In a related story, I agree with Nixon.
new transcripts from the Nixon White House tapes reveal that the Nixon administration regarded Thompson as a useful idiot -- "dumb as hell," in President Nixon's wordsI didn't expect to find myself agreeing with Richard Nixon, well, ever. In this case, I can't help it. Watching the Republican debate on economic policy on Oct. 9th made me realize that while there were several candidates on the stage that night, there was really only one policy: tax cuts will make the economy grow. A few months earlier, The Idiot (Nixon's word) took things a step further and said that cutting taxes will raise government tax revenue.
So it's not that funny, but there is reason to smile this tax season. The results of the experiment that began when Congress passed a series of tax-rate cuts in 2001 and 2003 are in. Supporters of those cuts said they would stimulate the economy. Opponents predicted ever-increasing budget deficits and national bankruptcy unless tax rates were increased, especially on the wealthy.This would be great news for Republicans, if it were true. As he has in the past The Idiot (Nixon's thought so) is cooking the books.
In fact, Treasury statistics show that tax revenues have soared and the budget deficit has been shrinking faster than even the optimists projected. Since the first tax cuts were passed, when I was in the Senate, the budget deficit has been cut in half.
Paul Krugman explains.
The Bushies have used rising tax receipts since 2004 as supposed proof that tax cuts pay for themselves — carefully ignoring the fact that revenues plunged in the early years of the administration, and that the subsequent rapid growth basically just gets us back to the previous trend. Also, they’ve pretended not to notice that mainly the revenue comes from an incredible surge in corporate profits, the byproduct of an economy in which economic growth leaves most workers behind.Notice that Krugman points out that tax receipts have been rising since 2004, not 2001. It seems like The Idiot (Nixon's description) said that the tax cuts he helped pass in 2001 didn't increase tax revenue, or pay for themselves. Then we get to the real problem with the Laffer Curve theory behind the Republican supply side dream economy.
But anyway, the revenue surge is over.
For those of you unfamiliar with it, the Laffer Curve is a graph that basically shows that at some tax rate between 0% and 100% the maximum tax revenue will be gained. As the tax rate increases from 0%, where no revenue is gained because there is no tax, tax revenues increase up to the point where the incentive to work is countered by the additional burden of tax. At this point an increase in the tax rate has either no effect, or a negative effect on the amount of tax revenue. The reasoning behind it has been spewed from every right wing pundit you've ever seen on teevee discussing tax policy, but if I'm going to be taxed 99 cents and get 1 cent, I'm probably not going to work (and definitely not if I'm taxed 100 cents and get none, hence the maximum tax revenue is found at a tax rate somewhere between 0 and 100%).
So the principle that The Idiot (Nixon, seriously!) and his fellow presidential hopefuls are basing their economic policy off of is that we are currently past the tax rate that maximizes tax revenue. We are taxing our people so much that we are discouraging them from working. If we backed off on the taxey taxey a little, they'd work more, and our tax revenues would increase since the lower tax rate would be made up for by the increased income. We'd throw a party, a good time would be had by all.
Of course if they're wrong, and we aren't past the magical tax rate, decreasing the tax rate would also decrease tax revenue. And since we're at war we know the Republicans wouldn't let us deficit spend, they're conservatives. Which rhymes with fiscal conservative. They would wouldn't put us in the hole.
Except, they would. Again, from Krugman.
To put this in perspective, here’s revenue as a percent of GDP since Clinton took office:Thompson is an idiot (my word this time, although I hear Nixon agrees). The Republican's stood on stage and talked about cutting taxes to help the economy, and cut the deficit (except Ron Paul, but let's be realistic here Ron Paul supporters, I've got better odds of winning the lottery than he does of winning the Republican nomination). Jason's post yesterday asked:
Chart: Revenue as Percent of GDP Since 1993
So everything you’ve heard about how revenues have boomed since the Bush tax cuts is wrong. What really happened? The revenue plunged, as a percent of GDP, in the early Bush years, then staged a partial, but only partial, recovery. And that recovery seems to have run its course.
Do American's really understand economic theory enough to know what it is that best represents their values, and if not, how do they make those decisions when it comes time to vote? And isn't this further complicated if voters are pretending different values in order to avoid perceived economic burdens?When you've got an entire party's worth of nominees (Ron Paul excepted) repeating the same unsupported claim and calling it an economic policy, I have to ask myself 'How can the voters ever be expected to understand what they're voting for when the politicians either don't get it or are so willing to mislead them about their economic goals?' This is how Thompson, The Idiot (me and Nixon), ended his column:
To face these challenges, and any others that we might encounter in a hazardous world, we need to maintain economic growth and healthy tax revenues. That is why we need to reject taxes that punish rather than reward success. Those who say they want a "more progressive" tax system should be asked one question:It seems his own answer would be the latter.
Are you really interested in tax rates that benefit the economy and raise revenue--or are you interested in redistributing income for political reasons?