Summations Only

Well, there are a few things wrong with the Laffer curve.The first is that people who bang on about the Laffer curve always seem to assume that we are on the right-hand side of the optimum. Even if the curve is correct in theory, the question of which side of it we're on is an empirical one. We cannot necessarily increase revenues by cutting taxes, we can only do so if we are on the right-hand side of the curve. This needs to be demonstrated.The second is that the x-axis of the curve ("tax rate") does not in fact represent a single figure. Suppose for the sake of argument that we are on the right-hand side of the curve. It does not follow from that that (for example) cutting taxes on tobacco will so much stimulate the consumption of tobacco that the government will gain from doing it.It would still remain an empirical question --- even if we were, and knew that we were, on the right-hand side of the graph, this would not prove that "trickle-down economics" would work, and that we could stimulate the economy and increase tax receipts by cutting taxes for the rich, as the Laffer curve cheerleaders seem to think. Even if we are on the right-hand side of the curve, maybe we would do better to increase taxes on the rich --- and then move left on the Laffer curve by giving tax breaks to the poor. This is again an empirical question.All the Laffer curve tells us is that in principle it is possible for some taxes to be too high. It doesn't tell us that they actually are, or that we know which taxes they are if they are.Edited by Dr Adequate, : No reason given.

Well, it's not so clear that tax breaks for them would help the economy.If they are highly taxed, then one way for them to protect their wealth is ... drumroll ... to invest it in their companies, rather than giving it to themselves in paychecks. So it's not clear that giving them tax breaks would increase their entrepreneurial activities rather than their cocaine consumption. Again, this is an empirical question, no-one can solve it a priori.

True, but in that case there is more than one solution to being on the right of the Laffer curve --- for example, instead of reducing taxes one could pass legislation stopping the loopholes by which tax avoidance is achieved. Or one could raise the taxes on these "untaxed or less taxed economic activities". The existence of these possibilities actually shows that even if we were on the right of the Laffer curve, we could shift to the left-hand side (to be more precise, to change the shape of the Laffer curve so that we were on the left-hand side of it) not by cutting taxes but by increasing them. No he doesn't. Then I don't see why you think you're disagreeing with me. You say that taxes "can be sufficiently high to dampen economic activity"; I say that in principle it is possible for taxes to be sufficiently high to dampen economic activity. The only distinction between us is that I have used more words.Edited by Dr Adequate, : No reason given.

Well, we can only go by the evidence we have. We can't construct randomized double-blind experiments. On the basis of the evidence we have, I would say that trickle-down is a failure.Edited by Dr Adequate, : No reason given.

Then I think that short of actual evidence, we must suppose that the answer is "the government".Because "in terms of the greater good", the greater good is a goal that the government actually aims at, unlike rich people.Now, there are some rich people, from Andrew Carnegie through to Bill Gates, who have given their money to the greater good. I do not dispute that.But that aside, which is more likely to contribute to the greater good of the American people: Rush Limbaugh spending his money on French wine and Cuban cigars, or the federal government spending the same money on the upkeep of federal highways, which both employs American citizens and improves American infrastructure.?If you have data, then now is the time to unleash it. If you don't have data, then it seems much more likely that the latter does more for the general good. I don't think that they are very good at it. But I suppose that they are the people who are actually doing it.You're making a comparison of apples and oranges. The government is not very good at social and economic programs. Whereas Paris Hilton is very efficient at snorting Colombian cocaine. Now, clearly our national wealth should be distributed so as to use it most efficiently ...... oh, wait. The government may not be very good at social and economic programs, but at least it is instituting them. We need such programs, whereas our need for cocaine consumption is not so clear.

Well, I was thinking of the evidence that you yourself just supplied. Average GDP/population has risen. And yet most of that has gone into the pockets of the rich. It has scarcely become easier for the poor to buy food and heat; it has not become easier for the average family to buy health insurance or to send their kids to college. Making the rich richer has not made everyone richer, it has left many people just the same --- or worse. So much for "trickle down". We have made the rich richer, but without making the poor richer --- or the middle classes, if it comes to that. What, precisely, has trickled down?Now, as I say, we do not have enough evidence to draw a completely satisfactory conclusion. We can certainly imagine that if taxes on the rich had been just a little higher in order to defray middle-class expenditure on college fees, then civilization would have collapsed and you and I would both have resorted to cannibalism. But the evidence that we have is that the increasing wealth of the rich does not bring about universal bliss through the magic of "trickle down".And there is no reason why it should. Money, after all, is money. If I had another $100/week I can guarantee you that I would spend it. No-one has given me a reason why this money would better stimulate the economy if it was spent by Ms. Hilton.

Well, we could compare a lot of different countries, and see if (for example) socialized healthcare invariably leads to ruin.What we can't do is take a statistically significant number (say, 1000) of Americas, divide these Americas into two randomly selected groups, govern one group one way and the other group another way, and then have someone blinded as to the precondition decide which of them is doing better. We have to make do with what we have.

Well surely the fact that wealth does not actually trickle down refutes the trickle-down hypothesis.For more data, I suppose one could graph disparities of wealth against mean or median GDP and see if the correlation is positive, negative, or non-existent.But really, what we would need is for one of the proponents of the trickle-down "theory" to list some of its predictions. Note that "If you cut rich people's taxes this year we'll be better off next year than we would have been if you didn't" doesn't count, 'cos of the absence of a control group. That would be more in the nature of a dogmatic assertion.

Well, it's widely asserted. But it's probably not true.I don't even think that people who say it think it's true. I've said this before, and I'll say it again, please let me hear, just once, some conservative asserting that the Army should be disbanded and that national defense should be provided by hiring competing companies of private mercenaries in a free market.Well, I'm still waiting. While I wait I have to conclude that their reasons for wanting defense in the hands of government but not (for example) healthcare is that they care about the former but not the latter. When they want something doing, and doing well, they turn as one man to the government. When they don't want something doing well, they will bang on about the virtues of free markets, the supposed inefficiency of government, and the evils of "socialism", but if they really believed the ideology by which they claim to be guided they'd want to privatize the Army. Very little about my posts is random. And your point is? Well, the government also spends money, which, as you say, create jobs. They aren't throwing money down a pit and burying it, it all gets back into the economy somehow. However, in addition to that they are contributing to the social good. They produce things such as federal highways, literate children, an absence of Chinese armies occupying California, etc, etc. The rich sometimes also act for the social good, as when they invest their money in building factories; but sometimes they don't. When a rich man pays for an oil-painting of his favorite poodle, then to be sure the painter gets paid, but it hasn't added value to the infrastructure so much as if the same money had been spent by the government on repairing pot-holes.

In what sense does it work, and why "of course"?

I have no idea why people believe this. I didn't demonize them for not doing so. But they don't, and this is, as you say, because some responsibilities do properly belong to government. There are some things for which we don't, can't, and shouldn't trust to Adam Smith's invisible hand. The solution to inequities, not to say iniquities, in our tax code is to stop trying to redress them?This would be a strange new use of the word "solution" of which I was previously unaware. Like the fact that the government is trying to spend the money for the greater good, whereas the rich (by and large) are not?

Which?

Or, alternatively, with GDP/capita, but at a lower slope.It's that lower slope that's worrying us. I am still not Jar. And here was I thinking that when the Census Bureau measures income, they measure income. Unfortunately they seem to be creating wealth principally for themselves, hence this thread. It's not exactly the rising tide that lifts all boats, is it?

I'm sure people wouldn't report income on which they were evading tax to the Census Bureau, but not so sure that they'd withhold information about income on which they were avoiding tax. Why would they? No it doesn't, it's labelled perfectly accurately. Then we may assume that that's not what's being asked. No-one would start a thread to ask if the rich spend money. And the presumption must be that someone who is trying to do something is more likely to actually do it than someone who is not. Few people, for example, have won an Olympic medal in the high jump by tripping on their shoelaces and falling over a pole.

That would be question 47c, actually.Try again. But that's through their pursuit of profit, not their spending of their discretionary income. These are two different questions. How about you tell me what you believe, and I tell you what I believe?Edited by Dr Adequate, : No reason given.