NationStates Jolt Archive


Anyone taken economics?

Autocraticama
07-03-2005, 15:17
If you have, you should know what the Laffer Curve is. The Laffer Curve may have 1 or 2 lines on it, nothing more, bucause noone wants to show that it is correct. It was implemented during the regan administration, and reganomics worked. ush is trying to do it again, but hitting strong opposition. Everytime i go into a debate qand say something about the laffer curve, the thread dies.

People try to refute it, but it cannot be refted. Basically, it says that, as you raise taxes up to a certain percentage, you obtain more and more revenue. This follows commen sence, but then here comes the point that causes most news commentators and laypeople to discredit it (they are obviously not economists). When you get to a certian income bracket and raise taxes for those people it actually decreases governemnt revenue. They lose an incentive to work, as these people know that most of the money they make will go to the governemnt, so why work more? They are taxed more money for the work that they do, it inhibits productivity.
New Sancrosanctia
07-03-2005, 15:20
If you have, you should know what the Laffer Curve is. The Laffer Curve may have 1 or 2 lines on it, nothing more, bucause noone wants to show that it is correct. It was implemented during the regan administration, and reganomics worked. ush is trying to do it again, but hitting strong opposition. Everytime i go into a debate qand say something about the laffer curve, the thread dies.

People try to refute it, but it cannot be refted. Basically, it says that, as you raise taxes up to a certain percentage, you obtain more and more revenue. This follows commen sence, but then here comes the point that causes most news commentators and laypeople to discredit it (they are obviously not economists). When you get to a certian income bracket and raise taxes for those people it actually decreases governemnt revenue. They lose an incentive to work, as these people know that most of the money they make will go to the governemnt, so why work more? They are taxed more money for the work that they do, it inhibits productivity.so is that supposed to be an excuse to tax the bajeezus outta the poor? cuz that's always fun. damn serfs.
Autocraticama
07-03-2005, 15:25
so is that supposed to be an excuse to tax the bajeezus outta the poor? cuz that's always fun. damn serfs.
no, it is a reason not to tax the bajessus out of aanyone.
Jeruselem
07-03-2005, 15:26
Nice theory, but those theories assume a rather perfect tax system.
The truth is the "lower income" people more or less pay what is demanded by the taxation system but for the "upper echelon" things are different. The more you earn, the more creative ways are used reduce tax burden and hence they are encouraged to earn more.
Damascue
07-03-2005, 15:26
Yeah, that "trickle down" stuff worked GREAT...[/sarcasm]


I have issues with the Laffer Curve. Mainly this.

Ok, so if taxes get raised above a certain percentage, the rich people decide that its not worth it to work as hard so they stop and that decreases revenue. Great.

However, I think they need to get over it, quite honestly. Because raising taxes on the middle/lower class, although it would provide more revenue, is not the best idea. Unlike the upper class people, who can slack off on their productivity because they have more than enough money and their "incentive" is gone, the lower classes HAVE to work. So, taxes or not, they are still going to get up everyday and go and struggle to keep afloat.

I'm not sure if this post made sense, but whatever.
Alien Born
07-03-2005, 15:35
The Laffer curve ignores the fact that it is people that are being taxed. People are greedy. They always want more, so if you tax the high end earners more, they do not react by working less and earning less, they work more to have more for themselves. Of course there is a catastrophic discontinuity in the graph at 100% as this motivation suddenly vanishes and the tax revenue would be 0. Up to that point, however there is no reason to think that raising taxation will reduce taxation revenue before some very high percentage is reached.
Portu Cale
07-03-2005, 15:35
The laffer curve gives a general behavior of received tax values in the economy: basically, it states that if you start raising taxes, the income you get also increases, but until a certain point: After that point, you are burdening the economy so much, taking away so much from people, that they won't work. So your tax revenues go down (the laffer curve follows a bell trajectory).

Think like this.. you have an income of 100. The tax rate is 10%. How much the goverment receives? 10

But if the tax rate is 100%, the goverment will receive not 100, but 0. Why? Because no one will work at that rate.


Note that, like all economical models, the laffer curve assumes of stuff to be simple, like a single tax rate for the entire economy, etc. Still, though it as much holes if you try to use it straight on into the real economy, it is a very usefull tool to guide one's reasoning on tax policy.
New Sancrosanctia
07-03-2005, 15:37
no, it is a reason not to tax the bajessus out of aanyone.
*sigh* if you're sure.
Hitlerreich
07-03-2005, 15:43
Yeah, that "trickle down" stuff worked GREAT.

thank you, yes it did actually, poverty was greatly reduced when Reagan left the White House, after having to clean up the mess left by the peanut man
Texan Hotrodders
07-03-2005, 15:44
no, it is a reason not to tax the bajessus out of aanyone.

Oops. :D
Alien Born
07-03-2005, 15:49
Note that, like all economical models, the laffer curve assumes of stuff to be simple, like a single tax rate for the entire economy, etc. Still, though it as much holes if you try to use it straight on into the real economy, it is a very usefull tool to guide one's reasoning on tax policy.

Only if you are taxing vulcans. The differences between the Laffer curve and the real world results are large. It assumes that the government size is zero, an obviously false assumption. It assumes a flat taxation rate, an often false assumption. It disregards the complex motivational structures that real people have.

Superficial investigation of the literature confirms the impression that the Laffer curve remains basically a suggestive ad hoc relation besides the fact that it is widely referred to as a policy tool and a theoretical input for analyzing bureaucratic behavior. If our interpretation is correct that the Laffer curve (as the Phillips curve) is the geometrical expression of a reduced-form equation we are obliged to state the underlying system. Because the Laffer curve is generally connected with standard macroeconomic analysis it remains an unsatisfactory analytical tool because it tends to conceal the fact that the optimal size of government is zero. In standard macroeconomics the government has no useful role to play if we ignore the existence of likewise unsatisfactory effects of government expenditures on employment via the multiplier.
source (http://www.gmu.edu/jbc/fest/files/Monissen.htm)
The Winter Alliance
07-03-2005, 16:02
There is one way around this... since most of the people who make those huge incomes are business owners, why not offer subsidies to people who hire a certain amount of employees? Actually, we probably already do that.

I have no problem taxing lottery winners to the hilt... of course since the lottery is sponsored by the state here, it would make more sense just to pay out a smaller amount tax free IMNSHO.

In the long run you will find that taxation of any kind is not so beneficial. The best way a government could possibly work is to cut costs all the way back to the point where government is only run on private donations. Cut spending.

In modern times, this has become increasingly difficult because of the exorbitant cost of defense. Defense is one of the primary reason for the existance of any government. Notably the cost of defense spending is so high because arms manufacturers constantly raise prices to negate the effect of higher taxes on themselves and their salaried employees. It's a pretty vicious cycle.
Portu Cale
07-03-2005, 16:08
Only if you are taxing vulcans. The differences between the Laffer curve and the real world results are large. It assumes that the government size is zero, an obviously false assumption. It assumes a flat taxation rate, an often false assumption. It disregards the complex motivational structures that real people have.

Deixa os Vulcanos em paz :p

E sim, concordo, mas para uma análise muito simples, serve para guiar raciocinio, mais a nivel fiscal que outra coisa.
Lacadaemon II
07-03-2005, 16:21
The Laffer curve ignores the fact that it is people that are being taxed. People are greedy. They always want more, so if you tax the high end earners more, they do not react by working less and earning less, they work more to have more for themselves. Of course there is a catastrophic discontinuity in the graph at 100% as this motivation suddenly vanishes and the tax revenue would be 0. Up to that point, however there is no reason to think that raising taxation will reduce taxation revenue before some very high percentage is reached.

The laffer curve is empirical, not theoretical.

Edit: As was demonstrated rather neatly by tax revenues in the US and UK in the early/mid 1980s.
Eutrusca
07-03-2005, 16:24
Almost like a back-bending supply curve! :D
Alien Born
07-03-2005, 16:25
Deixa os Vulcanos em paz :p

E sim, concordo, mas para uma análise muito simples, serve para guiar raciocinio, mais a nivel fiscal que outra coisa.

Tá bom vou deixar.
Não escrevo portuguese muito bem ainda, então me desculpe qualquer deslize.
O problema de tomar o arco de Laffer com um base du raciocínio é que ele levar às conclusões erados. Não resultraria num maior receita tributaria se reduz os impostos nos ricos, este somente acontecerá se a taxa de impostos é muito alto. (Acima de 75%) . Até este ponto o rico trabalhará mais para ganhar mais.


Portu Cale: Leave the Vulcans in peace :p

And yes, I agree, but for a very simple analysis it is sufficient to guide ones thinking, but on the fiscal level it is another matter.

Alien Born: All right, I'll leave them alone
I don't write Portuguese very well yet, so please excuse any slips.
The problem of taking Laffer's curve as a base for thinking is that it leads to the wrong conclusions. A greater tax receipt would not be the result of reducing the taxes on the rich, this only happens if the tax rate is very high (above 75%) Up to this point the rich work more to gain more.
Alien Born
07-03-2005, 16:29
The laffer curve is empirical, not theoretical.

Edit: As was demonstrated rather neatly by tax revenues in the US and UK in the early/mid 1980s.

The Laffer curve depends on a size zero government. How can it possibly be empirical?
I am not arguing that at extereme levels there is not an increase in revenue by pro entrepreneur policies, as were implemented in the Thatcher/Reagan era. I am simply arguing that the Laffer curve is a vast over simplification and ignores all but one factor in tax revenue. And that factor it gets wrong.
Charles de Montesquieu
07-03-2005, 17:45
I think I'll clarify the Laffer curve for those who think it is an excuse to tax the poor more than the rich. The Laffer curve only applies to how much revenue the country gains from the rich by taxing them a certain percentage. While increases in the percentage we tax the wealthy (or anyone else) usually cause increases in the revenue we take from them, sometimes an increase in the percentage of income paid as tax by a group causes a decrease in total taxes collected from this group. This is because revenues from taxes have two sources. The percentage of tax we charge, and the amount of money the tax payers have. Generally, the higher either one of these is, the more money we will take in taxes. However, these two are slightly inversly related. The more we tax people the less money they can use to gain more money. Therefore, high taxes cause people to have less money to tax. Thus, at a certain point, a higher percentage of taxes lowers the amount of revenue the government gains from taxes.
In other words, by charging the rich a lower percentage tax, the government can sometimes take a greater total tax from them. By doing this, they can charge less tax on the poor (because they are gaining more total from the rich). So instead of Laffer curves being an excuse for a regressive tax system, they are actually a reason for lower taxes for all tax payers.
Gen William J Donovan
07-03-2005, 17:56
The Laffer curve depends on a size zero government. How can it possibly be empirical?
I am not arguing that at extereme levels there is not an increase in revenue by pro entrepreneur policies, as were implemented in the Thatcher/Reagan era. I am simply arguing that the Laffer curve is a vast over simplification and ignores all but one factor in tax revenue. And that factor it gets wrong.

As do all economic theories.

The increase in tax revenues in the mid 1980s cannot just be explained by "pro entrepreneuri" policies, tax revenues increased significantly from direct income taxes also. So you have to admit, the laffer curve has empirical support.

And it stands to reason if you think about it.
Vittos Ordination
07-03-2005, 18:19
I think the idea that people wouldn't work as hard or wouldn't try to make more money if higher tax rates were imposed is not true.

However, raised tax rates would cause the cost of investment and necessary return on investments to skew into areas that would cause companies to be less likely to embark on new projects.

So while I still am not sure that it is more than an ad hoc theory proposed simply to make trickle down economics look justified, but it does at least a decent basis in reason.

EDIT: And saying that if you have taken economics would mean that you know the Laffer curve is correct and that trickle down economics works is a complete falsehood, as a great deal of economists will disagree with you on both accounts.
Autocraticama
07-03-2005, 18:27
I think the idea that people wouldn't work as hard or wouldn't try to make more money if higher tax rates were imposed is not true.

However, raised tax rates would cause the cost of investment and necessary return on investments to skew into areas that would cause companies to be less likely to embark on new projects.

So while I still am not sure that it is more than an ad hoc theory proposed simply to make trickle down economics look justified, but it does at least a decent basis in reason.

EDIT: And saying that if you have taken economics would mean that you know the Laffer curve is correct and that trickle down economics works is a complete falsehood, as a great deal of economists will disagree with you on both accounts.


Let me use an example used by Regan himself. When he was doing films, they were churning out as many as 7 fimls per year per actor. When taxes were high, they did not want to put the extra effort into making more of the money because they would only keep roughly half of what they mad doing another picture. Thinking at the margin is what it is. There was no more reason to be in another picture, since the revenue gained per picture dropped drastically after a certain point. Trickle down econoomics worked in the regan era. it would today.
Alien Born
07-03-2005, 18:29
As do all economic theories.

The increase in tax revenues in the mid 1980s cannot just be explained by "pro entrepreneuri" policies, tax revenues increased significantly from direct income taxes also. So you have to admit, the laffer curve has empirical support.

And it stands to reason if you think about it.

I have thought about it, and yes it does stand to reason if people were fully rational. They are not. I accept that there may be some effect in increasing revenue by reducing over excessive top rates of income tax, the problem with the empirical data is, in addition to it being highly corrupted by other factors, that the USA has never had an excessively high top rate of income tax. So any increase in tax revenue can not have been due to the Laffer effect. I choose to look elsewhere to explain the data, as I am not convinced that this idea is relevant to the facts.

The UK, on the other hand has had ridiculously high top levels of tax, in the 1970s, and a reduction of this could well have contributed to increased tax revenue, although the discovery and exploitation of North Sea oil at the same time makes this very difficult to be sure about.

Oh and it still requires a zero size government to work.
Frangland
07-03-2005, 18:32
my problem with way-inflated taxes on the rich is that the more you tax them, the less they have to pump into the economy:

-Less to spend on stocks (which means less money for companies to spend on R&D, or maybe LABOR)

-Less to spend on products and services (which means less money for companies to spend on R&D, blah blah, and LABOR)

-Less to spend on the companies they actually own (which means less for said rich person to spend on myriad possible divisions including LABOR)

SO you see why it has always seemed funny to me why liberals want higher taxes on the rich, when in effect higher taxes on the rich will hurt the working man, who forms a large portion of the Democrat voting base (unions...).

So you vote for the tax hike, the rich man has less money, some of your Democrat voters get fired, and the Democrats blame the rich man... when it was the fault of high taxes.

Abe Lincoln was right: You cannot raise up the poor by bringing down the rich.

I don't like it when people bitch without offering solutions, so in an attempt not to be hypocritical, here's my general suggestion:

-do not tax the poor at all (they need all the money they earn)

-moderately tax the middle classes (say, ceiling of 30% for upper-middle-class)

-tax the rich only slightly higher than that (ceiling of, say, 33%).

-spend wisely

People bitch and whine about the rich but they shoulder most of our tax burden. Now think how much they could HELP us if we lower that load just a little bit (see above).
Markodonia
07-03-2005, 18:34
The laffer curve is empirical, not theoretical.

Edit: As was demonstrated rather neatly by tax revenues in the US and UK in the early/mid 1980s.

The unemployment rates in in the US and UK during the 1980s also provide some rather interesting empirical evidence.
Vittos Ordination
07-03-2005, 18:34
Let me use an example used by Regan himself. When he was doing films, they were churning out as many as 7 fimls per year per actor. When taxes were high, they did not want to put the extra effort into making more of the money because they would only keep roughly half of what they mad doing another picture. Thinking at the margin is what it is. There was no more reason to be in another picture, since the revenue gained per picture dropped drastically after a certain point. Trickle down econoomics worked in the regan era. it would today.

That was a fine economic explanation. :rolleyes:

However, I did agree that it had some basis in reason, but I think the proponents of the Laffer Curve only latched on to it to justify their politics. They liked Reagan and they liked conservative politics, so they in turn liked the Laffer Curve.

May I ask what economics courses you have taken?
Soviet Narco State
07-03-2005, 18:40
Ha, the laffer curve makes me laugh. The US had a top marginal tax rate of over 90 percent in the 1950s and the economy did great. Clinton raised the top marginal rates in the 1990s with the same result. According to my Tax law professor Sweeden for a while had a top rate of 110 percent although I cannot confirm this.

The obvious problem with the laffer curve is that the rich have the lowest propensity to consume-- They tend to put more of their money in the bank rather than spending it. This provides less stimulus for the economy. You get more bang for your buck if you spend the money on government projects or give it to poor or working class people.
Charles de Montesquieu
07-03-2005, 19:00
Originally Posted by Soviet Narco State
The obvious problem with the laffer curve is that the rich have the lowest propensity to consume-- They tend to put more of their money in the bank rather than spending it. This provides less stimulus for the economy. You get more bang for your buck if you spend the money on government projects or give it to poor or working class people.

Actually, the rich only put their money in banks if this is the most profitable choice. For the sake of diversification and self-insurance, they usually put some of their money in banks, but they spend most of it on their businesses, producing jobs. Furthermore, even the money in the bank is used to fund real estate and business loans (as well as consumer credit), naturally (not artificially) increasing the demand for homes (providing more jobs for those in this industry), the supply from businesses, and the demand for consumer products. If the rich did not have so much money in banks, poorer consumers would not buy nearly as much, because they could not afford it without credit, which would not be as available if not for the amount of money in banks. Thus, redistribution like this would only cause the economy to become more stagnant because it would keep the rich from having as much money in banks, which use this money to make loans that increase consumer ability to buy products, which drives the economy and produces jobs.
Niccolo Medici
08-03-2005, 09:13
Well, I am not an economist, but I have had six seperate economics professors at 3 different schools. Not one supported the Laffer curve, and two actively attempted to debunk trickle down economics in their classes.

Strangely enough, one of my history professors was from the Austrian school of ecnomics, and he thought the Laffer curve was poorly thought out even though he supported the concept of severely reduced taxation on the rich.

Thus, none of my training or teaching in ecnomics can give me any scholarly support for the Laffer curve being an effective tool for anything other than policy marketing.
Lacadaemon
08-03-2005, 09:17
Oh and it still requires a zero size government to work.

Well it has too. If government was given a positive size, well then, you could argue that the effect would be more pronouced.
The Cat-Tribe
08-03-2005, 10:14
If you have, you should know what the Laffer Curve is. The Laffer Curve may have 1 or 2 lines on it, nothing more, bucause noone wants to show that it is correct. It was implemented during the regan administration, and reganomics worked. ush is trying to do it again, but hitting strong opposition. Everytime i go into a debate qand say something about the laffer curve, the thread dies.

People try to refute it, but it cannot be refted. Basically, it says that, as you raise taxes up to a certain percentage, you obtain more and more revenue. This follows commen sence, but then here comes the point that causes most news commentators and laypeople to discredit it (they are obviously not economists). When you get to a certian income bracket and raise taxes for those people it actually decreases governemnt revenue. They lose an incentive to work, as these people know that most of the money they make will go to the governemnt, so why work more? They are taxed more money for the work that they do, it inhibits productivity.

Beating head on desk . . . Yeah, there is a conspiracy to keep the Laffer curve quiet because it works. That's why reagan eliminated all those deficits. Bang, bang, bang ...
Places to Be
08-03-2005, 10:19
Hey, joyous news for all California residents:

Old news... but still scary. (http://conventions.atlantic-media.us/archives/2004/09/arnolds_kitchen.html)

Check it out... some guy named Art Laffer is advising our governator.
LazyHippies
08-03-2005, 10:46
my problem with way-inflated taxes on the rich is that the more you tax them, the less they have to pump into the economy:

-Less to spend on stocks (which means less money for companies to spend on R&D, or maybe LABOR)

-Less to spend on products and services (which means less money for companies to spend on R&D, blah blah, and LABOR)

-Less to spend on the companies they actually own (which means less for said rich person to spend on myriad possible divisions including LABOR)

...(etc)


This is a common misconception based on a flawed understanding of macroeconomics. While what you say is technically true, the suggestion that the money will not be pumped into the economy would only be true if the money the government obtains from taxing the rich is stored away or used to pay off foreign debt. However, the vast majority of the time, the government chooses to spend the money.

Most people think of government spending as a bad thing because they think about it from a microeconomic perspective. In other words, people are accustomed to dealing in microeconomic terms every day because it is what forms the basis of all their common monetary transactions. In microeconomics, the money you spend is gone. You decided to spend $300 on an iPod, so the $300 is gone and you will never see it again. So, obviously when we think of spending, its natural to mistakenly think of it as making money disappear from our pockets.

The government operates in a macroeconomic world. When the government spends money it isnt gone like the money you spend. When the government spends money that money is invested into the economy of the nation. When the government spends, it is taking the money it collected from taxes and using it to pay for goods and services.

To illustrate this, lets say the government increases the taxes on Donald Trump, so Trump decides that this year he will not buy that yacht he was considering buying. OK, so the yacht company doesnt get Donald Trump's business this year. But the government uses the money it collected from Mr. Trump to purchase an extra F-15 for the airforce. So, the money goes to Boeing instead of the yacht manufacturers, and Boeing uses that money to pay its engineers, mechanics, technicians, laborers, programmers, etc. Each of those people is in turn taxed on the money they earned (which came from the government), and the cycle continues. Boeing employs all sorts of people. They employ, engineers, scientists, technicians, mechanics, assembly line workers, janitors, secretaries, business executives, etc, etc. They also subcontract work to other companies. As you can see, when the government spends the money is not disappearing, it is being invested in the economy.

In other words, whether the rich people are pumping money into the economy or not is irrelevant because that money is being pumped into the economy regardless. The question isnt will that money be pumped into the economy, because it wil, no matter if its by the millionaire or by the government. The question is what will it be used for? The selfish whims of the filthy rich, or projects that are of befenit to the society as a whole?
The Winter Alliance
08-03-2005, 11:30
This is a common misconception based on a flawed understanding of macroeconomics. While what you say is technically true, the suggestion that the money will not be pumped into the economy would only be true if the money the government obtains from taxing the rich is stored away or used to pay off foreign debt. However, the vast majority of the time, the government chooses to spend the money.

Most people think of government spending as a bad thing because they think about it from a microeconomic perspective. In other words, people are accustomed to dealing in microeconomic terms every day because it is what forms the basis of all their common monetary transactions. In microeconomics, the money you spend is gone. You decided to spend $300 on an iPod, so the $300 is gone and you will never see it again. So, obviously when we think of spending, its natural to mistakenly think of it as making money disappear from our pockets.

The government operates in a macroeconomic world. When the government spends money it isnt gone like the money you spend. When the government spends money that money is invested into the economy of the nation. When the government spends, it is taking the money it collected from taxes and using it to pay for goods and services.

To illustrate this, lets say the government increases the taxes on Donald Trump, so Trump decides that this year he will not buy that yacht he was considering buying. OK, so the yacht company doesnt get Donald Trump's business this year. But the government uses the money it collected from Mr. Trump to purchase an extra F-15 for the airforce. So, the money goes to Boeing instead of the yacht manufacturers, and Boeing uses that money to pay its engineers, mechanics, technicians, laborers, programmers, etc. Each of those people is in turn taxed on the money they earned (which came from the government), and the cycle continues. Boeing employs all sorts of people. They employ, engineers, scientists, technicians, mechanics, assembly line workers, janitors, secretaries, business executives, etc, etc. They also subcontract work to other companies. As you can see, when the government spends the money is not disappearing, it is being invested in the economy.

In other words, whether the rich people are pumping money into the economy or not is irrelevant because that money is being pumped into the economy regardless. The question isnt will that money be pumped into the economy, because it wil, no matter if its by the millionaire or by the government. The question is what will it be used for? The selfish whims of the filthy rich, or projects that are of befenit to the society as a whole?


That sounds like Keynesian economics and to a strong degree, you are correct in saying that government money spent on big business is more effective than private spending.

However, you disregard foreign trade deficit (Just as the current administration does.)

It's too late now, but our primary objective should have been to pay off foreign and internal debt, by CUTTING government spending.

The global economy is heading for a sharp downturn. Had we acted upon this and reduced our foreign obligations, we would have been a shining beacon of free trade when the rest of the world economy failed. But know since we refused to pay off our debts, took out more credit, and entangled ourselves with the world economy, our economy will suffer greatly as well.
Isanyonehome
08-03-2005, 14:30
Beating head on desk . . . Yeah, there is a conspiracy to keep the Laffer curve quiet because it works. That's why reagan eliminated all those deficits. Bang, bang, bang ...

What did Reagan's tax policy(lowering rates) have to do with the deficit?

His tax policy increased the revenue that the govt received. The deficits came about because of the crazy increases in spending. Just in case you werent aware, Congress is the body that spends.
Keruvalia
08-03-2005, 14:33
Oh, God, No! I took economics as per required for my degree plan and it was the single most boring piece of tripe ever conceived by mankind since Church.

I wanted to slash my wrists while burning the classroom to a stinking pile of ash.

Ugh.

Edit: I feel the same way about this thread.
The Winter Alliance
08-03-2005, 14:36
Oh, God, No! I took economics as per required for my degree plan and it was the single most boring piece of tripe ever conceived by mankind since Church.

I wanted to slash my wrists while burning the classroom to a stinking pile of ash.

Ugh.

So melodramatic.
Hell-holia
08-03-2005, 14:40
If you have, you should know what the Laffer Curve is. The Laffer Curve may have 1 or 2 lines on it, nothing more, bucause noone wants to show that it is correct. It was implemented during the regan administration, and reganomics worked. ush is trying to do it again, but hitting strong opposition. Everytime i go into a debate qand say something about the laffer curve, the thread dies.

People try to refute it, but it cannot be refted. Basically, it says that, as you raise taxes up to a certain percentage, you obtain more and more revenue. This follows commen sence, but then here comes the point that causes most news commentators and laypeople to discredit it (they are obviously not economists). When you get to a certian income bracket and raise taxes for those people it actually decreases governemnt revenue. They lose an incentive to work, as these people know that most of the money they make will go to the governemnt, so why work more? They are taxed more money for the work that they do, it inhibits productivity.

Yes, it is the equivalent of an x = -Y^2 curve (sorta). Whats your point? Don't tax too high? It is an accurate graph, though. The most complicated part about the Laffer curve is trying to find the optimal X where tax revenue will be the highest.
LazyHippies
08-03-2005, 14:44
That sounds like Keynesian economics and to a strong degree, you are correct in saying that government money spent on big business is more effective than private spending.

However, you disregard foreign trade deficit (Just as the current administration does.)

It's too late now, but our primary objective should have been to pay off foreign and internal debt, by CUTTING government spending.

The global economy is heading for a sharp downturn. Had we acted upon this and reduced our foreign obligations, we would have been a shining beacon of free trade when the rest of the world economy failed. But know since we refused to pay off our debts, took out more credit, and entangled ourselves with the world economy, our economy will suffer greatly as well.

I am fully aware of the debt problem. But my post wasnt designed to explore the US economy. I was simply setting the record straight on a common misconception that I saw perpetuated by an individual here. Im not saying the government needs to spend and forget about debt, Im saying that taxing the rich does not prevent that money from being reinvested into the economy.
LazyHippies
08-03-2005, 14:51
Yes, it is the equivalent of an x = -Y^2 curve (sorta). Whats your point? Don't tax too high? It is an accurate graph, though. The most complicated part about the Laffer curve is trying to find the optimal X where tax revenue will be the highest.

It is not completely accurate because there are plenty of people who would continue to work even if they made no money for it. There are plenty of motivators besides money. Take a look at the open source movement for example. Some people in the open source movement are payed by companies like Red Hat to work on free software. The vast majority of open source developers however, work on the creation of free software without being payed for it. They are motivated by things other than money. A love for programming perhaps, or a desire to learn more about something, maybe for the prestige, or for who knows what reason. The graph is inaccurate as is the entire theory because it fails to take other motivators into account. People are motivated by alot of other things besides money. Heck, Ive done construction work for free myself (as part of a hurricane releif effort). There are alot of people who like their job and obtain satisfaction from what they do. It is not uncommon to hear of the guy who won the lottery but continues to work at the same place he has always worked for money he doesnt really need and is now peanuts compared to how much he makes on the interest from his lottery money alone.
Funky Beat
09-03-2005, 04:25
I'm in Year 11 Economics right now... not up to that curve thing, however, we're studying Economic Systems...