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Friday, January 02, 2015

The Laughing Curve

Laughing all the way to the bank, that is, with trickle-down monies that somehow were stuck in the spigot and never made it down to the rest of of us schnorrers.

What does one make of an economist who writes an opinion in a prestigious daily newspaper about matters that seem to have been politically distorted?

First piece,

The Laffer Curve turns 40: the legacy of a controversial idea
By Stephen Moore December 26, 2014
Stephen Moore is chief economist at the Heritage Foundation and a co-author with Arthur Laffer of “An Inquiry Into the Nature and Causes of the Wealth of States.”
... Even liberals unwittingly acknowledge the Laffer Curve truth when they support higher tobacco taxes to stop smoking or a new carbon tax to reduce global warming. If higher carbon taxes reduce CO2 emissions, why is it so hard to understand that higher taxes on work or investment lead to less of these?
When I asked Laffer if, 40 years later, there is any point of consensus in economics on the Laffer Curve, he replied: “I think today everyone agrees with the premise that when you tax something you get less of it, and when you tax something less, you get more of it.”
My favorite portion is that which I underlined.
First, higher tobacco taxes were intended to help pay for the social costs of smoking... well, maybe not totally:
... Unequal taxation amounts to subjugation, and in the smoker’s case… callous subjugation. It is clear, the states have abandoned all notions of protecting the rights of its citizens… only the pretext of protection remains. Health is not the issue in the state’s war on tobacco… the states don’t give a damn about health... zero, nada, zilch.
If they did they’d be forking out their tobacco revenue on actual treatments. Further, most states have actually cut their tobacco prevention programs and in many states as much as 75% of tobacco revenue goes into their general fund. The remaining 25% is spent mainly on administrating nothingness and thus serves their empire-building agenda more than ill-affected smokers. Of little substance, these programs are empty shells with a facade psychologically engineered to reflect otherwise.
In other words, outcomes are a little messy, but he is pretending that for the Laffer curve they are precise.
Furthermore, when speaking of CO2 emissions, the writer willfully ignores the fact that a CO2 tax would not lead to less energy all around, but would lead to replacement sources of energy... you know, like capitalist economist like to say, "Creative Destruction!"  Destroy the old way and new sites of investment will arise!

Paul Krugman responded:
The New York Times
Lies, Damned Lies, and Reaganolatry
December 27, 2014 3:23 pm

... He [Moore] declares that under Reagan
the government’s budget numbers show that tax receipts expanded from $517 billion in 1980 to $909 billion in 1988 — close to a 75 percent change (25 percent after inflation).

I have a suspicion that the Post forced him to include the inflation-adjusted number, rather than let him get away with the gee-whiz nominal number, which is, um, inflated by the relatively high rate of inflation that prevailed even in the later Reagan years. In any case, however, Moore offers no context, leaving the impression that this was an extraordinary achievement.

So I looked at real federal receipts over a longer period, shown above using a log scale so that the slope of the line represents the rate of growth. If you take the period Reagan was in the White House, 1981:1 to 1989:1, I get an increase of 14.3 percent; I’m not sure why Moore’s number is bigger, but never mind. What you might want to do, however, is compare that performance with the 8 years preceding and the 8 years following. And here’s what we get:

1973:1-1981:1: 30.3%
1981:1-1989:1: 14.3%
1989:1-1997:1: 31.4%

Laffer roolz! Or maybe not.

Does the WaPo mind being used as a platform for deliberately deceptive innuendo, with some plain old falsehoods thrown in for good measure?

Mr. Moore does work for The Heritage Foundation, which is now run by the Republican ex-Senator Jim DeMint. I find it extremely difficult to believe Mr. DeMint would approve of stretching the truth so far, but he can't be everywhere at once, sticking his finger in the dike of falsehoods that pours out from The Heritage Foundation.


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