I prefer Keynesian Economics over Trickle Down Economics but

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The issues with the Laffer curve are severe due to the fact that Government would have to project economic conditions and variables ahead of time since tax rates tend to be set before income is actually earned. Furthermore, when budget periods are taken into account one needs to have a degree of predictability for revenue in order to budget properly. Finally there is the question of the NPV of the taxes, and what average cost of capital to use to determine the NPV of the expenditures.

GAAP = General Accepted Accounting Principles. What you are doing is taking a projected number, for instance the tax revenue at a 30% average rate over the whole country, then arguing that decreasing this to lets say 25% is an expenditure, which for a lack of a better term is insane. As I said, you're taking a revenue number that isn't obtained and then attempting to put an expenditure of the difference between Sum A and Sum B as a liability. If I did accounting the way you are arguing here, I'd be doing jail time for FRAUD. If you cannot actually do the books as you say, then for the purpose of accounting its not true. For the purpose of a cheap rhetorical point, it is.

It's not about starving the beast but about not screwing with accounting to make a cheap rhetorical point in front of an economically unenlightened audience. Taxes ultimately do increase the deficit/reduce the surplus, this is true, however its not an expenditure in the literal sense so using that term is at best stupid and at worst propaganda. There is of course an argument to be had on whether the spending of that difference by the private sector and citizens results in a higher NPV than government spending that difference. However, in that argument, you would have to account for the cost of collecting that capital by government, then subtract the effect of private citizens spending the same money in order to end up with the best solution.

Yes, that would also be a problem.

Wasn't the Laffer curve drawn up on a napkin? Did Laffer hit his head on the toilet when he came up with this untested theory?

No, that is the flux capacitor.

It was drawn on a napkin in a meeting with Gerald Ford, but he didn't invent the idea. It is attributed Ibn Khaldun and John Maynard F*cking Keynes.

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It is illogical. People don't decide to stop this "wealth creation" just because taxes are higher. It goes back to the "to get the rich to work harder, pay them more, to make the poor work harder, pay them less" which is accepted conventional wisdom. Higher marginal taxes on the rich actually makes them less inclined to award themselves obscenely high salaries and bonuses and actually invest money back into productive purposes. For shame! There has been really a move to ban all methods of inducing wealthy people to "do the right thing" because such is seen as an insult to them, as wealthy people are the best people they know what's best and to tell them what to do is an insult. Meanwhile, controls on the lower orders are tightened and tightened, as they "never do the right thing" and must be kept under close watch and control. We see the results; the very ugly results.

Wealth creation is reduced when taxes are higher due to less capital to invest. Do you know anything about economics at all or do you just spit out things you've read in marxism weekly? With higher taxes, you also need a higher return on an investment in order to generate the same wealth. Its not the "to make the rich work harder" rhetoric you use, its because the threshold for what constitutes an attractive investment become higher. Salaries and bonuses tend to be reinvested through diversification, and due to US law and the US citizens, the most attractive investments have been in foreign countries.

For instance, it makes more sense to invest in China, because not only do they offer cheaper labor, less red tape, a better education system and harder working/more competent workers, they are the market of the future. Producing lower quality products in the US at a higher cost and then having to ship those products to the end consumer in China will hurt the companies in the long run. The right thing for me, is that which benefits me and those I care about the most, I could care less about anyone else. The whole "leftist" morality play, is becoming so played out because its not really about morals, its about bleeding hearts and empathic wussies who want everyone to have a great standard of living , even if they have to spend every cent of everyone else's money to do so.

What you are describing is the income effect.

But there is also the substitution effect.

If someone is comfortable with a certain standard of living, they will substitute away from labour (of which the rewards have been reduced) toward leisure.

Actually more wealth is created when there's more demand in the economy because money isn't being hoarded at the top. Still, if someone is told they'll be hit with a 90% marginal tax rate if they award themselves more than $2 million a year and milk their enterprise that way then they may instead put that money back in the business and not pay that tax. Perhaps the tax code will include incentives to get this money invested productively. That's what happened before the Reagan people decided that any methods of leverage on rich people is an insult and wrong and evil and most were abolished. They claimed it in part in the name of simplifying the tax code and that the loopholes that made that few people actually paid the 90% was some kind of cosmic injustice... really.

Is the work of some megabuck executive what really drives production? I say it is not. This idea that taxing them will make them work less hard and therefore we'll have less production is abject nonsense. Their work really isn't that closely aligned with production at all.

The business of business is business - to make money. That's the role of these bigwigs. Their business is not to produce widgets. I repeat, their business is not to produce widgets. Businessmen and the government do not have the same interest - government, supposedly in service of the people, wants more production, the businessmen want to make more money. These are not the same thing.

Don't worry, I'm having issues trying to understand what he's talking about as well, with a degree in economics and 10+ years of investments in my past.



Well, you're somewhat off target here. Demand is a function of disposable income and supply is the function of desiring return on capital. In your equation, you're killing off the supply bit, thus creating surplus demand. Money is being invested in supply constantly by investors, and this creates demand through salaries paid.

There are countless reasons why investing back into a business is not a good idea. The primary one is that investment in a secondary or tertiary business would be more beneficial both based on return and on diversification. Reinvesting returns into a business is only productive and sound so long as the return is larger than you could obtain elsewhere. Furthermore, the benefits of diversification makes a secondary or tertiary company a better investment since it reduces downside risk.

Only in the heads of the economically insane is it wrong that owners reap the benefits of investing their capital wisely and productively. If I came to you when you collect your salary, put a gun to you and told you that you should take 90% of that salary and give it back to the company so that other people could get a higher salary and drive up demand, you would cry your little eyes out.

It's only "fair", "morally right" and "productive" when people who do not understand economics, business and finance tell people who do how to deal with money.



It is the work of an executive which has the biggest influence on a company. Not only is the executive ultimately responsible for everything that happens within the company. They also make the long term strategic decisions.

An executive is the person who decides to go for a new market, a new product, and so on, so their work is what decides what happens with production on every single level within a company.

The argument isn't that "if we tax them harder, they work less hard" the argument is "if we tax them harder, they say f**k you as*holes and go get a job in a foreign company." resulting in a lot of brain power leaving the country.

The only thing you're producing is evidence that you have no clue when it comes to economics, business, finance or anything related to the topic.

You're wrong here as well. Government wants more production, because more production means more jobs, more jobs means less people collecting social aid in the form of unemployment, food stamps, welfare and other programs that cost the government money. Furthermore, it means more tax revenue for the government since everyone who works has to pay taxes.

So in the end, government also only cares about making money.

Executive talent is highly overrated. People make huge amounts of money for either bungling or for plans to raid pension plans and asset-strip companies. Who cares if some crybabies leave. Let them leave! There will be plenty of people who can do just as good a job for what after all would be far more than most occupations can pay.

If we're talking about Keynesian economics, that argument is nothing more than an off-topic semantic nitpick. If taxes are cut in order to eliminate the surplus every time the budget has a chance of poking out of the red territory, you are left with a long-term trend of indefinitely growing debt-to-GDP ratio. I wouldn't have a gripe with Republicans if they at least admitted to their constituents that they are not really concerned with the national debt but are using it as a tool to further their true agenda, which is to shrink the welfare state. The debt issue is being used as a scare tactic.

In any case our ever growing private-debt-to-GDP ratio is a bigger issue to be concerned about than public debt. It indicates that too much of our economy is being financed on expanding credit and financial/asset inflation instead of technological innovation and productivity growth.

The "semantic nitpick" is a recognition of the facts. And only facts matter.

ruveyn