Lucy & Arthur
A Ploy
It was a last-minute thing about not wanting to get the ball dirty. So she said. Whatever, time after time Charlie Brown fell for it.
With every Republican President since and including Reagan, it was about undoing anything like Social Security, welfare, food stamps, etc. that smacked of Frances Perkins’ New Deal safety net and doing so whilst giving the wealthy a tax cut.
Since and including Reagan, each incoming Republican administration has told the public that tax cuts will, per the Laffer Curve, pay for themselves by spurring economic growth. Something that has never come remotely close to happening. Given that most people: don’t like paying taxes; never learned that taxes are the cost of democracy, of good government; don’t know that tax cuts don’t work; and can’t see that most of the cuts go to the wealthiest; the proposed tax cuts invariably become law.
As night follows the day, each time, almost immediately following the passage of a massive tax cut favoring the rich, came the lamentations about deficits and debt and calls to cut spending on social programs by Republican politicians on the various media. Since today’s market-driven media loves a headline; its editors and news readers/performers go along, pretending that the increasing debt is breaking, headline news, and that it is caused by spending without bothering to explain that it is all a ploy. Once more, the working class and the poor have knowingly or unknowingly agreed to help out the rich. Once more, Republicans kill two birds with one stone. The rich save $ millions while kids and many others go without food, healthcare, housing, ….
Working-class voters got suckered again because they were sold out by their sold out representatives. Likely didn’t protest because they didn’t understand. Because it wasn’t in the market-driven media’s or the sold out politicians interest to explain what was happening; show the arithmetic.
For governments (simply put): Deficits/surpluses are the difference between revenue and expenses. Most government revenue comes from taxes. If revenues exceed expenses during an accounting period, there is a surplus. If expenses exceed revenues during an accounting period, there is a deficit. Formulaically: surplus/deficit = revenues – expenses.
* (d/s = r – e) *
Cumulatively, these surpluses and deficits become the national debt or surplus.
* Debt/Surpluscurrent = [Debt/Surplusprevious + {(Σperiod (speriod + dperiod)}] *
Most of our now $36 trillion-plus national debt is due to tax cuts enacted during Republican Administrations that mostly benefit the wealthy. These tax cuts were invariably followed by Republican politicians saying with straight faces while being interviewed on national TV by complacent, never-questioning news readers/performers that the debt situation is most dire; calls for huge immediate cuts in spending social programs. Whether Reagan, Bush, or Trump, it is the same cruel ploy. The wealthy get wealthier and guess who pays.
We are a nation of 330 million transitioning from the Industrial Age to the Digital/Information Age, from a so-called capitalistic economic model to a who-knows-what model, in a time of Climate Change, in a world of 8.5 billion doing the same. Here and around the world, government is rapidly becoming more expensive. Good government is always worth paying for (we are all dependent upon government). The alternative to good government is a failed nation; in such historically challenging times as these, perhaps the failure of civilization.
In January we will have another Republican Administration with another proposed tax cut, followed by demands to cut safety net programs. We will see more attempts than ever to reduce regulations. We will see these things and worse done in these momentous storms by a pay-to-play, oligarchic, kleptocratic, kakistocracy.
And why is it, over time, that the voters don’t learn? Maybe the voters have some responsibility here. Fool me once, shame on you! Fool me twice, shame on me!
As a scientist, I was always suspicious of the Laffer curve because there were no units on either axis, an omission that would fail any middle school student. That made the graph untestable and thus unfalsifiable.
Joel:
And easier to explain too! The answer would be: “I really meant this.” Somewhere in the past there were probably UOM. A broad assumption is made with the Laffer Curve. I get your point.
@Bill,
“Somewhere in the past there were probably UOM.”
Link, please.
“ broad assumption is made with the Laffer Curve.”
It was magical thinking, full stop.
Well Joel:
Maybe this will help?
Image 1:
Image 2: Laffer with a 70% Tax Rate
Image 3: Laffer with a Change in Prices due to Tax and no Change in price even when a change in Tax Rate
Vertical Axis is Tax Revenue in theoretical $ Dollars and Horizontal Axis is Tax Rate in percentages. I “believe” this may answer your question?
Laffer Curve I went simple on this and gave you a representation of a theoretical Laffer Curve. I believe the 3rd example comes the closest to what you are looking to see in terms of UOM.
@Bill,
Well, the first graph is the one I was referring to–no units.
The second and third are not Laffer’s curves, they’re just illustrations of possible scenarios using the Laffer Curve format.
The problem with the Laffer Curve as originally proposed is that it started with the obvious facts that (a) if you collected zero taxes or confiscated all private money, there would be no tax revenue, then (b) if you collected some tax money and didn’t confiscate 100% of income, there would be some tax revenue, and finally (c) there would be an inflection point between zero and 100% representing an optimal tax rate. What Laffer never did is stipulate exactly where that inflection point would be, as shown in your first graph. It’s impossible to say in that graph what the optimal tax rate is, the graph just cartoons the idea that there is one. What’s the evidence that there is a single optimum under all economic conditions and at every income level?
What the other graphs are are attempts to depict smooth, Laffer-like curves based on models. Of course, the shapes of the curves are purely conjectural.
This is economics by cartoon.
Joel:
The inflection point is where the numeric cross and based upon horizontal and vertical points. Typically, one would need to know the totals of each to determine such. Today, taxes do not match spending. Any determination would have to be met by increases in taxes, increases in funding by other means, or cuts in spending.
The politics today are set to cut spending due to jackass political interests have chosen to produce a deficit so as to purposely cut essential spending and ignoring their action to reduce taxes mostly for the upper income brackets.
Well put Ken. Thanks!
The best demolition of the Laffer Curve was by Martin Gardner in one of his last “Mathematical Games” columns in Scientific American, December 1981; it was reprinted in his collection The Night is Large: collected essays, 1938 – 1995, but unfortunately doesn’t seem to be available for free online. Gardner’s essay coined the term “neo-Laffer curve;” see e.g. https://en.wikipedia.org/wiki/File:Neo-Laffer_curve.svg
Bob:
Thank you.