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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: DuckTapeSunroof who wrote (746968)	8/4/2006 11:37:53 AM
From: TimF	Read Replies (1) \| Respond to of 769670

Well, if you can't at least pin it down to a general area of the curve... then it is useless to you when it comes to making policy prescriptions! Reasonable claims can be made as to what general area of the curve where you are. Of course people will disagree these claims, but that doesn't make them useless. Also even if you don't know where you are the curve still tells you something. Tax cuts will have less negative effect on revenue than simple arithmetic would suggest no matter where you are on the curve, and tax increases will increase revenue less than a simple calculation would seem to indicate. Where you are on the curve determines whether this effect is small (perhaps an X% cut in tax rates decreasing revenue by only .95x%), or large (with a X% tax cut increasing revenue) or somewhere in between. Re: "The Laffer curve is more of a short term effect." No, it's not. Primarily it is. Changes in tax rates, and changes in behavior in response to those tax rates are not instantaneous, so the Laffer curve doesn't describe an instant effect but its relative short term, and most a few years and often less. It isn't a guess of how incentives will change economic growth over years, decades, and centuries. It is looking at how much revenue can be extracted at a particular time. vistech.net investorwords.com And, yes, you CAN know fairly precisely --- because the effects of tax changes can be tracked and measured... No they can't. Not really. You can look at what the tax rate and the revenue received is before the cut and what the tax rate and the revenue received was after the cut, but that doesn't tell you what you really want to know. Ideally you would be able to know what the revenue would have been without the tax cut and what it was with the tax cut so you could compare the two, but you can't measure something that could have happened but didn't. The tax cut isn't the only factor producing changes in revenues. There are billions or trillions of factors, the vast majority may be insignificant but there are a still a large number of factors with some potential significance. Figuring at all the major factors and adjusting for them is at best educated guess work. You can't run controlled experiments on the economy. THIS is WHAT THE US TREASURY DEPARTMENT JUST DID.) No, they made estimations, guesses, and projections. They didn't and can't measure the effect of the tax cut directly, because they can't compare it to what might have happened but did not. Re: "Over a few years, perhaps since Bush's tax cuts took effect. That may well have gained back 10% of the revenue that was lost to lower rates. But growth compounds. Its not a one time effect." Yes, they KNOW THAT. It was factored into the Treasury Department analysis. No it wasn't. The analysis looked at what happened. It didn't project growth out in to the future forever. If it had tried to do that its projections would become increasingly unreliable. It simply isn't possible to calculate future growth or most other future changes with precision. Correct. From this particular 'odd' mix of tax changes they determined that about 10% of the revenue that was lost to the government was 'regained' - at least in the short-to-mid-term - by extra growth. Still, that left 90% of the forgone revenue that was NOT regained through faster growth... and, since government spending was NOT REDUCED by that amount (but, sadly, spending actually increased dramatically), this 'lost revenue' was added directly to the national debt --- where it continues COMPOUNDING and REDUCING the ECONOMY'S GROWTH RATE. The 10% is recovered after a relatively short time. Its already been recovered. The economic growth continues and produces more than 10% as the economy gets bigger and bigger. The 90% reduction in revenue is not a reduction in the size of the economy. Extra spending may have a larger effect than the tax cuts and may reduce economic growth more than the tax cuts increased them, but the issue is the tax cuts themselves. The extra spending was an additional decision besides the tax cuts, it isn't part of the tax cuts or a requirement in order to have tax cuts. Its quite possible that the net total effect of Bush's budget changes is to decrease long term economic growth, but that doesn't mean the net effect of each part of the overall package decreased growth. The tax cuts has a positive effect on growth, even without offsetting budget cuts. However not only was the budget not cut to offset the tax cut, the budget was greatly increased. That increase is a separate issue from the tax cuts.