Laffer Curve is a joke

Conventional conservative doctrine holds that when taxes are cut, tax revenue goes up. It is complete bullshit, - cash grab by the wealthiest greedy Americans. Like other conservative issues, history and facts are being re-written. The problem with those clowns at The Heritage Foundation, and other conservative groups who pass off this propaganda is one big assumption that can't be true - they all assume any cash kept on a tax cut is re-invested in the U.S. and is then used to create more jobs. They don't take into account the propensity of billionaires to travel and spend their money overseas, not only for frivolities for themselves and their families, but also in outsourcing jobs in their growing businesses.

We tried this tax cut strategy in the Reagan Presidency, who left the country with a record deficit. Note Ronny also had two stimulus plans - eat your hearts out Heritage. But that one is for another day...

To an ordinarily person this principle of cut the rate and get more, doesn't pass the smell test. After-all if the country was a household, and you reduce your income (tax revenue) then, if you are living paycheck to paycheck, you will start overdrawing, or dipping into your credit cards. You should keep to your original instinct on this one, and call this one c r a p.

But those daft conservatives will have you believe that in the U. S magically, when taxes are cut, those brilliant billionaires will reinvest it all back in the U. S. And when they do re-invest it, those funds will create jobs.

Nice try. Herewhy this theory is BS, even though we've already seen it bust.

Not all of those tax dollars are invested in the U. S. The poor among you may have never traveled or studied overseas, but it might not surprise you that many Americans are living, and studying overseas, all paid for by their parents. And these schools aren't cheap! Wonder how many more would be over there if we cut taxes again. Even if they're invested it probably will be overseas where labor costs are lower. I had a boss who once said I could hire all the help I needed - in the Philippines! And I did, to keep from working 16 hour days.

So where does the conservative Laffer plan fail here? Tax cut dollars are not invested in the U. S. They are invested overseas, or consumed overseas where they support the economies of other countries. Indeed - the CBO estimated that at best 28% of the tax cut cash would be reinvested in 10 years.

And another thing - where does does the supposed tax cut benefit stop, as they say on Saturday Night Live - REALLY? For this to be true, that as you cut taxes revenue increases, at another magical point - 0% taxes - we should have the ultimate in investment - and an infinite tax revenue? Kind of like a perpetual motion machine. Hogwash again.

And investment in the U. S. is just where Food Stamps and Unemployment Insurance excels. Because the unemployed and those on food stamps are not likely to travel, that money is invested locally, employing people in grocery stores, transportation, farms and factories. All these jobs created or kept by these programs pay taxes. Poor people actually need the cash to so they actually spend it, and they don't travel because they don't have the money, so they spend it locally. Studies say over 80% of the Food Stamp and Unemployment Insurance money is-reinvested.

Next time someone tells you our economy will be better off if we cut taxes for the very rich, LAUGH and tell them you know better, and the only ones who are better off, are the people that get the tax cut, in this case those with gross incomes or net profits of over $250,000 per year - less than 2% of the U. S. population.

Corporations or Government, Good and Bad,

This year’s political fights brought out by conservatives and republicans focused the attention of some on subjects many of us had thought were decided long ago. Not only did we hear their rhetoric pointed at century-plus past enemies, but in apparent total social, historical and ethical blindness, we heard how capitalism has always been good for the U. S. and the best thing for Government to do is to get out of the way.

Phew! What a crock - right?

They do have a point in there don’t they? I’m not exactly where they are coming from but I will give them a point that Communism has pretty much been a bust, wherever it has been tried has been pretty much a bust. In Russia, they slaughtered millions in a vain attempt to bring about a poor attempt. Indeed, some would point out that communism has never really been tried in it’s purest form. Wasn’t the elimination of money one of the key points? But I’m not sure I’d want to even see an attempt at that one - I lived in Moscow during the last trial and witnessed what a mess people really make of a ‘utopia.’

But conservatives weren't talking about communism. They were talking about socialism, kind of the little sister and not nearly as draconian. But what is really wrong with socialism? All we’ve heard is that it is not American, and not capitalism - and is bad.

Is that all they’ve got?

Other than flamers, the wealthy, or party hacks, I have not talked to a single individual spouting the socialism bad, Federal Government needs to be smaller, capitalism is always good, lower taxes are always better, health care reform is bad line - THE LINE - not a single individual who would give up Medicare, Medicade, Social Security, farm subsidies, unemployment insurance, national defense. None of them even knew Social Security or Medicare would be considered socialism. Get it? They were following the lead of people they trusted and didn’t even know what it meant.

What do they want to give up? Let’s see, what have we been falling behind other countries? Oh yea, it’s education! So the one thing we have been getting behind in, as kids are falling behind by being schooled by their parents at home, predominately in areas where the instance of STD and teen age pregnancies are highest, where test scores are falling farther and farther behind kids in other countries. Countries where we are also falling behind economically - because of course they are getting better and better educated. AND THEY WANT TO CUT THE EDUCATION BUDGET. Is there anything that makes less sense? Oh yea, like trying to talk people who love their Social Security into hating it.

What we know from economics: businesses are great when competing fairly with each other. The competition drives down prices, and inefficient operations are driven out of business. Once a business drives out all competition though, it becomes a monopoly, cutting output and raising prices. An oligopoly, with a few businesses with coordinated operations also keep prices up and volume down. Think AT&T when it was the only phone company. When it was broken up, we ended up with competition across the industry and many many more choices. If government wouldn’t have stepped in, we would still have AT&T - the only place to get a phone. And diamonds? Debeers is outside U. S. Government control. It controls a cartel that keeps diamond prices artificially high. The world has more than enough diamonds, that, if they all entered the market, would drive prices down. Diamonds might lose their luster as a special stone. But this that we have now, an artificial shortage is created. My point is that is good for the government to step in and break up companies.

And what about corporate compensation? We have all heard the stories over the last few years about corporate executives and sales staff making millions of dollars a year in companies the Government was forces to support before they collapsed. And why did they need support? Because of the deregulation of financial industries. Some businesses became experts in producing and selling toxic securities that were known to be very risky and likely to be a poor producer in a down economy.

The idea is sound up to a point. A business has a plan and needs to make a certain profit level. A business finance manager wants to hit that profit level regardless of economic conditions. This manager buys a basket of securities that are predicted to perform at a certain level under different market conditions. For instance, when the economic activity goes up and the world gets stronger then people buy more lobster and Mercedes Benz’. Prices and securities based in those goods go up. But the business financial manager needs investments in a down time too. Potatoes and gold both rise in value in down economic times: a finance manager might buy gold backed securities if she had cash in a down time, or she might buy invest with J. R. Simplot. In the same light, a financial manager may be talked into buying sub prime mortgages by Goldman Sachs to balance their portfolio for a certain situation. But as AAA rated they were sold as proven cash payers before the collapse - and as thus are paying a record fine. The bottom line is that without regulation, these markets will crash into a depression as we have already experienced, or they will fraudulently sell securities to each other, all to make more and more money.

And health care reform? Republicans have suggested as an alternative when the insured have been dropped because they have a costly disease, the dropped victims could pool together and buy insurance together. Do you get it? It’s like if your house burned down, your home owner’s policy would drop, and you’d have to buy insurance in a pool with other home owners with burned down houses. Are they serious? What is the use of buying insurance anyway if they are allowed to drop it. Only someone determined to destroy insurance and the business would suggest such a drastic approach. Most of us of course want a Government that is there to protect us from business.

And more on the health insurance. This past year, insurance companies, who pay their executives well, sometimes $10m+ per year each, spent hundreds of millions of dollars to attempt to destroy the health care reform supported by a majority of Americans. The bill that came out lacks some of the socialist parts favored by a majority of Americans, in the way of a government run insurance plan to compete with the insurance companies. But of course, in these crazy days, businesses, which are there to compete, don’t want to have t go up against a government rum play. It would drive them out of business. Nothing about inefficiency, nothing about being better for health care for Americans. It’s all about greed of the companies and making big salaries for their executives.

The bill we ended up with is not favored by Americans. Republicans would like to repeal it but the majority of the country is wary. By a two to one margin, and in direct opposition to conservatives and Republicans, Americans want more health care and not less.

What else does government do well. Of course defense of our county - but do you recall the founding fathers were wary of a standing army? I’m sure you will see the conservatives will flip sides again when they have to explain why the founding fathers didn’t want the expense of an army.

And tax cuts always make business better and increase tax receipts? As I recall that was the Laffer curve and even it’s author Arthur Laffer admitted it doesn’t work. Of course, once the tax rate approaches zero does Government tax receipts approach infinity. Pure garbage. But somebody is till believing it.

But Government is not efficient as well. We all have heard the stories about the defense department buying the $50 hammers and the $1500 coffee pots. They have departments that were created 100 years ago for processes that have ended yet the jobs are still here. And when they win wars, like the cold war, spending doesn’t really go down.

So what is the answer? It is going to be what we have had the last 100 years - mixed private and public. We need to stop the name calling and sloganeering and talk about substance and real ideas again. And we need good people to work in industry and government. Good ethical people, not just ambitious people that are trying to make as much money as possible, or get as much attention as they can, at the expense of everyone else.