Karoli Kuns — Reaganomics Inventor Excuses Kansas Failure, Says Tax Cuts Were 'Too Small'

Art Laffer doubles down on Kansas.

Crooks and Liars
Reaganomics Inventor Excuses Kansas Failure, Says Tax Cuts Were 'Too Small'
Karoli Kuns

Dirk Ehnts — A comment on the trickle-down economics of Arthur Laffer, 2017 Trump edition

Laffer’s trickle-down economics did not do well empirically. Whether a cut in taxes stimulates the economy is a different question, and also any changes in tax rates might be overcompensated by changes in government spending taking place simultaneously. This, I believe, was part of the bait-and-switch under Ronald Reagan (tax cuts for the rich, but huge increase in government spending on defence) and will be part of the Trump policy, too. Nothing new here.

econoblog 101
A comment on the trickle-down economics of Arthur Laffer, 2017 Trump edition
Dirk Ehnts | Lecturer at Bard College Berlin

Sean Guillory — Ukraine’s New Neoliberal Necromancer [Art Laffer]

Laffer's record, culminating in Sam Brownback's Kansas "experiment."

Yet one need not survey the last thirty years to see the results of Laffer’s dogma. Rewind to 2012, when Laffer advised Kansas Governor Sam Brownback to shove his slash-taxes-for-economic-growth snake oil down the Plains State’s throat. Brownback, a disciple himself, dutifully complied. Laffer’s plan, after all, would serve as a “real live experiment” for the potency of supply-side economics. By 2015, Kansas was stuck with a $600 million budget deficit. When Brownback reproached Laffer on his promise of economic growth, Laffer chided him for his lack of faith and urged patience. “Kansas is doing fine,” says Laffer. What was the prescription for this calamity? Austerity.

Laffer is the US government's choice to advise Ukraine on a new tax system?

Read Russia
Ukraine’s New Neoliberal Necromancer [Art Laffer]

Sean Guillory

Yevgeniy Pasishnichenko — The engineer of Reaganomics comes to Ukraine: What now?

Art Laffer spotted in Ukraine. Yes, really.

Now an American economist Arthur Laffer has been appointed as an advisor to the ex-American Minister of Finance of Ukraine Natalie Ann Yaresko.

You can't make this stuff up.

Fort Russ
The engineer of Reaganomics comes to Ukraine: What now?

Yevgeniy Pasishnichenko
Translated for Fort Russ by: Paul Siebert

Mark Thoma — Paul Krugman: Voodoo Never Dies

Krugman goes all "Marxist,"sort of, and mentions class warfare — of the rich against the rest — because they can.

The opposition needs to roll out Kansas.

"Voodoo never dies" = "Zombie economics" (ht John Quiggin). The zombies run on money.

Economist’s View
Paul Krugman: Voodoo Never Dies
Mark Thoma | Professor of Economics, University of Oregon

Joe Conason — Here's What Happened to One State After its Republican Governor Implemented an Extreme Tax Cutting "Experiment"

Déjà vu. Soon to be known as Laffer's Folly.

AlterNet 

Here's What Happened to One State After its Republican Governor Implemented an Extreme Tax Cutting "Experiment"
Joe Conason

Barry Rithotlz — What's the Penalty for Pundits Who Get It Wrong?

Five years ago, Arthur Laffer -- creator of the Laffer curve and a member of President Ronald Reagan's Economic Policy Advisory Board from 1981-89 -- wrote an op-ed article. It was a grab bag of his pet peeves: opposition to Federal Reserve policies in response to the financial crisis and concern about the “unfunded liabilities of federal programs,'' including Social Security and Medicare. And, of course, he decried deficits, which in large part are the result of his thesis that tax cuts often increase revenue. As it turns out, for the most part, they don’t....

Pretty much every single warning, every data point, every item Laffer complained about was wrong.

Why does this happen, and why are there no penalties for being so inaccurate?

This isn't about economics, it's about politics. Unfortunately, the dismal science has become the vehicle of choice for those who seek to further their own political agenda....
We would do well to heed the words of Cambridge economist Joan Robinson, who observed “The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.”

The deceptions need to end.

Some are blinded by ideology. Some seek to blind others by it.

Bloomberg View
What's the Penalty for Pundits Who Get It Wrong?
Barry Rithotlz
(h/t Brad DeLong)

The joke's on us!!!

Source: whoaorno.com via Mike on Pinterest

Bruce Bartlett — “Taxes and a Two-Santa Theory" -The Origin of Modern Republican Fiscal Policy

Wondering where the Ryan budget comes from?

In 1976, the journalist Jude Wanniski wrote an essay, “Taxes and a Two-Santa Theory,” little noticed at the time and virtually unknown today, that put forward a theory that has had extraordinary influence on the Republican Party. Indeed, virtually everything Republicans say about taxes and spending today echoes that theory.

Read it at The New York Times | Economix
The Origin of Modern Republican Fiscal Policy
By Bruce Bartlett
(h/t Mark Thoma)

Supply side destruction. Worker pay collapsed under Reagan's voodoo economics team

Hey, Art Laffer...how do you explain this?

Wasn't supply side economics supposed to incentivize everyone to work harder because they'd get to keep more of their hard-earned money? Well, work harder they did, but they earned far less. Average hourly earnings collapsed under Reagan. Art Laffer how do you explain this? Laffer's the greatest con man of the last 30 years!

Average hourly earnings y-o-y % change

The Laffer Curve and Fiscal Policy

The dynamic calculation would be supplementary and not replace the current official scoring methodology, but the obvious long-term goal is to require official revenue estimates to incorporate “Laffer curve” effects in order to make it easier to cut taxes and harder to raise them.

The Laffer curve, named for the economist Arthur Laffer, posits that tax rates may be so high that a tax-rate reduction will raise revenue to the government and a tax-rate increase will lower revenue.

While no economist denies the theoretical possibility of a revenue-raising tax cut or revenue-losing tax increase, Republicans talk as if the United States is always on the high side of the Laffer curve – no matter what the tax rates are – so every tax cut will pay for itself and no tax increase could possibly ever raise net revenue and thus reduce the deficit.

Read it at The New York Times | Economix

Tilting the Budget Process to the G.O.P.
by Bruce Bartlett
(Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul.)

Must-read from the MMT perspective. It shows how the present budgetary process works from the right and how it is dictated by ideology rather than macroeconomic reasoning, let alone sectoral balances.

Republicans don’t really care about accurate revenue estimates; they just want them to show that tax cuts pay for themselves, so they can pass more of them without constraint. As my fellow Economix contributor Simon Johnson has noted, the corruption of the agencies that produce budget data is a crucial cause of Europe’s debt crisis.

Keven Drum chimes in at Mother Jones
Republicans Once Again Unleash Reality Distortion Field
by Kevin Drum

Dueling wings of the GOP

Newsmax, a nutritional supplement sales organization and expensive email list with a right-wing news website attached, is hosting a Republican presidential debate, “moderated” by fictional television clown tycoon Donald Trump, set to air on a television channel you probably don’t actually know you have that spends most of the broadcast day airing paid programming. Historical fiction author Newt Gingrich — a disgraced serial adulterer with a still-unexplained $500,000 credit line at Tiffany and Co. who is also for some reason the current frontrunner for the party’s nomination — could not be happier. For some crazy reason, Republican campaign strategist Karl Rove is not particularly thrilled with all of this.

Read the rest at Salon
Rove v. Trump: The Unlikely War for the Soul of the GOP
by Alex Pareene

From the economic point view, this is a duel between two wings of the GOP, the tradition fiscal conservative wing that regards debt as immoral and seeks to balance budgets and the Bush/Cheney/Laffer "deficits don't matter" wing that Poppy Bush called "voodoo economics" when running against Reagan for the nomination. Fiscal conservatives believe that it was Bush's extravagance that lead to the election of Barack Obama, whom they regard as a Kenyan Marxist/Keynesian socialist.

Mundell-Laffer on the External Sector; c.1975

Tom posted a link to an article he came across from the late Jude Wanniski's Polyconomics which was a review of a paper written by Mundell and Laffer in 1975. I was a subscriber to Wanniski's analysis some years ago until his sudden passing.

It is titled "A New View of the World Economy", and provides what they believed was an operative description of the external sector in 1975. This was just a few years after the US completely abandoned the gold standard so perhaps at that time, people were very eager to come up with some new ideas as to what a new framework for understanding the global economy would be. Here is an interesting excerpt:

Going a step further, Mundell has revived the proposition, and Laffer has documented empirically, that money, like apples and gold, is also subject to these international forces of supply and demand. When, for example, there is an excess demand for money in the United States relative to the rest of the world, we will import money and run a balance of payments surplus -- i.e., more money will be coming into this country than is going out. When there is an excess supply of money in the United States, we will export money and run a balance of payments deficit. This idea also has its roots in earlier centuries, but is still a minority view among economists everywhere. Balance of payments deficits are thought to represent not a market phenomenon but a structural problem -- i.e., "capital flight" or "undercompetitiveness." Laffer has further demonstrated that when a country`s growth rate accelerates relative to the rest of the world its balance of trade worsens; and vice versa. (As a child grows, it consumes more than it produces.) But such a deficit is not cause for alarm. What is then happening is something perfectly natural. As long as its government does not speed up its own money creation, the country will export bonds to pay for its deficit in trade. All that is occurring is that the rest of the world has decided the country in question, with its higher growth rate, is a good place in which to invest. (Just as parents invest in their growing children).

Some observations:

The authors seem to treat all "money" as a singular fungible commodity, seemingly ignoring the fact that there are different currencies in every country; and the relative value of each (as indicated by an exchange rate) can change over time. Ignoring "Hickey's Law" ;) that a currency must stay in it's currency zone.

They state that a country with a higher growth rate will exhibit a balance of trade that "worsens", implying exports: good, imports: bad. This flies in the face of our current global situation where China has had MUCH higher growth than the US while at the same time running an external surplus with the US that is unprecedented in the entire history of human civilization.

Mundell and Laffer posit that a country can EXPORT bonds to "pay for" real imported goods; and that the country taking possession of a foreign country's bonds looks at such a transaction as an "investment".

These are bizarre descriptions of international transactions. This was written in 1975, just a few short years after the US dropped the gold standard in full so perhaps some understanding is in order as the authors may have been "brainstorming" to try to come up with a new framework.

But Wanniski's affirming review of these claims was written in 2005, and I am not led to believe that either Laffer or Mundell have significantly changed their perception of reality. Both Mundell and Laffer are still influential within economic policy circles. These beliefs may still influence policy recommendations they are making to this day.