Presidents, the Tax Burden, and Economic Growth
by Mike Kimel
Presidents, the Tax Burden, and Economic Growth
This post also appears at the Presimetrics Blog. It contains some information that has appeared in a few different Angry Bear posts, but I think I’m starting to manage to put it into a more coherent narrative. And as I’m able to do that, I’m able to move slowly to the next part of the story.
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A couple of weeks ago I had a post on the Presimetrics blog, also on the Angry Bear blog looking at economic growth rates and political parties. The post shows that from 1929 (that’s as far back as GDP goes) to 2009, growth in real GDP per capita was faster when the president was a Democrat than when the President was a Republican. Furthermore, growth was faster for Democratic Presidents who faced a Democrat-majority Congress during their entire term than for those who did not face a Democrat-majority Congress for at least part of their administration. Similarly, Republican Presidents facing Democratic majority in Congress during their time in office tended to better than Republican Presidents facing Republican majorities for most or all of their term. It isn’t a message you’ll hear very often, but it is the only one that is compatible with the data, as you can easily check yourself.
In this post, I want to look at one of the major distinctions between Democrats and Republicans, and that is tax policy. Let’s start by looking at the Federal tax burden (total Federal government current receipts / GDP) by President. The data comes from the Bureau of Economic Analysis’ National Income and Product Accounts (NIPA) tables. Federal government current receipts were pulled from line 1 of NIPA Table 3.2, and GDP comes from NIPA Table 1.1.5, line 1. (Note – this is slightly different than the way we do it in
The graph below ranks the Presidents by the annualized change in the tax burden. The change is measured from the year before a President took office (the “baseline” level) to his last year in office.
Figure 1.
(As is my practice in these posts I tend not to include the years through after 1938 for FDR because otherwise someone is going to claim that whatever happened while FDR was in office was due entirely to World War 2.)
The graph shows that there is some correlation between the parties and changes in the tax burden. Every single Republican president for whom there is data reduced the tax burden. Conversely, every Democrat except Truman has raised the tax burden. Obama, at least during his first year, is on track to follow Truman and lower the tax burden.
The next graph shows growth rates in real GDP per capita (obtained from line 10 of NIPA Table 7.1)
Figure 2.
The graph shows very clearly that Presidents who hiked the tax burden produced faster economic growth – by far – than the Presidents who cut the tax burden.
And should there be any tea-partiers reading this, yes, in his first year, Obama cut the tax burden. A lot. The so-called stimulus package involved a lot of tax cuts. But as I’ve already noted, to get out of a recession, government spending has historically been much more useful as a stimulus than tax cuts.
Here’s another way to look at things:
Figure 3.
The graph below repeats Figure 3., but it includes a few labels if you want to know which point represents which President.
Figure 4.
In any case, it’s pretty clear that if lower taxes provide any benefits to economic growth, those benefits are extremely well disguised. In fact, it appears that lower taxes are a prescription for slower, not faster economic growth. (Try reconciling the data with Republican, libertarian, or Austrian economic theory.)
Now… I do not believe that higher taxes, in and of themselves, are a cause of faster economic growth. In the book we suggest a few reasons why higher tax burdens might correlate with faster economic growth. But since the book went to press, I’ve had a bit of time to think about ways to test some of these ideas, and I’ve come up with a few new thoughts as well. I hope to try out a few of these ideas in blogs in future posts.
Dear Mike
2 typos in “I tend not to include the years through 1938 for FDR,” “through” shold be “after”
and
in “than the Presidents who hiked the tax burden.” should be “than the Presidents who lowered the tax burden.”
I’m interested in your ideas for determining causation and will watch this space (OK so I always do but with more eagerness than usual).
To link Mike’s analysis and conclusion that higher taxes lead to economic growth you would have to show that all the items we purchase were inferior giffen goods. But this would be saying that everything is below average. I don’t see how mike could be right. In addition Mike needs to show that lower after tax cash flows from business has no effect on profits, business investment, and overall supply.
Also, I don’t see any statistical analysis controling for other factors going on at the time. We have had two major changes in federal tax regimes over the last 80 years. First, Hoover and FDR raised taxes at the start and during the great depression. With some ups and downs this high tax regime lasted until the early 1980s when Reagan and the democratic congress cut them. The current regime has lasted through the two Bushes, Clinton, and the Obama presidency. The previous regime included the presidential terms of Hoover, FDR, Truman, Eisenhower, Kennedy, Johnson, Nixon, Ford, and Carter. So the first (high tax) regime had 5 democrats and 4 republicans, and the second (low tax) regime had 3 Republicans and 2 democrats. Given that both democrats and repubicans span both regimes I don’t see the case for associating one party historically with high or low taxes. Today the tax cutters are in the tea party faction of the the republican pary. On the democrat side the voice of the tax raisers don’t get much national media attention.
Whitewhale,
Not Mike’s conclusion. You just made that up.
Rdan,
Mike said this:
In fact, it appears that lower taxes are a prescription for slower, not faster economic growth.
So if like Mike says lower taxes are a prescription for slower growth it follows that higher taxes are a prescription for higher growth. The line in italics is a conclusion. You were saying something about making things up?
Whoa, Mike shows us just how bad “O” is. Worst than Hoover?????
Along with WhiteWhale’s story we have another. For most of the period the goal has been to balance the budget, and trying to keep us from or minimize structural deficits. To do that we adjust spending and taxes. Good times both go up, bad times both (uh, or one or the other might go down.) At any rate the goal has been to balance on that razor’s edge using only a view from the rear view mirror.
Finally, for the normal ignranti who comment here, consider the policies of the Bush tax cuts that were driven by an excess in revenues as he took over and then a recession. How many wanted the US Govt to continue taking more than they actually needed for the annual budget? Or, how many here wanted the Fed Govt to continue cutting spending during the recession? Which policy do you think works best?
Could it be a tax cut to allow for the excess revenues to be better spent by the original owners and then added spending (deficits) to alleviate the recession? Of course your Lib/Dem policies would have been different. How????
Below, you can see the deficit path that Bush was on. A bubble burst and it was no longer possible to balance the budget.
Whoa, Mike shows us just how bad “O” is. Worst than Hoover?????
Along with WhiteWhale’s story we have another. For most of the period the goal has been to balance the budget, and trying to keep us from or minimize structural deficits. To do that we adjust spending and taxes. Good times both go up, bad times both (uh, or one or the other might go down.) At any rate the goal has been to balance on that razor’s edge using only a view from the rear view mirror.
Finally, for the normal Libs/Dems who comment here, consider the policies of the Bush tax cuts that were driven by an excess in revenues as he took over and then a recession. How many wanted the US Govt to continue taking more than they actually needed for the annual budget? Or, how many here wanted the Fed Govt to continue cutting spending during the recession? Which policy do you think works best?
Could it be a tax cut to allow for the excess revenues to be better spent by the original owners and then added spending (deficits) to alleviate the recession? Of course your Lib/Dem policies would have been different. How????
Below, you can see the deficit path that Bush was on. A bubble burst and it was no longer possible to balance the budget.
CoRev,
My friend. “Could it be a tax cut to allow for the excess revenues to be better spent by the original owners and then added spending (deficits) to alleviate the recession?
Likely, No.
What happened during the Bush tax cuts is not that those who were supposed to be taxed used the money for something better.
Rather, those who would have been taxed lent the money to Bush’s deficit spending. There is no evidence of the private sector investing other than in AAA US G t bills, and the housing bubble. Not very good investments, the money for mac mansions should have gone to more productive uses, the real estate agency and house builders are unfortunately too large a portion of the US economy, vastly subsidized by the US G in tax and monetary policies.
Like it or not the US G and it deficit are the investment of best choice.
I suspect this is what Greenspan worried about with the declining deficit, the investor class would have had so much money laying about and so few solid investments that things would have gotten bubbly without having the Federal Reserve print tons of money as they did anyway to keep the 2003 recession from impacting the 2004 election cycle.
The US has been in a super liquid state since Milton Friedman sold everyone in the Reagan WH on monetarism.
The deficits make room to park some of the excess liquidity.
Same said about tariffs not paid to fill sovereign wealth funds with greenbacks.
If there is no better use for the cash, and the USG is spending it anyway it should have be taxed.
I have been around since the 50’s, I am almost as long in the tooth as CoRev.
Seems to me that FDR (1937 tax hikes were a mistake and kept the depression going a few more years) enjoyed a reason to raise taxes called WW II, where the USG controlled nearly 70% of GDP in war mobilization and industrial production controls. There was no better use for all the cash made in wages to build the military stuff (I was a military logistician) to defeat the Axis.
I don’t recall Reagans tax policy but I do recall the monetarists growing the deficits in a wild race to see whether the US or USSR would be bankrupted by their respective militarists. The USSR went first. US deficits grew!
Then GHW Bush did raise taxes, got him booted from the WH. The economy stabilized and began to grow, Clinton enjoyed the ride.
The better distinction is from Reagan through today where the idea that deficits don’t matter obviated any role of tax policy since the Fed played the game so well, fighting inflation just enough while ignoring the decline of the US productive sectors.
However, militarism is still racing to bankrupt the US.
ILSM, sorry, but I don’t understasnd your point(s). Try reframing/reorganizing what you are saying. For example, the meaning of this statement is just not clear to me.
“ What happened during the Bush tax cuts is not that those who were supposed to be taxed used the money for something better.” If they were taxed they no longer had the money to spend, or perhaps your thought is incomplete.
Anyway, after that start I was totally confused at what your point was.
アスタリフトコラーゲンドリンク
Obama lowered the tax burden or a recesssion that greatly lowered receipts? FDR certainly increased the tax burden, but wasn’t he increasing from very low levels of tax burden? Further, except for the two ends, as I have argued before, we have been in a pretty stable range where taxes have not been tinkered with much overall despite the cries otherwise. I will also add that differences in tax receipts in teh middle have been the result of excess revenues from unstable sources, like tech bubbles, or housing bubbles.
Well in teh next two years we will see how well the thoery holds, becuase there are a lot of tax increases that will be implemented.
Consider……………..
Where did the cash go that the few large beneficiaries of the Bush tax cuts kept? The USG increased its part of aggregate demand and there was limited inflation, outside the housing bubble.
If most of it was lent back to the USG then that is why the Laffer curve is for cocktail knapkins.
Think that one through.
Otherwise, you should think critically about the faults of monetarism; the circular debt, monetary expansion cycles.
Then consider why every one is afraid of deflation.
Don’t sweat the tails (of the population/income distribution).
Yeah, the decline in the top bracket from 90% to 35% is nothing to sweat……
No big deal.
This back and forth about whether the economy does better under one party or another is largely a waste of time.
Even if there were some correlations, there surely is NO CAUSATION. The Presidents serve lousy 4-year terms (two of ’em, max) at a measly $400k per year. http://en.wikipedia.org/wiki/President_of_the_united_states#Compensation That in comparison to CEO’s in the S&P 500 whose careers span decades and whose base compensations are in the millions of $’s per yer–around 300 (THREE HUNDRED) times the median line worker. http://sociology.usc.edu/whorulesamerica/power/wealth.html
Tables 6 & 7
Get real.
MSB=MSC (marginal social benefit = marginal social cost) The best economy reaches this in all markets… The only way to reach this is with the help of government, because government provides public goods according to MSB, whereas private sector does not.
There are a lot of positive expternalties for the growth of the economy that result from government providing public goods and services… It shouldn´t be surprising that the economy can grow with government spending….
Edward Lambert,
If you look up the definition of public goods the government has and is expanding in many areas that don’t fit the definition. Here are some items that don’t fit the definition of a public good: Healthcare, education, social security, medicare, and housing. On the other hand roads, bridges, public parks, internal security and national defense are public goods.
The government could help more with the cleanup in the Gulf of Mexico. So far they mostly have left it to BP. I don’t see the Active army, the national guard, the U.S. Navy, Airforce, and Marines moving major assets into the region to aid in the clean up. Note none of this involves a permanent increase in the size of the federal government.
RW,
I have a few ideas, but I don’t have the entire story battened down. Part of that is not having the data to test one of the ideas. Well, we’ll see what I can find.
CoRev,
I’ve had a number of posts showing Obama’s first year so far. Why the surprise this time?
As to your bubble bursting theory… its funny, apparently a bubble burst in 1981 too.
Mcwop,
Two problems with your theory. One theoretical, one empirical.
The theoretical problem is that we’re talking about collections as a share of GDP. For a fall in GDP to automatically lead to a fall in the ratio, gov’t revenue has to fall faster than GDP.
And empirically, that doesn’t happen all the time. I’m working off memory here, but I believe there were 19 instances between 1930 and 2009 in which real GDP per capita fell. The tax burden rose in five of those years. So about a quarter of the time, the tax burden rose… despite the fact that cutting taxes is viewed as a prescription for fixing recessions.
Neddie,
What exactly does the CEO salary have to do with Presidents?
As to your first point, take a gander at graph 2. That’s policy, not party. Now if you believe that tax policy has no effect on the economy, you’re welcome to your opinion.
EL,
The current orthodoxy seems to forget that.
Mike,
“Now… I do not believe that higher taxes, in and of themselves, are a cause of faster economic growth”
So in other words all my predictions about what you really believed about this topic were correct, and you owe me an apology. I should have known I was over the target when I was getting so much flack.
Of course, here at AB we only work with Real GDP per capita, and growth rate….Why? Well because it makes Democrats look good, without any analysis required. Nevermind the lagging effects, or the non-loyalty to party ideology.
Y = C + I + E + G
where
Y = GDP
C = Consumer Spending
I = Investment made by industry
E = Excess of Exports over Imports
G = Government Spending
The real analysis of each presidency or the ability to decide economic performance lies within the Real GDP Calculations. Pay no attention that Real GDP per capita is being exposed in many respectable economic cirlces as not having the ability to tell the real story of “buying power or standard of living.”
So why is the growth rate slope trend flattening and not increasing for both Republican and Democrats, even though Mike is selling that Democrats produce faster growth? Because Exports to Imports sucks, and growth of government and government spending is increaseing.
And no a Government job is not the same as a private sector job no matter what your alien masters programed in your brain.
ilsm –
Wow, that is so revisionist. FRD raised taxes AND CUT SPENDING in 1937-38 to balanace the budget, and that is what caused the 2nd dip of the depression. It earned him a chiding letter from Keynes. He didn’t make that mistake a 2nd time.
Reagan’s tax policy had the net effect of inhibiting the growth of Gov’t revenues. Look at Reagan’s average revenue growth rate for his regime: 5.35%. Consider that average inflation over Reagan’s years was 4.56%, and GDP growth averaged 3.4%. Under those circumstances, revenue growth should have been at least 7.96%, not a paltry 5.35%. (My calculations on data from the CBO)
http://jazzbumpa.blogspot.com/2010/02/taxes-and-revenues.html
This is why deficits grew under Reagan. Suggesting that Clinton benefited from Reagan’s policies while St Ronnie and Bush the greater suffered for it is simply nonsense. Clinton raised taxes, balanced the budget, AND had the greatest GDP growth since the 60’s. Yes – greater than St Ronnie’s inflation-bloated numbers.
The better distinction is from Reagan through today where the idea that deficits don’t matter obviated any role of tax policy
Evidently you slept through the Clinton administration. You see – deficits don’t matter only when there is a Repug in the white house.
However, militarism is still racing to bankrupt the US.
Alas, that might be the one thing you got right.
Cheers!JzB
ILSM siad: “Where did the cash go that the few large beneficiaries of the Bush tax cuts kept? ” Did they keppe them?? Convert to greenbacks and place them in jars buried somewhere or under the mattress??? Not likely. All went to consumption. Some immediately, and some delayed by the recipient paying down their debt. Even the latter ends up as spend funds.
Why would anyone invest just in USG Bonds? Even if they did, they are out and back again like many of us have done this decade. What’s the Laffer curve have to do with anything?
The rest of your comment gets into gobbleygook-land. Too disjointed.
Mike, why thre snark? Actually can you think of the bubble that was burst in 1981-2? Does it start with runaway inter…?
As to the surprise, IIRC we have not seen the chart comnparing O to Hoover.
Mike –
Calculated Risk has graphs today of employment growth vs GDP and GDi growth. Strong correlations, of course. GDP growth, taxation, employment, deficit reduction and poverty reduction are all strongly related. This really shouldn’t shock anyone.
http://www.calculatedriskblog.com/2010/06/employment-and-real-gdp-real-gdi.html
It’s amazing to me how many commenter’s here either whine about a lack of large number statistics, as if that invalidates all your efforts and conclusions – you have to work with the data you have, not the data you want (unless you make shit up, but that’s a right wing trick) and then claim – either directly or indirectly – that policy doesn’t matter.
Yet, all right wingers claim that their policies do matter, and are demonstrably better – in contradistinction to all the available economic evidence.
This, more than anything (even the obvious delusion of Cheney) has convinced me that right wing regressives, Austrians, and Glibertarians cannot abide reality. For them, when reality comes up against ideology, ideology wins, every time.
This faith in dogmatism over empirical observation is the intellectual equivalent of magical thinking.
Cheers!
JzB
Tax burden (Govt recipts/GDP) is cyclical and tends to fall durring recessions, weak economy =falling tax receipts. Thus I think you have the line of cuasation in this correlation backwards. I would also question the use of the year before (say 2008 in the case of Obama or 2000 in the case of W) as your baseline. The U.S economy is lke an oil tanker not a speedboat and things do not change immediately just because someone puts their hand on a bible. Use of 2009 for Obama and 2001 for W would make more sense, especaially when dealing with anything related to fiscal policy. After all the govt fiscal year runs through 9/30 so for the frist 3Q of the first year, the president is dealing with a budget passed under the previous prez. I know that means you really have no datapoint yet for Obama, but I think it makes more logical sense. If that adjustemtn is made, how does the data look?
That is absurd. If the City of Dayton has a municipal garbage collection agnecy, why is the job of a municipal garbage man any different than if the city outsources it to Waste Management?
Jimi –
Mike looked at lagging effects in 2007. All of his conclusions still hold. Check it out.
Well because it makes Democrats look good, without any analysis required.
After all the analysis done here over the years? Mike has sliced and diced this every way his critics could think of, and the conclusions are always the same. Please don’t embarrass yourself like this. You get a lot of flack because you spew a lot of nonsense.
Take a look at your equation. Gov’t spending raises, not lowers GDP. Do the math.
Then think a bit about standard of living. That has to do with wealth distribution, even more than GDP growth. If you’ve been paying any attention, you’ll know that it is more skewed to the rich now, than at any time since 1928. This is due to reduced taxation and the systematic dismantling of New Deal policies.
The growth slope is flatting, but, except for B. Hoover Obama – who lowered taxes even more – it’s always higher with a Dem Pres. That has also been shown here many times. Sub-optimal tax policy on the wrong side of the Laffer curve has a lot to do with it. Obama is acting like a Repug, and we’re basically screwed.
Cheers!
JzB
Jimi,
I believe I’e always said that raising tax burdens is not in and of itself a cause of higher growth. If you spot an example where I stated otherwise, please feel free to point it out.
jazzbumpa,
Thanks. I generally check CR every day. I gotta take a look.
Dirk,
I had a post in the past looking at causality. I just can’t find it right now. But if memory serves, I looked at four year increments, and broke them into two year pieces.
In one pass, I looked at tax burdens in the first two years and growth in later years. In the other, I looked at growth in the first two years and taxes in the second. As I recall, the effect of tax policy on growth was stronger than the other way around.
The cost of Health Care, Pensions, and the difference in tax revenue. A job created by government is not creating a product or service. Of course, you can argue how much a government job is creating wealth, but it is minimal compared to what happends in the private sector.
In your example, who monitors the government worker to work as hard and as efficient as a corporate bean counter does?
Jazz,
You haven’t the slightest clue what your talking about.
-Mike has sliced and diced this every way his critics could think of, and the conclusions are always the same. Please don’t embarrass yourself like this.
Mike has not (and has admitted) that the analysis is not indepth enough, but to his credit, he is trying to nail it down.
-Gov’t spending raises, not lowers GDP. Do the math.
O.K. now that I’m done laughing, that’s kinda of what the point is genius. If the spending is not of value to the health of future growth, it is then going to be a negative influence that shows up in someones elses Presidency. In the eighties when Reagan was spending up a storm in the fight against the Commies, the Military spending was going to technology development in the private sector, and the country reaped huge rewards because of it. There is a major difference wealth redistribution, and strength in the economy, and unless we have a very detailed and structure analysis you will not be able to tell just from Real GDP per Capita data. There is buisness taking place outside this country as well.
Jazz,
The stimulus didn’t work, and never has
Obama tax cuts were a joke, and of course it isn’t enough, because everybody knows that there is a huge tax increase coming.
Democrats own it, and have for 18 months ( and have controlled congress for 4 years), yet it gets worse everydiay, and they tried every trick in the book to hide the fact that they are only growing government, which is making it worse. They have the power to use all the ideas that they claim are the keys to recovery, including the census trick, but yet it gets worse everyday, and your still blaming everybody else…
Delusional!
Well since the amount of money we have spent on war and the defense infrastruture including the personel is a small fraction of the entitlement spending I guess that makes you correct…..in Bazarro World.
The areas you mention could be considered public goods depending on your point of view… if you feel that all society should have access to these things, then it can be considered a public good…
Healthcare, for example, is seen as a public right in other countries, but in the US it is seen as a commodity in the market…
Education is a public need, in that you want a basic education for all society… this aids in jobs, understanding laws, business creation in marginalized communties…
Housing is seen as a need for everyone in society, but not everyone can get into stable housing… that is why you see public housing…
One thing to keep in mind… industrialization has required worker mobility… this mobiity of workers has led to disintergration of family and community support systems…
You see now that workers are not mobile because their houses are in foreclosure or can´t be sold… This lack of mobility is hindering the economic system right now…
So a consequence of free market industrialization is a disintergration of social support systems… Thus the government´s role to provide support is important now, because communities have lost the ability to do it… So now more goods and services that 150 years ago were provided among communities now need the govt to provide them… This is a consequence of industrialization and is happening world wide…
Healthcare and education are public good. Education being the best investment and healthcare being the second best.
If you listen to the Republican their economic policy should result in far greater economical growth than the Democrats. If fact according to Republican Democrats should cause depressions. But the facts are that Republicans cause depressions and recessions and Demcracts cause growth. But Republicans stick to their ideas no matter what. It’s as if they can’t understand that their ideas are so bad that they will destroy this country. And when we are a third world country they will blame the Democrats. Because nothing is ever their fault and they are never wrong. If you listen to them Bush Jr. was the greatest president of all times. And FDR was the worst. He caused the great depression. F*ing crazy.
Jimi,
You are right that in most instances, there is less monitoring of government workers to ensure that they are working hard than there is of private sector workers.
The converse is that there is less incentive for government entities to impose massive negative externalities on some of its citizens. Transferring your costs onto some other American citizen raises the profits of a private party. (If Exxon had paid for the full costs to others of the Valdez spill, would it even exist today?)
In my life, I’ve been far more negatively impacted by third parties diligently imposing their costs on me than by the fact that folks at the DMV move slowly.
As an example, you may recall my post a few months ago about I had to move abruptly when my wife, my cats, and I were all sickened as a result of our apartment being full of fumes, which were there because a gas drilling operation a few hundred yards away. Several others in the complex also upped and moved – those who could afford to get up and go regardless of the financial cost of moving on no notice. (Some of them would have had to have broken their lease.) The remainder remained… and remained sick during the time the drilling was taking place. And the fact that people moved out in a hurry also damaged the apartment complex owner who all of a sudden, through no fault of his own, found himself with a surprising number of vacancies. My guess is that the benefit to the gas drillers came in the form of lower costs of drilling, but the reduction in its costs was less than the increase in our collective costs.
Which is another way of saying… the economy would have been better off with less diligence on the part of the drilling company’s workers.
Jimi,
In Bazarro world we worry about wasting 5% of GDP on waste and corporate welfare.
In Bazarro world we take care of 128 million citizens with 12% of GDP.
In whatever you call the other world you seem to prefer munificently take care of a couple of million people with 5 or so percent of GDP.
I will stick with Bazarro world.
Alto in the old superman comic I think it was bizarro world.
Jazz,
I used the example of WW II to show the need to keep one of the spending streams under control. Consumer spending was “rationed”.
I was wide awake as the Reagan years opened the Fed’s presses and kept reducing the rate on my ARM year after year.
As to Clinton, yes I was aware that the trend to marginally raise tax rates continued in his years. I was newly single and chasing……
My point was GHW Bush profie in courage raising taxes.
My underlying thesis:
It does not matter to the economy if the government taxes or borrows to raise cash for expenditures, if the cash/money raised comes from the same people.
Corrollary:
The place to cut expenditures is in “discretionary” not “entitlements” because “discretionary” spending competes with private investments.
The people make a killing on discretionary spending are a small fraction of the population.
If the USG controls 15% of GDP through militarism and corporate welfare which tie up technological resources then those are better cut to let the private sector run the tech economy.
Socialism seems okay for the few. Just not the many.
As a critic (insider) of USG spending on technology, along with the late Seymour Melman, I observe that in tech resources the USG pushes up input prices thus harming tech research elsewhere.
For example, the military industrial complex handles about $130B per year for engineering, test and initial production of assets that do not improve national productivity and keep their engineers well paid while be largely unproductive.
If $75B in engineering resources per year were cut loose on engergy………………………….
The war machine is only a public good to the militarists and war profiteers.
DoT infrastructure is a public good if paid for.
NASA is not a public good generator.
DOE is a public good destroyer letting oil off the hook, etc.
Civil society is a public good.
Anti poverty is a public good.
And a job on a defense contract or DoT or NASA, are not the same as private sector work.
The 15% of GDP the USG spreads around for corporate welfare and its sister militarism are no like provate sector work, they are protected industries, socialism for the few.
18 months compared to how many years of Reaganomics……………….
Republican congresses in the 1990’s.
Who owns what?
Third world land of wage slaves and serfs.
That is a republican party trend.
And the christian right, sado-masochists enjoy the ride to slavery.
Actually the move from 90% to 35% is no big deal, becuase at 90% there were massive deductions. Almost nobody paid that rate. In fact the AMT was implemented becuase rich people paid no taxes despite high marginal rates.
Edward Lambert,
The desire on how the government choses to spend our money is a function of one’s point of view, but the definition of a public good is not. Here is a wiki defintion:
In economics, a public good is a good that is non-rivalrous and non-excludable. Non-rivalry means that consumption of the good by one individual does not reduce availability of the good for consumption by others; and non-excludability that no one can be effectively excluded from using the good.
Healthcare, education, social security, medicare, and housing don’t fit this description. They are in the words of the definition both rivalrous and excludable. Providing these services uses them up making them not available to anyone else. If as an adult if I want to enroll in high school geometry or English class I can’t. They exclude me because I already went to high school and I’m the wrong age. Also, I would take up space and teacher resources that would then become not available to regular students.
All these items can be purchased by individuals. Having the government either buy them or subsidize them might be a nice thing to do, it might represent what the public wants to do with some of their money, but this does not make them public goods.
Reagan raised taxes, and cut. He raised teh payroll tax, and got rid of many deductions in 1986. Bush Sr. raised taxes, he did not cut as indicated in your green chart.
OK, if you pick one sentence, very selectively, from a longer text, and then insist on an odd meaning for “appears”, perhaps you can arrive at the conclusion that what Kimels said is that taxes cause growth.
The selectivity in choice of sentence in this case, howver, is egregious, given this:
“Now… I do not believe that higher taxes, in and of themselves, are a cause of faster economic growth.”
How’d you miss that? ‘Cause what we have here is you claiming Kimel said something, when right in front of you, in black and white, is Kimel saying exactly the opposite of what you claim he said.
Now, that’s note the only problem. The Giffen good bit is also a bit of a problem, as it leaves out the government sector. If the government supplies normal (non-inferior) goods and services, and there is a positive return to government investment, then your objection to what you claim to be Kimel’s point falls apart. Your argument, if extended to its logical conclusion, is an argument against any government at all. That point has been made repeatedly, for years. Are you unaware of the argument (which even Art Laffer includes in his little curve) that government is necessary for economic growth, or did you simply wilfully ignore it> Either way, the argument you offered doesn’t hold water.
Peter,
“But the facts are that Republicans cause depressions and recessions and Demcracts cause growth.”
How else are we in the far right going to turn you into a slave? Quit telling everybody the truth. If you want your stupid economic freedom, move to Somolia, and leave us and our agenda alone.
Crazy is in the eye of the beholder, and we don’t find holding the poor down while we get richer and live like kings all that crazy.
A few more Bush Jr.’s as our leaders and the master plan will be complete…..so shut up please!
CoRev,
It gets tiresome, after a while, to see you adopt positions that were long ago overcome by facts. Where you to adopt a new position that was utterly contrary to reality, I could understand it. People make mistakes. But once the error is uncovered, intelligent, honest people shed their wrong notions and move on.
Treasury had a large pile of outstanding debt when Clinton took office, around 60% of GDP, and it dropped only to aroung 56% of GDP at the lowest point. So the entire government taking in more than it spent issue needs to be seen in terms of that debt. The US faced a demographic lump – easy as pie to see – that implied a rise in government obligations relative to revenues. Reducing outstanding debt would have eased that situation.
In aswer to what I assume is a rhetorical question, the majority of US citizens favored budget balance to tax cuts at the beginning of the Bush presidency. That is a matter of record. So besides me, millions of people want exactly what you are implying they did not. The Bush administration mounted a propaganda campaign to change that view.
Your comment reveals an attachment to the tired old arguments of the right, but we knew that. The problem is that those arguments have been around long enough to have been examined and have their flaws exposed. Why you want to trot them out, I can’t understand. Go on, think of some new arguments. I realize that requires work, but intellectual work is what bright people do. I realize that, when you’ve heard cogent arguments against your views and found no answer to them, moving from the repetition of those tired old arguments to fresh thought can be scary – since fresh thought might lead you to understand how mistaken you’ve been till now. Even so, going to your grave reciting debunked, fact-free notions seems pretty pathetic.
Ned,
Stomping your feet and insisting that the answer you like is the true answer is kind of useless. You don’t know what the causative relationships are, even if you do CAPITALIZE in an effort to say you do. You just have a bias.
The way this empirical thingie works is, you find correlations, and then you explore them. You wiggle the analytic technique around to exclude factors that would produce correlation without causation and see what is left. You do these things with an open mind, rather than buried to your hips in pre-conceived notions.
So…sorry dude, but you don’t get to say whether their is causation. You either show it is, show it isn’t, or show some respect for those who put in the work to do so.
Oh, and by the way, since we are talking about correlation and causation and the like, is your point that high pay causes performance? My understanding is that you don’t have correletion, much less causation, for that one. It is very hard to find a link between pay and conventional measures of performance. That strongest link is to size. Oh, and the logic of the argument that pay some how is a clever way to assess quality, when CEO pay is decided by a board (often packed by the CEO) while the president has to rely on a competing branch of government for pay raises, is pretty silly. The maximum tenure for presidents is set in the Constitution, so the fact that presidents don’t stay as long as some execs is a reflection of rules, not quality.
Please, don’t bring stuff like that in here.
Mike,
I had a post in the past looking at causality. I just can’t find it right now.
Maybe your dog ate it.
Hehe!
mcwop,
All this is why I avoid using marginal rates. With a couple of minor and very short term exceptions, they don’t seem to matter. Tax burden if nothing else moves along with growth rather closely, and its not unreasonable to assume that there is some relationship whether direct or indirect.
mcwop,
I’m looking at the percentage of gdp that was collected in taxes. I showed you what I believe the data shows. Now its possible I made a mistake, or its possible I am outright lying. However, I have provided the data sources should you wish to check it so you don’t have to take my word for it.
Now, assuming I am not lying or in error, then the data shows what I say it shows. And if it does show what I say it shows, what is left, should you wish to disagree with what the graph shows, is to explain why looking at the data the way I am doing it is wrong or that I am reaching a conclusion that is unmerited.
So in short… Bush Sr. raised marginal taxes. However, he reduced the share of GDP that was collected by the Federal government, which is to say, he reduced the tax burden.
Effective rates are best, but I cannot find historical data pre-1979 for effective rates.
You are not lying by any stretch, and the data is correct. I just think interpretation is the tough part. For example, if Bush Sr raised marginal taxes why did share of GDP go down? In that particular case it was probably recession. Interestingly, despite Bush Jrs tax cuts, marginal rates are still higher than when his father was president, but lower than Clinton’s.