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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (530184)	11/18/2009 10:12:07 AM
From: RetiredNow	Read Replies (1) \| Respond to of 1574452

The Last Laffer: Bush's Treasury admits that tax cuts aren't free. In Washington, as in fairy tales, be careful what you wish for. In a February speech, Vice President Cheney said, "It's time to re-examine our assumptions and to consider using more dynamic analysis to measure the true impact of tax cuts on the American economy." Calling for "dynamic analysis" or "dynamic scoring" can be supply-side code language for the view that tax cuts pay for much or all of themselves through stronger economic growth. Cheney proposed creating a new unit within Treasury to conduct this dynamic analysis and confidently predicted that it would find that tax cuts increase government revenues. On the other side are the intellectually rigorous, professional economists who sit across the street from the White House at the Treasury Department, who were tasked with carrying out Cheney's "dynamic analysis" of President Bush's proposal to make the tax cuts permanent. "An important feature of this model is that a permanent reduction in taxes, as compared to baseline, would lead to an unsustainable accumulation of debt," they write. the Treasury economists have another important finding: The sooner we get rid of the tax cuts, the better it will be for the economy. Specifically, they found that national output would be 0.9 percent higher in the long run if we let them expire in 2010 rather than allowing them to continue along, forcing us to face even bigger tax increases in the future to make up for all of the added deficits and debt. slate.com

To: RetiredNow who wrote (530184)	11/19/2009 11:17:02 PM
From: TimF	4 Recommendations Read Replies (2) \| Respond to of 1574452

Most would say we aren't on the far side of the Laffer curve, meaning tax increases (at least if their not particularly perverse, or if their not directed against investment) would likely increase revenue. But many economists would dispute the idea that we are as far down as that study suggests. In any case where we are on the laffer curve misses the point. The objective should not be to maximize current government revenue. Even though a modest tax increase would likely increase revenue (at least if we wait until after we are out of the recession to do it, tax increases during recessions are a very bad idea), it would be a net negative for the economy. If the private sector loses X, and the government gains an extra .8x that's not a net gain.