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Politics : Formerly About Advanced Micro Devices
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To: tejek who wrote (331229)4/13/2007 12:38:21 PM
From: TimF  Read Replies (3) of 1573683
 
The CBO puts unrealistically low estimates on the elasticity of labor supply.

See
Message 23453936

Even the minimal benefit shown by the CBO would eventually result in higher federal revenue if it was sustained (but it would take decades or generations not just years)

Also even if total revenues are lower (and I agree that they are lower than they would have been without the tax cuts), that doesn't mean there isn't a benefit. Additional growth is good. How much revenue produced is hardly the sole measure of what makes for good tax policy.

What the data do show clearly is that, despite major tax cuts in 2001, 2002, 2003, 2004, and 2006, the economy’s recent performance has been far from stellar.

Correct, it hasn't been stellar. OTOH it has been good. But the real issue is not how good it is, but how much better it is than what it would have been without the tax cuts. If it was awful but would have been even worse without the tax cuts, then the tax cuts were beneficial. If it was stellar but worse than it would have been without the tax cuts than the tax cuts didn't help.

Of course its rather hard to estimate how things would have been had different policies been put in place, but that's what you need to measure if you want to see how well one policy worked compared to the alternatives. Also note that even the CBO study with its unusually low estimate for supply elasticity of labor, shows a benefit to the economy. More realistic estimates for labor supply elasticity show an even bigger increase.
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