Droopy's Myths Debunked

[_Droopy]

Proponents of tax cuts often claim that “dynamic scoring” — that is, considering tax cuts’ economic effects when calculating their costs — would substantially lower the estimated cost of tax reductions, or even shrink it to zero. The argument is that tax cuts dramatically boost economic growth, which in turn boosts revenues by enough to offset the revenue loss from the tax cuts.

But when Treasury Department staff simulated the economic effects of extending the President’s tax cuts, they found that, at best, the tax cuts would have modest positive effects on the economy; these economic gains would ra at most 10 percent of the tax cuts’ total cost. Under other assumptions, Treasury found that the tax cuts could slightly decrease long-run economic growth, in which case they would cost modestly more than otherwise expected. (http://www.cbpp.org/7-27-06tax.htm)

Economic modeling already thoroughly discredited by empirical data. Move along...

The claim that tax cuts pay for themselves also is contradicted by the historical record. In 1981, Congress substantially lowered marginal income-tax rates on the well off, while in 1990 and 1993, Congress raised marginal rates on the well off. The economy grew at virtually the same rate in the 1990s as in the 1980s (adjusted for inflation and population growth), but revenues grew about twice as fast in the 1990s, when tax rates were increased, as in the 1980s, when tax rates were cut. Similarly, since the 2001 tax cuts, the economy has grown at about the same pace as during the equivalent period of the 1990s business cycle, but revenues have grown far more slowly. (http://www.cbpp.org/3-8-06tax.htm)

This is simple lying. The 1983 - 1990 boom was the largest peace time economic boom in U.S. history. Both the size of the economy and government revenue nearly doubled. Try to find some sources with some degree of intellectual credibility.

Some argue that, even if most tax cuts do not pay for themselves, capital gains tax cuts do. But, in reality, capital gains tax cuts cost money as well.

Now, we need to stop right here and clarify some first principles, which is really where the rubber meets the road. The idea that tax cuts need to be "paid for" is politicianspeak that contains an implicit assumption that any present state of government spending, regardless of any possible rational or constitutional justification that could be made for it, must be maintained at the current level at all costs.

Tax cuts don't need to be "paid for" for the simply reason that most of what the federal government now occupies itself with is unconstitutional, irrational, immoral, and destructive to the moral, intellectual, and social fabric of the nation.

The fundamental purpose of serious tax cutting is certainly not to increase government revenue, which increases governments size, scope and invasiveness. The primary purpose of cutting taxes is to increase individual freedom and create larger numbers of citizens who are independent of the state.


Taxes, therefore, being "paid for" is simply a cynical and clever way of saying that all government programs must continue to exist irregardless of their constitutional, practical, or moral legitimacy.

Keep this in mind please: government has no money. Ever. Each and every penny of money taken in as tax revenue belongs to those who earned it through honorable, productive work and wealth creation. Each and every penny. Government creates no wealth. All the wealth and funding it has, at any given time, has been confiscated from productive citizens (either that, or it has been created out of thin air, the destructiveness of which is well understood).

Government exists by our good graces and by the consent of the governed, and the present government attitude (represented in the progressive income tax itself), that every penny of earned income belongs, by preemptive right, to the state and to the political class, and that it is they to allow us a portion of the total that rightfully belongs to them, is an attitude of malignant import and intent that, if left to itself, will eventually destroy anything approaching either a free or civil society.

Our Red Kevin Graham, however, having quickly evolved from defending Bush, capitalism, and the war in Iraq only a couple of years ago, has now morphed into an apologist for unlimited government power, a kind of divine right of government ownership of all private wealth, a rehabilitator of revolutionary socialism, Marx, the Soviet Union, and a shill for deeply sinister forces hostile to individual liberty and the rule of law.

But these are, after all, a part of the "bitter fruits of apostasy" transferred and manifested in realms other than the strictly theological.

[_Kishkumen]

CFR regarding the "majority of tax scholars" claim.

Droopy, I hang out with tax scholars on a fairly regular basis. None of them, except for one conservative ideologue nut, did much more than roll their eyes when I asked them about this Laffer business. I'm just telling you.

The empirical facts of the matter are in contradiction to your claim above. Boosts to the economy, depending upon the degree to which rates are reduced, the marginal rates they are reduced from, and their timing, can be dramatic.

In your fantasy land, I am sure that is true.

You and Kevin may retreat further and further from the real world into your tiny little crib-like cubicle of leftist ideological nostrums and pious etatist fantasies of your own moral and intellectual self importance, but those of us still connected to the real world will continue to rely on the disciplines of critical thought and the empirical facts of experience to guide us, as well as, even more importantly, a reverence for the truth, which is everywhere and always the first and most troubling casualty of the cowardly retreat from the challenges of the mortal condition into leftism.

The usual Droopy boilerplate insults. It is a simple fact that cutting taxes does not appreciable raise revenues. You are living in a dreamworld.

The "consensus" argument from authority has developed a very bad reputation Kish, and even if you can demonstrate this claim empirically, the majority opinion of academics in social sciences like economics within which data can be manipulated to a far greater extent than in the natural sciences (where we know it can be manipulated to a startling degree) are no more definitive than they've ever been.

What you are essentially admitting here is that you are shameless about the fact that ideology drives your conclusions. I know you won't admit it, but I also doubt you would be so stupid as to suggest that the natural sciences support your position on the Laffer Curve.

Keynesian demand side monetary theory has been empirically and theoretically discredited almost since its inception (by Von Mises and other distinguished free market thinkers, like Henry Hazlett) and yet survived its delegitimization to deeply influence economic policy through the sixties and seventies and on into the present (the inane "stimulus" ideas of the Obama administration ).

What kind of tangent are you on now? If I don't buy Laffer, I must be a Keynesian? Is that your claim? I think you suffer from a form of ideological logorrhea. Get you going on one of your rants, and you just hit all the tangential points for the helluvit.

Consensus isn't going to cut it. Adduce some serious, balanced, rational, critical arguments, or hit the road.

Uh, ditto. Since I have yet to see such a thing from you that wasn't essentially a breakdown of the latest fringe conservative lunacy, I won't be holding my breath.

[_Kishkumen]

The really important thing here is to demonstrate, through a little logical argument and the pointing out of some simple, basic facts, the degree to which Graham carefully and at only a surface level, cherry picks the data and claims he uses while ignoring salient variables and complexities that would monkey wrench his arguments.

OK. Let's see.

Let's take his claims about the Bush tax cuts, just for one example.

In the first place, the Wall Street Journal is not a "right wing" paper; only its editorial section is conservative.

Droopy debunks Kevin's argument by nit-picking about the ideological stance of the Wall Street Journal. Odd strategy.

Firstly, the total new jobs created between the Budget Reconciliation Act of 1993 and the end of Clinton's term was actually 21.4 million, not 23 million.

OK, so Droopy imagines that the difference between these two figures (and he does not cite a reference to his source) is a devastating rebuttal?

Secondly, as there is no reason to believe, historically or as a matter of substantive economic theory, that increases in tax rates create greater economic activity (indeed, this is counter-intuitive on its face)...

Huge assertion without any evidence or argument adduced to back it up.

...other factors present during the Clinton years must come into play as causal factors in the growing economy at that time, including the 1997 tax cuts, which most certainly stimulated the economy and perhaps softened the negative effects of Clinton's substantial tax increases, negating economic weakness that did not materialize because of the stimulative effects of those tax deceases.

Notice the "must," which he hopes he can slip by his reader, although he has not provided any reason why it "must" be the case.

Thirdly, Welfare reform, lower government spending as a share of gross domestic product, the highly successful NAFTA, and other variables combined with the stimulative effect of lowering taxes on productive economic activity were probably the main wellsprings of the healthy economy in Clinton's second term, not tax hikes, which decease productive economic activity, discourage investment and job creation, and shrink the total tax base.

So, in other words, without being able to determine what it is that stimulated the economy, Droopy, driven by his ideological position, simply throws a bunch of crap at the wall because he likes the way it sticks better. Droopy would not be alone in being unable to determine the precise reason for the ups and downs of the economy, but he is unlike many except his fellow ideologues in that he is dead certain that he does know, even in the face of obvious evidence, like this stupid post, that he does not.

Not much beyond correlation, which is why one must have a broad understanding of a number of variables involved in any such analysis as well as a substantive theoretical background from which to interpret statistical graphs such as this, which are after all, human methodological constructions that only capture a limited and compartmentalized snapshot of much more complex phenomena.

So Droopy admits that, being essentially a novice in the world of economics, he is unable to say, when it comes down to it, whether tax cuts or tax increases lead to higher revenues. He just goes for the story that supports his ideological position, and when others appeal to authorities who might know more that Droopy, that is unacceptable.

Its simple to understand that evenue rises as GDP goes up, as population rises and more people enter the workforce, and as people live and work longer. This explains Graham's disingenuous statistical analysis through which he attempts to show that revenue has continually risen over decades while through both high and low tax periods:

Which puts the lie to the position that tax cuts will necessarily lead to higher revenues in the future. What one should ultimately be concerned with, evidently, is the creation of jobs and the health of the workforce. Of course, Droopy will return to the shibboleth of cutting taxes to stimulate business investment, which we have noticed does not really work out so neatly as Droopy would like us all to believe. So where are we? Oh, maintaining Bush tax cuts for the wealthy is not the magic panacea to save the economy. Drats!

...government revenue was well under half of what it was after the seven year supply side boom of the eighties.

Especially when you ignore the actual Reagan record on taxes, cutting loopholes, etc. When you have remade Reagan in your ideologically pure image, you can rewrite history as you like it.

Again, Graham has two fundamental problems here, the first being that he simply does not understand basic free market economics, and the second being his disdain and rejection the disciplines of critical thinking in his quest for a quick ideological/psychological fix.

More Droopyesque claptrap and empty verbiage. Yadda-yadda "free market" blah blah "you are stupid" bling blah "feel good psychological" bling bling "Marxist, Leftist" blah.

Thanks again for a lot of empty nothing and a complete waste of time.

[_Kevin Graham]

First graph presented by Droops shows the top marginal income tax rate which has absolutely nothing to do with "refuting" anything I said in debunking his three myths.

Droopy then claims I "cherry picked" a paragraph from Laffer to falsely claim Droopy doesn't understand his theory. He then goes on to cite Laffer's focus on three major tax cuts of the past century. Contrary to Droopy's claims, I already acknowledged and addressed this by pointing out that Laffer focuses only a few tax cut examples while ignoring the major tax increases. The tax increases resulted in booming revenues for the Federal Government in ways the tax cuts never did, which in and of itself refutes Droopy's myth. The fact is Droopy still doesn't understand the Laffer curve. In a nutshell, Laffer argues that tax cuts increase revenues under certain circumstances (when taxes are outrageously high) whereas Droopy asserts that they increase revenues under all circumstances. Can Droopy ever admit this?

Droopy's second graph is just a repost of the first graph, which details the top marginal tax rate, which again has nothing to do with anything we're talking about since it tells us nothing about revenues received. Droopy is obviously lacking substance if he has to keep up the smoke and mirror game like this.

Droopy's third visual is a chart of percentage share of taxes paid by class, which again focuses only on that narrow window of the 1920's and doesn't deal with the subject at hand either, which is total revenues received from income taxes. So he is totally pretending to address the issue, hoping folks over here will be intellectually lazy as they are over at MAD. From the US Treasury website we see how the tax increase before the 20's led to higher revenues. I presented this once already and Droopy ignored it. Watch him ignore it again:

Another revenue act was passed in 1918, which hiked tax rates once again, this time raising the bottom rate to 6 percent and the top rate to 77 percent. These changes increased revenue from $761 million in 1916 to $3.6 billion in 1918, which represented about 25 percent of Gross Domestic Product (GDP). Even in 1918, however, only 5 percent of the population paid income taxes and yet the income tax funded one-third of the cost of the war.

The economy boomed during the 1920s and increasing revenues from the income tax followed. This allowed Congress to cut taxes five times, ultimately returning the bottom tax rate to 1 percent and the top rate down to 25 percent and reducing the Federal tax burden as a share of GDP to 13 percent. As tax rates and tax collections declined, the economy was strengthened further.

So here is a chart from the website usgovernment revenue.com:

Clearly we can see revenues shoot up after the tax hikes of 1918 and then began to level off after the economy was strengthened and taxes were reduced in later years. This is even supported by Droopy's fourth chart, which he was too stupid to understand:



Notice that the "Inflation-Adjusted Revenue" according to Droopy's own chart, says that revenues were $6.6 billion in 1920 after the tax hikes, and then after the 1925 tax cuts, were dropped to $4.2 billion. Droopy tries to dig himself out of his own hole by changing the argument. The argument is whether tax cuts always result in higher federal revenues. I've refuted this on more than one occasion, and now we see Droopy's dumb enough to refute himself with his own charts. He also seems to think I argued at some point that tax cuts could never result in increased GDP, revenues, employment, etc. He's trying to beat a straw man because he can't defend his initial, idiotic claims which are nothing short of myth. He thinks that by presenting graphs that suggest economic benefit from a couple of tax cuts throughout history, that this somehow refutes the numerous increases in revenue that resulted from tax increases. It is a fool's game for sure, but this is to be expected by a guy who can't formulate his own arguments, and has to resort to cutting and pasting entire websites while ignoring the parts that actually prove my point.

Ultimately, he has done nothing to change the fact that I debunked his three myths. All he has done is show us that he's actually dumber than we thought.

[_Kevin Graham]

And yes the Wall Street Journal became a Right Wing piece the second it was purchased by Rupert Murdoch, the same Neoconservative who owns Fox News and other propaganda machines.

[_Buffalo]

I feel so sorry for droopy. Mojos, bro. :(

[_Kevin Graham]

Oh, and I wanted to comment on this graph really quickly:



Notice that Laffer doesn't highlight the massive tax increase on businesses in 1982, or the payroll tax increase or the Clinton Tax hike of the 90's. Instead he, wants you to believe the increases in revenues occurred because of the tax cuts and increases he mentions in the chart. That's pretty cheesy, if not downright deceptive.

The fact is most economistsdon't find the Laffer curve useful.

"Federal revenue is lower today than it would have been without the tax cuts. There's really no dispute among economists about that," said Alan D. Viard, a former Bush White House economist now at the nonpartisan American Enterprise Institute. "It's logically possible" that a tax cut could spur sufficient economic growth to pay for itself, Viard said. "But there's no evidence that these tax cuts would come anywhere close to that."

There is absolutely no sound economic reason for arguing that an extension of the Bush Tax cuts would increase revenues and thereby make a dent in the exploding deficit. All economists not working for Right Wing think tanks, agree with this. In deficit times, higher taxes is what works to reduce the deficit. This has always been the case and it is something Droopy doesn't care about. Tax cuts have always exploded the deficit out of control, beginning with Reagan's double of the national debt (something Droopy doesn't dispute). It was the case during the Civil War, the post-depression thirties and post- WWII. Now that we are experiencing the greatest deficit this country has ever seen, we should learn from history, not spit in its face. To continue with low taxes is just going to make the matter worse. But most folks on the Right know this. A few nimrods like droopy actually buy into the wishful thinking, but the folks driving the agenda don't care about the deficit. Dick Cheney said it himself, "deficits don't matter." What they want is more money for their wealthy financiers, who trickle that money back to them via campaign contributions, etc. The fact that the majority of Americans will suffer through a continuous declining economy means nothing to them because they'll still get theirs no matter what. And when it comes time to grade the effects of the extended Bush tax cuts in five years, we'll get more excuses as to why they didn't work. Besides, they'll just blame the economy on a "socialist" President. That seems to have worked so far.

[_asbestosman]

What they want is more money for their wealthy financiers, who trickle that money back to them via campaign contributions, etc.

I don't know if that's true or not, but it makes sense.

The fact that the majority of Americans will suffer through a continuous declining economy means nothing to them because they'll still get theirs no matter what.

That does not make sense to me. If the economy suffers, wealthy financiers will generally suffer too. Perhaps not as much as the majority of Americans, but that doesn't matter. If the goal is to increase personal wealth, then a strong economy would generally be better. Sure they could bet against the market, but that ends up being a one-time payout since afterwards people will not be willing to buy bets against the market at high value. Besides, betting against the market also assumes that people will have enough money to pay up. I wonder how far Lehman Brothers would have gone to pay their obligations.

[_Kishkumen]

That does not make sense to me. If the economy suffers, wealthy financiers will generally suffer too. Perhaps not as much as the majority of Americans, but that doesn't matter. If the goal is to increase personal wealth, then a strong economy would generally be better. Sure they could bet against the market, but that ends up being a one-time payout since afterwards people will not be willing to buy bets against the market at high value. Besides, betting against the market also assumes that people will have enough money to pay up. I wonder how far Lehman Brothers would have gone to pay their obligations.

In the global economy, as long as there is a place that people with money can invest to make more money, what does it necessarily matter that the US economy does well or not? If I am making money in Chinese investments, paying dirt cheap Bush taxes in America, and living like a king in my gated community, sending the kids to private schools, what does it matter that most Americans will soon experience life in a banana republic?

[_asbestosman]

In the global economy, as long as there is a place that people with money can invest to make more money, what does it necessarily matter that the US economy does well or not? If I am making money in Chinese investments, paying dirt cheap Bush taxes in America, and living like a king in my gated community, sending the kids to private schools, what does it matter that most Americans will soon experience life in a banana republic?

Fair point. However, it seems that the US economy dragged the rest of the world down with it. That also seems to be the case with China and possibly Europe.