Mystery Economic Theater 2010

[Fusion_power]

High taxes are not necessarily bad for the economy any more than blood sucking leeches are bad for you...... until you run out of blood. There is no onus on any of us to prove that taxes are either bad or good for an economy. We should all understand that there is a level of taxation that suppresses economic growth in a given economy. When the tax rate exceeds that level, the overall economy pays a price.

Anyone see the doctored up unemployment numbers? Talk about spin! The unemployment rate ratcheted up a notch yet the economy created nearly 300,000 jobs. The official reason given is that more people are now looking for jobs who had previously given up hope. I'm deliberately avoiding making snide comments.

DarJones

[cheesehead]

Originally Posted by ewmayer

What are you, his playground big-buddy?

/* Begin O-T */ Try talking about Israelis in Gaza. /* End O-T */

No,he didn't say explicitly that said expansion was due to said tax rates

... because that's not what I meant ...

but by emphasizing the correlation so strongly, many reasonable persons would conclude that causality was being asserted.

As I said,

Originally Posted by cheesehead

You missed that what I was doing was to turn the current conservative economic rhetoric on itself. I'm pointing out that, by the conservatives' own repeated rhetorical logic about tax rates and economic expansion, they cannot object to rolling tax rates back to the Clinton years!

... so I do plead guilty to not having fully explained my rhetoric-turning at the same time I turned it.

Originally Posted by ewmayer

If there is no causal relation, what would be the point of raising the tax rates?

Rhetorical -- that's what the point would be -- rhetorical ... for the purpose of illustrating the falsity of a certain piece of conservative financial rhetoric.

But I'll tell you what - feel free to take a poll, asking readers if they think reading the above quoted sentence and taking away the impression that its author is implying causality is entirely unreasonable. If we get >= 20 votes (excluding me, you, fusion and cheesehead) and more than 2/3 say "unreasonable", I'll make a mea culpa.

If we're going to start polling about interpretations of out-of-context sentences, we're doomed!

But, fortunately, that was merely a rhetorical suggestion about interpretation of an out-of-context rhetorical sentence, not a sincere one.

[cheesehead]

Originally Posted by cheesehead

(Why do you think I did?)

Originally Posted by ewmayer

but by emphasizing the correlation so strongly,

he could mislead

many reasonable persons

who

would conclude that causality was being asserted.

Thank you for answering my question (despite the slight grammatical slip which is more blatent when quoted out-of-context).

[cheesehead]

Originally Posted by Fusion_power

Cheesehead, I will challenge two major parts of your presumptious logic.

Fine.

All I did was to turn a certain part of current conservative economic rhetoric, which is consistent with part of your posting, on itself, for the purpose of demonstrating its fallacy. So, I'll be delighted for you to help me demonstrate the fallacy!!! Thank you!!!

1. Your rationale seems to be that the U.S. went through a major economic expansion for 10 years and that during that time the tax rate was higher than it is today.

No, I'm pointing out that, according to the simplistic assertion of current conservative economic rhetoric that tax rates are highly correlated with economic expansion, conservatives cannot justify objecting to a proposal to return tax rates to what they were during the 1990s.

Our economy has similarities in having grown vigorously in spite of the onerous handicap of high taxes.

"Onerous" seems overblown. Compare my recommended 1990s rates to 1950s rates in the U.S.

2. I challenge the 'balanced budgets' statement because the budget was NOT balanced because of the tax rate. It was balanced because the strong economy was causing more total taxes - especially corporate taxes to be paid which resulted in the balanced budget.

Exactly.

It was not unbalanced by the then-current tax rates.

That's my point.

Thank you for agreeing with me.

I would however point out that at the time you view as a period of exceptional prosperity we had a democrat for president and a congress controlled by republicans. I happen to see this as a very fortuitous circumstance since the combination tends to offset the effect of a single party having control of both which is what we have today. In other words, the more the politicians are at each others throats, the less likely they are to spend money we can't afford.

... and you included not one claim about "onerous" tax rates in that paragraph, did you?

Congratulations!

See, it can be done -- to explain economic prosperity without claiming some high correlation between tax rates and economic expansion !!!!

Now, go and sin no more.

... And thank you, again, for helping me demonstrate the fallacy of a certain part of current conservative economic rhetoric.

[cheesehead]

Originally Posted by ewmayer

I didn't claim any pre-WW2 expansions of specific exceptional length > 120 months, merely that there were robust multiyear expansions.

But you did write:

Originally Posted by ewmayer

Cheesehead, you ignore the fact that there were significant and long periods of economic expansion in the U.S. before the post-WW2 period, and long before there was an income tax, much less one with top rates exceeding 50%.

You were saying that when I claimed that 1991-2001 was the longest economic expansion in U.S. history, I was ignoring "the fact that there were significant and long periods of economic expansion in the U.S. before the post-WW2 period".

Your statement clearly is an attempt to dispute that 1991-2001 was the longest economic expansion in U.S. history.

In other words, you were claiming "pre-WW2 expansions of specific exceptional length > 120 months", because that's what your disputation of my statement amounts to.

But please ... no apology is necessary, now that I've tried to explain everything here (and you and the rest have generously not interrupted during my spate of postings!)

[cheesehead]

Originally Posted by garo

And you owe cheesehead an apology for saying that he said that high tax rates cause economic prosperity when he said nothing of the sort.

But, garo, I really brought that on myself by presenting a turn of logic without explaining that I was presenting a turn of logic. No apology really necessary, I think. Thank you for your support anyway!

First year econ. courses still teach: Correlation does not imply causation.

Certain parts of current conservative economic rhetoric also violate some basic economics ... because they were thinktank-fashioned for political purposes, not economic accuracy. Indeed, they are specifically designed to prey upon economic illiteracy.

Perhaps this kerfluffle will help illustrate that to some of you folks who haven't understood what I've been getting at for a few years. :-)

There is no evidence that low tax rates help economic prosperity.

Now, you're just being silly.

Of course, there is such evidence!

It's just that that's not the whole picture as some conservatives would have us believe.

[cheesehead]

Originally Posted by garo

So let's try to improve the standard of the debate here, shall we?

Yes, let's all settle down.

What I/we've done here is to demonstrate the fallacy of a certain part of current conservative economic rhetoric. I apologize to those of you who, due to my failing to get your informed consent for participation in this experiment, have been ... temporarily misled into making unjustified postings.

Let's all remember how such misleading can easily occur, resolve not to deliberately conduct future such misleadings, and skeptically look at current conservative economic rhetoric. (oh, and ... be careful about out-of-context sentences!)

Let's all go and sin no more.

[cheesehead]

Originally Posted by S485122

Garo in my opinion you used a tone that was to aggressive.

Not too aggressive according to garo's past record, I think. (or mine, when I was in certain moods :-)

I do not think misunderstanding Cheasehead deserves an apology.

Correct!

Failing to catch a misspelling of "cheesehead", however ... actually, I'm surprised it doesn't happen more often. :-)

I also think that the argument by Fusion_power was that high taxes kill the economy. Cheasehead

Oh ... it does (happen more often), doesn't it? :-)

replied by giving examples where high taxes did not kill the economy. I think Ewmayer 's answer was just a bit enthusiastic (a priori no bad faith involved IMHO.

Jacob,

I think you (once again) have correctly interpreted and responded to what's going on when posts get a bit wild. Thanks!

[cheesehead]

Originally Posted by Fusion_power

High taxes are not necessarily bad for the economy any more than blood sucking leeches are bad for you...... until you run out of blood.

... and the 1991-2001 taxes were nowhere near that.

We should all understand that there is a level of taxation that suppresses economic growth in a given economy. When the tax rate exceeds that level, the overall economy pays a price.

... and the 1991-2001 taxes were nowhere ...

Anyone see the doctored up unemployment numbers? Talk about spin! The unemployment rate ratcheted up a notch yet the economy created nearly 300,000 jobs. The official reason given is that more people are now looking for jobs who had previously given up hope.

DarJones,

That's been the official, nonhidden, non"spun", honest definition of the unemployment rate forever. It has never, ever been intended to include people who have not worked for a long time (there's a well-defined cutoff length) and are not currently seeking employment.

It would have been misleading for "unemployment rate" to have included, for instance, my mother, who lived for 60 years after leaving her last paid job.

Should she have been counted as "unemployed" just because she was supported, all that time, by her husband (and later, his pension) but was not currently employed (or seeking employment)? Surely you'll admit that it would have been misleading to have included her in the "unemployment rate".

Now, once you've admitted that my mother shouldn't have been included, all there's left to argue about is where to draw the lines about length of unemployment and definition of "currently seeking employment" -- and the official definitions have always been publicly posted, with no shenanigans going on.

There's no "doctoring", no "spin". Just honest definitions ... which, unfortunately, are not always bothered to be sought out by commentators.

- - -

BTW, folks, notice that this (people resuming job-searching who had not been included in the "unemployment rate" for a while, but now are again counted only because they've resumed job-seeking) is yet another reason why unemployment rate is a lagging, not coincident, economic indicator. (I actually have sound reasons for most of my economic assertions!)

[garo]

As Laffer of the famous Laffer curve said, There are two tax rates that are guaranteed to bring in the same amount of tax: 0% and 100%. The task of policy makers is to find some optimal rate in the middle. Note that this optimal rate changes with change in economic conditions. I think we can be pretty sure given the humongous size of US deficits and the increasingly lopsided distribution of wealth in the US, that current tax rates are too low and not too high. Of course the headline tax rates may not be too low but all the exemptions mean that effective tax rates for many rich people are very low. For instance, I cannot think of any good reason why cap gains tax is so much lower than the marginal income tax - and before anyone talks about "encouraging investment", let me preemptively smack you in the mouth with the 60/40 treatment of futures. If you don't know what that means, go look it up.

[cheesehead]

Originally Posted by garo

I cannot think of any good reason why cap gains tax is so much lower than the marginal income tax

encouraging investment

- and before anyone talks about "encouraging investment", let me preemptively smack you in the mouth with the 60/40 treatment of futures.

(* mumbling with mouth full of 60/40 treatment of futures *) Okay, 1) encouraging investment and 2) political compromise.

If you don't know what that means, go look it up.

Did. Thansk.