Battle lines drawn over "growth revenue" in fiscal cliff talks

Comments (20)
Quietman wrote:

I’m not an economist but, let’s see, we had a growing economy at the end of Bill Clinton’s term and then the economy went into the tank after the Bush tax cuts. I say we go back to the Clinton tax rates. I also note that the top 1% have done very well in spite of the bad economy. The disparity of wealth in the U.S. is the largest that it has been since 1929. Republicans will get their chance to “fix” the economy in 2016; let the Democrats have their try.

Nov 15, 2012 2:26am EST  --  Report as abuse
PeterisK wrote:

If you want to get calmly trough the day, don’t read another banch of absurd reasoning Republicans use to justify “don’t rise taxes to rich people” line. There’s catch for you, dear tea baggers: NO country in whole world has gone trough austerity and cutting waste *without* increasing taxes (I know, I live in one of them). Because, well, taxes are the *only* solid income you can rely on – and well, you can cut spending because you want to, there must be a solid plan with fallbacks, how to replace that money taken out of economy, etc. Taxes can hurt if not implemented properly, but it also creates stability, because businesses know that goverment won’t default suddenly because their expectations on how they will decrease tax rates and how it will kick start economy collapses. In fact, most of economics agree that goverment taking money in taxes and if there’s surplus, getting that money back in economics is much effective way to deal with crisis.

Nov 15, 2012 3:20am EST  --  Report as abuse
Bob9999 wrote:

Yeah. We’re going to fund the deficit by cutting taxes.

Nov 15, 2012 7:14am EST  --  Report as abuse
Bob9999 wrote:

Yeah. We’re going to fund the deficit by cutting taxes.

Nov 15, 2012 7:14am EST  --  Report as abuse
minipaws wrote:

IOUSA!

Nov 15, 2012 7:18am EST  --  Report as abuse
matthewslyman wrote:

I have more data from taxpolicycenter.org, bls.gov etc., which I have processed into a readable form in relation to this question. The results of my investigation are quite conclusive: RAISING TAXES CAN BOOST GDP-GROWTH! You may find my article by searching the internet for “Reaganomics and Prudent Taxation”.

Republicans in the 1980′s were absolutely right to suggest that there’s an optimum overall level of taxation. Except, they were wrong to think that the levels of US taxation at that time were way too high. SOME of the taxes were probably slightly too high. After Reagan did his tax-cut thing, the economy tanked (worsening the recession, especially for the poor); just like it did again when Bush I and Bush II later repeated the same experiment.
ONLY when Reagan quietly started reversing course on tax-cuts did the American economy start improving. Only when Bush I abandoned his campaign promise and did a deal with congressional Democrats to raise taxes, did the American economy start improving a decade later, laying the foundation for the great economic growth of the Clinton era (also perhaps partially a peace-dividend from the end of the Cold War).

It’s a shame if Republicans have taken to forgetting the wisdom of their own former leaders, in changing course once it became known that their former policies had failed…

Nov 15, 2012 8:00am EST  --  Report as abuse
matthewslyman wrote:

> “The origins of dynamic scoring can be traced to the 1970s and supply-side economist Arthur Laffer, whose D-shaped Laffer curve represents the relationship between tax rates and the revenue they generate.
> “It postulates that raising tax rates beyond a certain point would be counterproductive and raise less revenue, and vice versa, but estimating the optimal rate is tricky.”

— In other words, the economists that Republicans quote don’t actually have a clue what the optimum level of taxation actually is! Therefore, their promises that the economy will improve if taxes are cut, is nothing but conjecture mixed with dangerous populist politicking.

Let’s go over that one more time, just in case anyone missed it:
> “estimating the optimal rate is tricky”

— No, it is NOT tricky. You change the tax rate, and you see what happens. After you’ve done this enough times, the true relationship between taxation and GDP growth becomes clearer.

Fortunately, we already have enough data to build up a clear picture of this relationship, within the context of modern American technology, demographics, market economics and politics. We’ve been keeping these kinds of data for over 60 years. I’ve already done a part of the necessary analysis, and pointed to how we might do more. See my article, “Reaganomics and Prudent Taxation”; which shows that the optimal rate for our time is certainly higher than 18%GDP (for comparison, the current rate is 15%GDP!)

Nov 15, 2012 8:07am EST  --  Report as abuse
TimoB wrote:

Math is hard, admitting your wonky economic theories are wrong is harder.

Nov 15, 2012 8:09am EST  --  Report as abuse
matthewslyman wrote:

For a basic understanding of why increased taxation can boost GDP-growth, consider for example, the comparative benefits to American productivity and quality-of-life of:
• A middle-class family purchasing a new Japanese games console or American-built swimming-pool for their large back yard,
• Deprived but hard-working & patriotic people receiving better funding for education, healthcare & parks; to be provided by American workers.

I realise that this comparison may be too simplistic and slightly stereotypical; but based on what I’ve seen of America, this is exactly the sort of choice that the American government is taking for millions of its citizens, every day!

Too many Americans are being held back from contributing their best effort to America because of basic health problems that would shame most third-world countries, or by poor education about financial matters or citizen/consumer rights.

Too many Americans are having their backs held against the wall by dysfunctional automated markets where wages are racing to the bottom, and are then being regularly robbed in a shake-down by under-regulated monopolies who then wash their ill-gotten gains in overseas tax-havens that allegedly host “head offices” providing “intellectual property services”.

These problems cause a massive drag on the entire American economy. This racket is perhaps the limiting factor for current American economic growth. It must be fixed. Higher taxes are a necessary ingredient in any solution to this problem…

Nov 15, 2012 8:24am EST  --  Report as abuse
CMEBARK wrote:

The so-called “dynamic scoring” theory is nothing more than “trickle down” economics by another name. There is absolutely not empirical evidence that tax cuts create jobs, especially tax cuts for the wealthy 1%. The Bush tax cuts, that continue to be effect today, have not created job one since 2007.
The Koch brothers and other wealthy Republicans took any of their tax saving and simply attempted to buy our political system via Citizens United decision and super PACs. They got little bang for their bucks, but will continue to whine about it until the next election.

Nov 15, 2012 8:39am EST  --  Report as abuse
pbgd wrote:

Don’t tell me they are talking about trickle-down economy again.

Nov 15, 2012 8:46am EST  --  Report as abuse
DHites wrote:

A comment I’ve recently read makes the most sense: ‘Create the Jobs first – then will discuss tax rates.’

Show the evidence that the current tax model is successful and I will agree to keep the tax level where it is at.

Nov 15, 2012 9:26am EST  --  Report as abuse
DrGuy wrote:

Why don’t both sides give Simpson/Bowles a chance. Sure there are parts of it that all sides do not like but that is what compromise is about.
Hope all you Republican bashers remember that the Simpson/Bowles committee was appointed by President Obama who did have the guts let alone leadership to support the recommendation of his own committee.
The Republican should have an lost a major opportunity to show some flexibility. Unfortunately they joined Obama in reversing the JFK concept by asking not what they could do for the county but what the country could do for the DNC or RNC.

Nov 15, 2012 9:37am EST  --  Report as abuse
Mott wrote:

Goes to show who this party is working for and against, and then they act surprised on why they lost the election.

I guess this is what this wealth-addiction does one to lose their mind.

Nov 15, 2012 9:50am EST  --  Report as abuse
pavoter1946 wrote:

Wishful thinking is the only thing Republicans have left. They want to duplicate the ‘magic’ of the Bush years. And while Bush lost the popular vote in 2000, Republicans considered that a mandate for Bush policies. But when Obama trumps Mitt, that is no mandate in the alternate universe many Republicans inhabit at this time.

Nov 15, 2012 10:10am EST  --  Report as abuse
hindumuninc wrote:

As tax brackets adjust at the rate of inflation but real wages rise faster than inflation people get pushed into higher tax brackets and revenue increases both nominally and as a share of GDP. The long term average of tax revenues as a share of GDP in the U.S. is about 18%, spending’s average is about 20% with the deficit a manageable 2% (which allows debt to GDP to stabilize given average inflation of 2% and GDP growth of 2-3%). During the Clinton years the Republican House kept spending increases to slightly slower than GDP growth and failed to increment tax brackets rapidly enough to account for the DotCom bubble pushing up wages, thus spending fell as a share of GDP and Tax revenue rose as a share of GDP causing them to reverse by the year 2000 to 20% for rev, and 18% for spending. Over the course of Bush’s term revenue averaged 17% of GDP (though it had rebounded to over 18% of GDP by 2006) and spending averaged just 19% with deficits averaging the usual 2% of GDP. Bush isn’t single-handedly responsible for the financial crisis anymore than Clinton is single-handedly responsible for the DotCom bubble (or do you expect me to believe that every internet company founded in the 1990s was a direct result of Clinton’s actions and every single mortgage that someone took out during the boom was a direct result of Bush’s prodding?) If you look at the CBO’s long term projections they show revenue rebounding to 18% of GDP (from the current 15% of GDP, held down mostly by unemployment and slow wage growth due to the debt based “balance-sheet recession” which is of course no more Obama’s fault than Bush’s) and that is even under the “Alternative Scenario” where the Bush tax cuts become permanent and the AMT is permanently indexed to inflation. In other words, all the current congress really has to do is two-fold: freeze spending in nominal terms, allowing inflation and real growth to whittle down the deficit without unpopular cuts; and reform Entitlements, because by even the most optimistic projections the SS trust fund runs out by 2037 and Medicare even sooner, something has to be done now in order to guarantee continued benefit payments in the future. Those are the facts, which are conveniently left out of “objective” journalistic analysis.

Nov 15, 2012 10:48am EST  --  Report as abuse
matthewslyman wrote:

@Mott: Do Republicans even realise that they lost the election? After reading this story, I’m not sure. It’s equally strange that they seem incapable of recognizing the failure of their previous tax-cut policies, when the US economy has failed practically every measure they originally gave for evaluating the success of those policies…

Nov 15, 2012 1:23pm EST  --  Report as abuse
rocque wrote:

Why isn’t this article classified under “Opinion”? Lower taxes do allow for more growth. Obama’s own economic advisor agreed with the majority of economists on this but she was not heard from again.

Nov 15, 2012 1:32pm EST  --  Report as abuse
matthewslyman wrote:

@rocque: True up to a point. Would going from 5% tax (an almost anarchic state) to 0% tax (a feudal anarchy, with no money to pay for a national army to defend America’s borders, no money for internal policing other than what the oligarchs paid for, etc.) allow for more economic growth? I think not… There’s a limit to these things (ever Arthur Laffer recognized this point). The mistake the Republicans made was to think they were on the right-hand-side of Laffer’s curve, when really they were on the left or in the middle of it. (Which way do I go, to reach London? North or South? This depends on where you are at the time…)

Nov 15, 2012 2:28pm EST  --  Report as abuse
fred5407 wrote:

Yah know, you can put new gasoline and oil in a worn out engine, but it still won’t perform better. We have an unworkable system with the municipal unions (San Bernadino)and a medical system that is out of control. Bush and Cheney lowered taxes and the economy eventually crashed. I don’t think any president can fix the system as it is set up. It is hard to get Congress to get off its rear end and address the problems, because they are all on the take.

Nov 15, 2012 3:19pm EST  --  Report as abuse
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