to represent an equal distribution that can be predicted as having any two points on the graph along the horizontal axis equidistant from point E. Because taxation is based in percentage, we would either have to assume that Point E equaled 50%, which would balance everything out, but I'm sure you would not agree to, or we would get negative percentages still gaining the government tax revenue.

For example:

If Point E = 40%

And we were to assign Point A as adding 50%, then we would see that 90% tax would still provide some, though not very much revenue. However, To follow the rule of equidistance that seems to be outlined in the curve, Point B would have to be 50% less than 40%, which would be a negative percentage. How can a negative percentage give revenues? That doesn't make sense.

The error in your perspective of this theory lies in the illustration. I think Laffer's curve can be broken down as being a compromise between two extremes, but that compromise is not determined. But, a socialist's tax numbers vs. a libertarian's tax numbers are both compromises. This does not suggest that less tax is always better than more tax, it only suggests that less tax than the Hypothetical point E (which is unknown) is better than tax above the hypothetical point E.


nod

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Reply #5 posted 07/25/03 3:02pm

AnotherLoverTo
o

Yep, I was going to say exactly what savoirfaire said, but he beat me to it! nod

wink

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Reply #6 posted 07/25/03 3:12pm

Aerogram

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AnotherLoverToo said:

Yep, I was going to say exactly what savoirfaire said, but he beat me to it! nod

wink


Well, Teller's very neat, and you gotta admit it's a very nice curve. smile
[This message was edited Fri Jul 25 15:12:56 PDT 2003 by Aerogram]

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Reply #7 posted 07/25/03 3:30pm

Aerogram

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It's interesting to note that even though some Libertarians claim taxes are slavery, they do recognize a certain taxation level is necessary. In other words, not all levels of taxation should be "slavery" to them. That's a simplification of a simplification. What they actually mean is that HIGH taxes are slavery, which isn't even close to being true, especially with their definition of "high taxes".

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Reply #8 posted 07/25/03 5:49pm

chemmie

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Aerogram said:

It's interesting to note that even though some Libertarians claim taxes are slavery, they do recognize a certain taxation level is necessary. In other words, not all levels of taxation should be "slavery" to them. That's a simplification of a simplification. What they actually mean is that HIGH taxes are slavery, which isn't even close to being true, especially with their definition of "high taxes".



OF COURSE DUMMY!!! lol

Those taxes would be "Usage Taxes" You pay for what you use. Pay for Social Security if you want it. Pay for medicare if you want it. Pay for schooling if you have a child in school or if you yourself want it. Pay for roads my gasoline taxes and tolls if you use them. Other sales taxes may also be appropriate to run certain governmental functions to ensure the safety of the American people and protect against corporate corruption and fraud.

also, a low, flat tax, for everyone can also be used. everyone pays the same percentage. a federal sales tax can be used that everyone pays based on consumption.

we dont want to get rid of all taxes, we just want FAIR TAXATION!!!

"I'm here to chew bubblegum and kick ass, and I'm all out of bubblegum"
"Giving leaders enough power to create "social justice" is giving them enough power to destroy all justice, all freedom, and all human dignity." - Thomas Sowell
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Reply #9 posted 07/25/03 6:58pm

Aerogram

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chemmie said:

Aerogram said:

It's interesting to note that even though some Libertarians claim taxes are slavery, they do recognize a certain taxation level is necessary. In other words, not all levels of taxation should be "slavery" to them. That's a simplification of a simplification. What they actually mean is that HIGH taxes are slavery, which isn't even close to being true, especially with their definition of "high taxes".



OF COURSE DUMMY!!! lol

Those taxes would be "Usage Taxes" You pay for what you use. Pay for Social Security if you want it. Pay for medicare if you want it. Pay for schooling if you have a child in school or if you yourself want it. Pay for roads my gasoline taxes and tolls if you use them. Other sales taxes may also be appropriate to run certain governmental functions to ensure the safety of the American people and protect against corporate corruption and fraud.

also, a low, flat tax, for everyone can also be used. everyone pays the same percentage. a federal sales tax can be used that everyone pays based on consumption.

we dont want to get rid of all taxes, we just want FAIR TAXATION!!!


I was talking about how this rethoric lacks even adjectives like "high" to flesh its skeletal argumentation.

You want everything to be optional. That was kind of my dream too...when I was 7 years old. smile

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Reply #10 posted 07/25/03 7:42pm

chemmie

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Aerogram said:

You want everything to be optional. That was kind of my dream too...when I was 7 years old. smile



of course! i am going to see a small fraction of my social security money. it is the worst investment in America for people who make decent money. Same with medicade. i wont need it, why should i have the money stolen from me and put into it?

"I'm here to chew bubblegum and kick ass, and I'm all out of bubblegum"
"Giving leaders enough power to create "social justice" is giving them enough power to destroy all justice, all freedom, and all human dignity." - Thomas Sowell
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Reply #11 posted 07/25/03 8:01pm

KingBAD

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chemmie said:

Aerogram said:

You want everything to be optional. That was kind of my dream too...when I was 7 years old. smile



of course! i am going to see a small fraction of my social security money. it is the worst investment in America for people who make decent money. Same with medicade. i wont need it, why should i have the money stolen from me and put into it?

because your grandparents may be in need of it now, or is it
"if they didn't save it, fuck'em"???

KALI my child will wreak havoc on all you love at my command... i am KING BAD!!!
evilking
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Reply #12 posted 07/25/03 8:10pm

chemmie

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KingBAD said:

because your grandparents may be in need of it now, or is it
"if they didn't save it, fuck'em"???


no, in an optional system, somebody could either have money taken out of their paychecks to contribute to a federal social security administration or take their money out and invest it themselves (a much better investment). if somebody chooses to do neither, they are a moron and yes, they deserve it... fuckem.

you can have the government take care of you or you can take care of yourself. which one do you choose? i tend to rely on myself a little more. thats why you start investing personally!

people need to realize that dependence on government isnt a good thing and should only be used out of necessity, not because of irresponsibility.

"I'm here to chew bubblegum and kick ass, and I'm all out of bubblegum"
"Giving leaders enough power to create "social justice" is giving them enough power to destroy all justice, all freedom, and all human dignity." - Thomas Sowell
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Reply #13 posted 07/26/03 1:43am

SpcMs

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chemmie said:

no, in an optional system, somebody could either have money taken out of their paychecks to contribute to a federal social security administration or take their money out and invest it themselves (a much better investment). if somebody chooses to do neither, they are a moron and yes, they deserve it... fuckem.

you can have the government take care of you or you can take care of yourself. which one do you choose? i tend to rely on myself a little more. thats why you start investing personally!

people need to realize that dependence on government isnt a good thing and should only be used out of necessity, not because of irresponsibility.


Well, u said it ourself, what percentage of the population do you think would b total morons and not invest/save/whatever? Quite a large one i'm afraid (if only because they can't afford it). Apparantly you cannot grasp what a burden these people would b on society.

Also, u say u could invest your money much better than the governement. Unless u assume you are genius and the rest of the world are morons, this simply cannot b true. That's y people join investment groups.

And another thing, the system was never designed so that you would get as much out of it as u put in it. On the average, yes. But if u never get ill, well, u won't see much of that health care money back. That too, is a very basic idea of insurance.

"It's better 2 B hated 4 what U R than 2 B loved 4 what U R not."

My IQ is 139, what's yours?
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Reply #14 posted 07/26/03 3:26am

Aerogram

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chemmie said:

Aerogram said:

You want everything to be optional. That was kind of my dream too...when I was 7 years old. smile



of course! i am going to see a small fraction of my social security money. it is the worst investment in America for people who make decent money. Same with medicade. i wont need it, why should i have the money stolen from me and put into it?


Because you have a conscience?

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Reply #15 posted 07/26/03 6:45am

chemmie

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SpcMs said:

Well, u said it ourself, what percentage of the population do you think would b total morons and not invest/save/whatever? Quite a large one i'm afraid (if only because they can't afford it). Apparantly you cannot grasp what a burden these people would b on society.

Also, u say u could invest your money much better than the governement. Unless u assume you are genius and the rest of the world are morons, this simply cannot b true. That's y people join investment groups.

I said I could invest my money better than Social Security. A monkey can invest it's money better than Social Security. What you fail to realize is that people who make decent money will get a NEGATIVE INVESTMENT out of Social Security! If I could ivent myself in any way, it would most certainly be a positive investment. I could make more putting it in bonds than Social Security! Social Security is the biggest joke ever played on the citizens of the US and only benefits those who do not put enough into it.

And another thing, the system was never designed so that you would get as much out of it as u put in it. On the average, yes. But if u never get ill, well, u won't see much of that health care money back. That too, is a very basic idea of insurance.

No. I will most likely see none of my Medicare money back. Because I will have my own health insurance when I retire. Either provided by my work's retirement plan or by myself. I do not need a horribly inefficient, government sponsored plan to keep me healthy. Once again, anyone with any knowledge at all can do better for themselves than Medicade. Medicade is the second biggest joke ever played on the citizens of the US.

"I'm here to chew bubblegum and kick ass, and I'm all out of bubblegum"
"Giving leaders enough power to create "social justice" is giving them enough power to destroy all justice, all freedom, and all human dignity." - Thomas Sowell
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Reply #16 posted 07/26/03 6:51am

chemmie

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Aerogram said:

Because you have a conscience?



It has nothing to do with not having a conscience. It has everything to do with me wanting to provide for myself first! I need to make sure my wellbeing is taken care of. And with Social Security and Medicade, my well being will not be taken care of. So I need alternative methods to ensure my well being. Those methods will cost me money. Money that I could be saving if I wasnt putting in to negative investments and health care I will see very little of.

I will put a ton into a system that I will not be able to use. That is theft and slavery.

Somebody else will put very little into a system they will highly use. That is a handout and a welfare state.

The highly inefficient system must go! What is wrong with me wanting an "opt out"? what really is so wrong with me wanting to provide for myself? i dont want the government to provide for me, i want to provide for myself! you might be weak and irresponsible, you would want the government to provide for you in that case. but I dont because I am responsible. let me out!

"I'm here to chew bubblegum and kick ass, and I'm all out of bubblegum"
"Giving leaders enough power to create "social justice" is giving them enough power to destroy all justice, all freedom, and all human dignity." - Thomas Sowell
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Reply #17 posted 07/26/03 7:37am

teller

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Oh dear...look at all these off-topic posts...oh well.

Saviorfaire--you raise a couple of EXCELLENT criticisms of my illustration, and I have to give you a gold star:

savoirfaire said:

However, point E has not been determined, and the curve outlined is just an example. You really can't say you would like something closer to point D, because Point D's value is not determined. Because we can't assume Point E is 50%, for all we know, point E Could be 5% or 95%. And assuming that, point E could actually be any percent, besides the absolute whole or zero of the sum total.


Correct! Point E is not necessarily 50%. Note that the graph doesn't have any numbers on it besides 0 and 100; this is deliberate. The illustration is an abstraction, it illustrates the principle, which you have correctly grasped.

Ideally, the illustration would be jiggly, like Jello I suppose, because not only do we not know exactly where point E is, point E also moves around depending on what's happening in the nation/world. If the country were invaded, to use an extreme example, point E would rise as people would be more tolerant of whatever taxes are required to fight off the enemy.

However, it doesn't take much to realize that that point E isn't 99% or 90% or even 80%. The curve may be an abstraction, but it's abstracted from reality: Human beings won't tolerate 90% or even 80% tax rates--there just isn't any profit left to make production worth the trouble. Nations have collapsed under the weight of 70% rates. So we know point E is somewhere closer to the middle than that. I suspect it's actually at 15% myself, but that would be hotly debated and that's not my goal here. The meaning of the curve itself is what we're after.

BUT, this is where I see the Laffer Curve falling apart. The curve seems to represent an equal distribution that can be predicted as having any two points on the graph along the horizontal axis equidistant from point E. Because taxation is based in percentage, we would either have to assume that Point E equaled 50%, which would balance everything out, but I'm sure you would not agree to, or we would get negative percentages still gaining the government tax revenue.


No, they are equidistant only along the horizontal axis because they yield the same difference in revenue, from point E. But there's nothing that says they will have the same difference in percentage rate, as the example below illustrates:


I think Laffer's curve can be broken down as being a compromise between two extremes, but that compromise is not determined. But, a socialist's tax numbers vs. a libertarian's tax numbers are both compromises. This does not suggest that less tax is always better than more tax, it only suggests that less tax than the Hypothetical point E (which is unknown) is better than tax above the hypothetical point E.

Absolutely correct! You've earned a gold star. nod

.
[This message was edited Sat Jul 26 7:42:27 PDT 2003 by teller]

Fear is the mind-killer.
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Reply #18 posted 07/26/03 9:05am

teller

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Here's a brilliant summation from Saint Jude:

Point E is the point at which the electorate desires to be taxed. At points B and D, the electorate desires more government goods and services and is willing -- without reducing its productivity -- to pay the higher rates consistent with the revenues at point E. And at points A and C, the electorate desires more private goods and services in the money economy, and wishes to pay the lower rates consistent with the revenues at point E. It is the task of the statesman to determine the location of point E, and follow its variations as closely as possible.

Fear is the mind-killer.
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Reply #19 posted 07/26/03 9:33am

Aerogram

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Nice save...

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Reply #20 posted 07/26/03 9:41am

teller

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Aerogram said:

Nice save...

What are you talking about?

Fear is the mind-killer.
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Reply #21 posted 07/26/03 10:03am

Aerogram

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teller said:

Aerogram said:

Nice save...

What are you talking about?


Because you took Savoirfaire's far more detailed explanation of Laffer and turned it to your advantage. I note, though, that the Laffer curve isn't very useful for either the right or the left, when you examine it in all its complexity. At first glance, it would seem to be a good indication that taxes should not go past a certain point, but since we don't know which point and no one disagrees that there's such a thing as job-killing high taxes, it's ultimately a "vérité de la Palice", e.g. something so well known it's hardly worth mentionning.

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Reply #22 posted 07/26/03 10:28am

teller

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Aerogram said:

teller said:

Aerogram said:

Nice save...

What are you talking about?


Because you took Savoirfaire's far more detailed explanation of Laffer and turned it to your advantage. I note, though, that the Laffer curve isn't very useful for either the right or the left, when you examine it in all its complexity. At first glance, it would seem to be a good indication that taxes should not go past a certain point, but since we don't know which point and no one disagrees that there's such a thing as job-killing high taxes, it's ultimately a "vérité de la Palice", e.g. something so well known it's hardly worth mentionning.

Turned it to my advantage? Um...you lost me. Saviorfaire showed real understanding.

But you're right about one thing--the Laffer curve is neither liberal nor conservative. It's just a fact. That liberals might be foolhardy enough to push taxes above point E is worth noting, but likewise conservatives might foolishly cut taxes too far below point E.

If it serves any polemic function for me, it's to put things into perspective when dealing with many pro-tax people who scoff at the notion that lowering taxes can EVER increase revenue, and it exposes static accounting methods that would naturally place point E at 100%.

Fear is the mind-killer.
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Reply #23 posted 07/26/03 10:37am

CHEECHWIZARD

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I is familiar wit da LAFFER dude sumwhut,
he wuz da one responsible fo da "TRICKLEDOWN" fiasco o da Regan admin.
I is go to his house and dey is got a bust o Regan dat is say "THE REAL PESIDENT" dat da got in da Bush admin.
WHUT A JOKE. Accordin to his views on economics we is get Reganomics. I is don't know 'bout you, but i is dread da day dat we is go through dat shit agin.


tricledown edits
[This message was edited Sat Jul 26 10:38:47 PDT 2003 by CHEECHWIZARD]

King BAD is the giver of ME LIFE
worshipworshipworshipworship
Me will Live for he, Me Die for He
this account, i would make it FRY for He.
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Reply #24 posted 07/26/03 10:40am

CHEECHWIZARD

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P.S.
I know i is don't talk rite, but i know you feel me.

King BAD is the giver of ME LIFE
worshipworshipworshipworship
Me will Live for he, Me Die for He
this account, i would make it FRY for He.
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Reply #25 posted 07/26/03 10:40am

teller

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CHEECHWIZARD said:

I is familiar wit da LAFFER dude sumwhut,
he wuz da one responsible fo da "TRICKLEDOWN" fiasco o da Regan admin.
I is go to his house and dey is got a bust o Regan dat is say "THE REAL PESIDENT" dat da got in da Bush admin.
WHUT A JOKE. Accordin to his views on economics we is get Reganomics. I is don't know 'bout you, but i is dread da day dat we is go through dat shit agin.

If you lived through the economic disaster of the 70's, how could you not like the economic miracle of the 80's?

Fear is the mind-killer.
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Reply #26 posted 07/26/03 11:02am

CHEECHWIZARD

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teller said:

CHEECHWIZARD said:

I is familiar wit da LAFFER dude sumwhut,
he wuz da one responsible fo da "TRICKLEDOWN" fiasco o da Regan admin.
I is go to his house and dey is got a bust o Regan dat is say "THE REAL PESIDENT" dat da got in da Bush admin.
WHUT A JOKE. Accordin to his views on economics we is get Reganomics. I is don't know 'bout you, but i is dread da day dat we is go through dat shit agin.

If you lived through the economic disaster of the 70's, how could you not like the economic miracle of the 80's?

Betta question...
If you is live through da REGANOMICS, HOW you gona liv through dat agin???
When da crimminal (NIXON) was in office, me as a undaprivalidged type was jumpin fo joy.
when the PASTOR (Jimmy) was in dere i had saved enough ta get past it unscathed.
I made it through Reagan by vertue of being the 'TOP' o my class of indiviuals who had our own ECONOMICS
Oh and Regan was in office 'til Clinton got in, no matter how you cut it.
The (whut was it 12) year clean up after that actually made it so i is could have some faith in a system designed against all i stand for.
Now in just a short matter o time, i is managed to not only
loose whut i had gained (legal issues and life choices)
but in havin got my foot in da door on a lucrative payscale,
had it snatch from unda me by a warmonger ass coperate shill
continuin da work o his daddy whom rode the coattail o da Regan admin.
Now how is this betta?

had to put a it edit
[This message was edited Sat Jul 26 11:03:51 PDT 2003 by CHEECHWIZARD]

King BAD is the giver of ME LIFE
worshipworshipworshipworship
Me will Live for he, Me Die for He
this account, i would make it FRY for He.
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Reply #27 posted 07/26/03 11:08am

CHEECHWIZARD

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take yo time, you'll get through it nod

King BAD is the giver of ME LIFE
worshipworshipworshipworship
Me will Live for he, Me Die for He
this account, i would make it FRY for He.
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Reply #28 posted 07/26/03 11:44am

Aerogram

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teller said:

Aerogram said:

teller said:

Aerogram said:

Nice save...

What are you talking about?


Because you took Savoirfaire's far more detailed explanation of Laffer and turned it to your advantage. I note, though, that the Laffer curve isn't very useful for either the right or the left, when you examine it in all its complexity. At first glance, it would seem to be a good indication that taxes should not go past a certain point, but since we don't know which point and no one disagrees that there's such a thing as job-killing high taxes, it's ultimately a "vérité de la Palice", e.g. something so well known it's hardly worth mentionning.

Turned it to my advantage? Um...you lost me. Saviorfaire showed real understanding.

But you're right about one thing--the Laffer curve is neither liberal nor conservative. It's just a fact. That liberals might be foolhardy enough to push taxes above point E is worth noting, but likewise conservatives might foolishly cut taxes too far below point E.

If it serves any polemic function for me, it's to put things into perspective when dealing with many pro-tax people who scoff at the notion that lowering taxes can EVER increase revenue, and it exposes static accounting methods that would naturally place point E at 100%.


The word "pro-tax" is alien... No one is for paying taxes that are not needed. The problem is that we don't agree what is needed and how much is too much. The Laffer Curve does not prove that tax cuts will stimulate the economy to the point we will be better off. The curve is about government revenue, not the well-being of society. One thing we've learned here, in Ontario, is that one way or the other, we will have to pay for what is needed. Don't want the government to build new roads because it would raise taxes a bit? Here comes the tolls. Don't think government should subsidize public transportation? Here comes the traffic jams, the smog, the respiratory illnesses. Don't see the point of public education? Say hello to the even less educated masses (no, everyone won't be able to afford private schools --- certainly not the good ones).

The stimulative effect of tax cuts tends to be viewed in the short term. Few discuss their wider, more long term impact, especially as we move through differenct economic cycles. That's why you can't find a large consensus among economists that they are always worth it. Recent experience would indicate that whatever stimulative effect is soon eroded as people adjust their finances, and having this much extra money no longer seems like an enticement to shop especially in light of the extra costs you've been asked to pick up for what used to be relatively cheap. You may take more money home, but you spend it at the tolls, for your son's hockey program (higher user feesy!), putting your father up in a residence that provides health care because his smog-aggravated respiratory illness means he's no longer independent (if these examples seem dramatic, consider that they come from the personal experiences of my co-workers). Of course, you have a choice to use another, toll-free road by prolonging our commute or moving, you can tell your son there's no hockey this year and you can let your father's life take its inevitable course, but that's not really much of a relaxing "choice" if you have certain standards.

A society that is mismanaged and whose issues go unchecked due to laissez-faire may be cash-rich overall, but it could also mean a concentration of wealth, spreadimg poverty, erosion of the middle class --- that's exactly what happened under Reagan. All Reagan did was intensify wealth concentration. It was all supposed to trickle down, but the middle class still continued to lose ground and it certainly didn't help the poor. We just had a boom that barely registered in the middle class : The top 5 percent racked most of the cash. Meanwhile, the gap between an average worker salary and an average CEO salary went through the roof, conforming yet again a culture of elitism and greed, "me first! fuck the masses" kind of vibe. I think we have every interest in stopping that trend.
[This message was edited Sat Jul 26 11:45:17 PDT 2003 by Aerogram]

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Reply #29 posted 07/26/03 11:50am

CHEECHWIZARD

avatar

Aerogram said:

teller said:

Aerogram said:

teller said:

Aerogram said:

Nice save...

What are you talking about?


Because you took Savoirfaire's far more detailed explanation of Laffer and turned it to your advantage. I note, though, that the Laffer curve isn't very useful for either the right or the left, when you examine it in all its complexity. At first glance, it would seem to be a good indication that taxes should not go past a certain point, but since we don't know which point and no one disagrees that there's such a thing as job-killing high taxes, it's ultimately a "vérité de la Palice", e.g. something so well known it's hardly worth mentionning.

Turned it to my advantage? Um...you lost me. Saviorfaire showed real understanding.

But you're right about one thing--the Laffer curve is neither liberal nor conservative. It's just a fact. That liberals might be foolhardy enough to push taxes above point E is worth noting, but likewise conservatives might foolishly cut taxes too far below point E.

If it serves any polemic function for me, it's to put things into perspective when dealing with many pro-tax people who scoff at the notion that lowering taxes can EVER increase revenue, and it exposes static accounting methods that would naturally place point E at 100%.


The word "pro-tax" is alien... No one is for paying taxes that are not needed. The problem is that we don't agree what is needed and how much is too much. The Laffer Curve does not prove that tax cuts will stimulate the economy to the point we will be better off. The curve is about government revenue, not the well-being of society. One thing we've learned here, in Ontario, is that one way or the other, we will have to pay for what is needed. Don't want the government to build new roads because it would raise taxes a bit? Here comes the tolls. Don't think government should subsidize public transportation? Here comes the traffic jams, the smog, the respiratory illnesses. Don't see the point of public education? Say hello to the even less educated masses (no, everyone won't be able to afford private schools --- certainly not the good ones).

The stimulative effect of tax cuts tends to be viewed in the short term. Few discuss their wider, more long term impact, especially as we move through differenct economic cycles. That's why you can't find a large consensus among economists that they are always worth it. Recent experience would indicate that whatever stimulative effect is soon eroded as people adjust their finances, and having this much extra money no longer seems like an enticement to shop especially in light of the extra costs you've been asked to pick up for what used to be relatively cheap. You may take more money home, but you spend it at the tolls, for your son's hockey program (higher user feesy!), putting your father up in a residence that provides health care because his smog-aggravated respiratory illness means he's no longer independent (if these examples seem dramatic, consider that they come from the personal experiences of my co-workers). Of course, you have a choice to use another, toll-free road by prolonging our commute or moving, you can tell your son there's no hockey this year and you can let your father's life take its inevitable course, but that's not really much of a relaxing "choice" if you have certain standards.

A society that is mismanaged and whose issues go unchecked due to laissez-faire may be cash-rich overall, but it could also mean a concentration of wealth, spreadimg poverty, erosion of the middle class --- that's exactly what happened under Reagan. All Reagan did was intensify wealth concentration. It was all supposed to trickle down, but the middle class still continued to lose ground and it certainly didn't help the poor. We just had a boom that barely registered in the middle class : The top 5 percent racked most of the cash. Meanwhile, the gap between an average worker salary and an average CEO salary went through the roof, conforming yet again a culture of elitism and greed, "me first! fuck the masses" kind of vibe. I think we have every interest in stopping that trend.
[This message was edited Sat Jul 26 11:45:17 PDT 2003 by Aerogram]

Mah woyds exackly!!! lol

bold edit
[This message was edited Sat Jul 26 11:52:46 PDT 2003 by CHEECHWIZARD]

King BAD is the giver of ME LIFE
worshipworshipworshipworship
Me will Live for he, Me Die for He
this account, i would make it FRY for He.
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Forums > Politics & Religion > A reminder about the LAFFER CURVE - and isn't it curious how it makes some people squirm?