Brad de Long and Kieran Healy are discussing a plot representing something about corporate taxes that’s in the Wall Street Journal. Brad even draws what he thinks is a better plot.
I’ve made an even better one, and I’m not even an economist. Can I get some AEI funding now?
And yet the underlying issue is whether tax cuts do pay for themselves. I confess to having been something of a skeptic–but I now have distinct memories for both the Reagan tax cuts and the Bush tax cuts that the horrors predicted by the left have failed to materialize, and the economic growth-leading-to-higher-revenues predicted by the right–has not been too far off from what we’ve actually gotten. In particular, I do note the shrinking deficit of the last few years, which was predicted by the various supply-side economists, and seems to have shocked economists more on the left. Now, I’m not yet about to hire Larry Kudlow to manage my personal finances, but I confess my experience of looking at the economic statistics since ca. 1985, and comparing them with predictions right and left, makes me more willing to lend an ear to the right. This, actually, is the last part of my conversion to general conservatism–as recently as the 2001 Bush tax-cuts, I was agin’ ’em–or certainly not much for ’em. But the rising government revenues the last few years have made me mildly supply-sidish. And I do suspect the trillion-odd extra dollars gone into the private sector will make historians look back at the 2000s–like the 1920s, 1950s, and 1980s–as one of the crucial decades for American economic investment, improvement, and dynamism; and that they will judge them one of the great achievements of Pres. Bush.
(I’d still repeal the tax cuts if all the extra money went to the military, but like I said, I’m still only mildly supply-sidish.)
The issues are one thing, the graph another. The graph, as lots of people have said, is embarassingly silly.
And sadly made by a Swarthmore grad.
But fear not, Withywindle, the chart will not look the same in another few years. Europe is moving towards lower tax rates – corporate tax competition has accelerated, with Ireland and the “new europe” leading the way. At first france and germany pushed for hamonization at (their) higher rates, but now are responding with their own packages of corporate tax reforms. In Germany, it follows some of the original TRA of 1986, at least in terms of broadening the base, but lowering the rates.
I am afraid, sir, that the uncannily smooth best-fit curve you depict was first discovered by famous economist Martin Gardner.
http://en.wikipedia.org/wiki/Laffer_curve#The_Neo-Laffer_Curve
Curses! Nothing new under the sun, once again.
“And I do suspect the trillion-odd extra dollars gone into the private sector will make historians look back at the 2000s–like the 1920s, 1950s, and 1980s–as one of the crucial decades for American economic investment, improvement, and dynamism; and that they will judge them one of the great achievements of Pres. Bush.” I have to agree that historians will look back at the early 2000s as a crucial decade. As for the rest, I call BS.
You make the claim that the deficit is shrinking. It is not. The rate of increase in the deficit is decreasing.
The Reagan economic recovery came after the Reagan Recession/Depression. Do you not remember that part? And then there was another hit toward the end of his regime; and then there was G. H. W. Bush’ recession in 1992 – no doubt because he had to raise taxes, right?
So what exactly is G. W. Bush’ economic performance record? It is very good, if you own lots of stock in oil, military-related, or pharma companies. It is not so good if you are invested in airlines, semi-conductors, automobile; or if you work for a living. Bush’ fault? More so than in the past, as he has applied more economic leverage than has been seen since WW II. Tax cuts to the rich, ‘free trade’ agreements (I am not forgetting, or forgiving, Clinton’s role), privatization of many functions (how many mercenaries in Iraq?), slashing prime interest rates (please don’t tell me that the Fed is independent) are a few of the most salient.