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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: Win Smith who wrote (103366)	2/6/2009 2:03:04 PM
From: TimF	Read Replies (1) \| Respond to of 542020

In a perfect world, states would build up a reserve in flush times. Some of them have "rainy day funds" or other names they give reserves. But they are probably mostly too small to avoid cut backs in bad times. I'd like to see the cut back in bad times reduced, while the increases in good times are also reduced. Many states go crazy with spending in good, or even normal times. Artie Laffer's napkin lives! "Artie Laffer's napkin" really connects to federal taxes more than states. Its the simple and obvious point that extremely high tax rates reduce govenment funding, as do extremely low rates. That at 0% taxes you have no government income, at 100% taxes you won't have much of an economy to give you any government income, and that in between revenue will increase as taxes increase to a point, then decline (or perhaps stay pretty steady for a bit and then decline). The Laffer curve ideas doesn't specify where that point is. Supply side economics often gets conflated with the Laffer curve. Its true they are related and connected, but they are different things. Supply side isn't primarily focused on maximizing government revenue, its point is that lower taxes tend to (all else being equal) lead to more economic growth. Of course in political debates things like "all else being equal", or the fact that the Laffer curve doesn't specify a specific inflection point can get lost, and it may come out like "if you cut taxes the economy will grow so fast that you will always have more revenue", but that's politicians or commenter making statements that aren't supported by their own economic theories. Meanwhile some on other side seem to think that at least up to a very high point, the more taxes the better, and that government spending is generally a free lunch, ideas that are not generally supported by the types of economic theories they might invoke (like Keynesian/neo-Keynesian theory).