Republican/free market ideology at odds with new CRS Report

[Daelak]

A report that came out mid-September, researched and written up by the Congressional Research Service, a non-partisan service arm of both the House and the Senate, that showed absolutely no correlation between higher tax rates and the % growth of the economy. Both house and senate republican denounced the findings.

http://graphics8.nytimes.com/news/bu...andeconomy.pdf

“The reduction in the top tax rates appears to be uncorrelated with saving, investment and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie,” the report said. “However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution.”



Again, you have to be in denial to make the argument that taxation rates have ANY detrimental affect to the economy and prosperity. This is just another report of over decades of research that discredit this false notion.

[Lenonis]

How anyone still believes in trickle down economics is beyond me.

You want to support the job creators? Then give them breaks when they actually create jobs in the US. Don't write them blank checks and cross your fingers.

[Sunseeker]

How anyone still believes in trickle down economics is beyond me.

You want to support the job creators? Then give them breaks when they actually create jobs in the US. Don't write them blank checks and cross your fingers.

Indeed, much like everyone tells low-level employees to "work harder" if they want better pay, you should be rewarded for what you do accomplish, not rewarded for possible future accomplishments.

[Phokas]

The thing is, we aren't in a free market. We provide subsidies to large businesses and regulate the hell out of the private sector. The people writing the regulations are being paid for by big business, therefor the regulations end up hurting small businesses and making them way to hard to start up or compete with the big business. What we have right now is crony capitalism. The Republicans aren't for free market for as much as Democrats are. Lower taxes for everyone inevitably means a stronger private sector, stronger standard of living, and stronger economy.

I suggest you read some Ludwig Von Mises, Hayek, or Rothbard, my good friend. Or perhaps even Milton Friedman.

[Daelak]

Indeed, much like everyone tells low-level employees to "work harder" if they want better pay, you should be rewarded for what you do accomplish, not rewarded for possible future accomplishments.

Exactly, it is truly incredibly how long a falsehood can become a major plank in a major political party in the US. The amount of people that are deluded is astounding.

---------- Post added 2012-11-01 at 09:14 PM ----------

The thing is, we aren't in a free market. We provide subsidies to large businesses and regulate the hell out of the private sector. The people writing the regulations are being paid for by big business, therefor the regulations end up hurting small businesses and making them way to hard to start up or compete with the big business. What we have right now is crony capitalism. The Republicans aren't for free market for as much as Democrats are.

I suggest you read some Ludwig Von Mises or Rothbard, my good friend. Or perhaps even Milton Friedman.

Egghh, I have read them. Tell me when is this road to serfdom going to be done? They are fairytales. They have no hard economic data to support their position, merely hypothetical assumptions that ignore humans' propensity to be completely irrational. But I will give you this, our political system, hell our entire federal government, has been molded for large multi-national companies and extremely wealthy individuals. Look at the tax code, look at patent law, corporate law, and as you said the subsidies.

[someotherguy]

How anyone still believes in trickle down economics is beyond me.

You want to support the job creators? Then give them breaks when they actually create jobs in the US. Don't write them blank checks and cross your fingers.

I like that.
Supporting actual job creators, not just anyone who's rich. Current 'job creator' terminology covers anyone who won the lottery and retired at 20. He never created a job in his life, and never will.
Actual job creators - those who create jobs, not those who have tons of money - should get our support.

[NineSpine]

The thing is, we aren't in a free market. We provide subsidies to large businesses and regulate the hell out of the private sector. The people writing the regulations are being paid for by big business, therefor the regulations end up hurting small businesses and making them way to hard to start up or compete with the big business. What we have right now is crony capitalism. The Republicans aren't for free market for as much as Democrats are.

I suggest you read some Ludwig Von Mises, Hayek, or Rothbard, my good friend. Or perhaps even Milton Friedman.

You were right until you referenced Austrian economists. Austrian economics is dead, and it's dead because it has been roundly disproven repeatedly over the last eighty years. At this point, arguing for Austrian economics is no different than arguing that the Earth is flat or that germ theory is wrong. Austrian economics made a lot of sense when we only had small datasets and very limited information about economies to work from. Those days are long over, and the gigantic amount of data we have access to today renders the Austrian argument that we can't scientifically analyze economies completely moot. That neuters the whole school and leaves it as just an empty husk made out of appeals to morality.

[Tradewind]

Indeed, much like everyone tells low-level employees to "work harder" if they want better pay, you should be rewarded for what you do accomplish, not rewarded for possible future accomplishments.

Socialist!! Get that hammer and sickle out of here, this is the real world Vladimir!

[Deleted]

I looked at the summary and this is essentially totally useless.

1. Comparing Top Marginal Tax rates is meaningless when the Top marginal tax rate today starts at $380 000, but when they were at the higher levels they started at income above $1 000 000 (70%), $2 300 000 (90%) (2011 dollars). Those are rates that almost no one paid by the way.

2. Calculating simple correlations like this for any policy action (stimulus, tax cuts, spendings cuts etc) with GDP changes is problematic due to the fact that certain policies are tend to be exercised in certain economic circumstances. Tax cuts and stimulus are usually used to try and boost the economy when it's weak, which might mislead people to think that the cuts and stimulus are the cause of the weak economy as they occur more often during low GDP growth periods.

The reason no one cares is because this report could've been constructed by a first year undergraduate. How anyone here thinks you should draw any conclusions from it is beyond me.

[Stede]

I looked at the summary and this is essentially totally useless.

1. Comparing Top Marginal Tax rates is meaningless when the Top marginal tax rate today starts at $380 000, but when they were at the higher levels they started at income above $1 000 000 (70%), $2 300 000 (90%) (2011 dollars). Those are rates that almost no one paid by the way.

I wouldn't say useless, at all. The explanation that the top marginal brackets has, over time, yielded to a lower rate bracket that now encompasses a fair bit of dual-income middle-upper class families is a very salient point, but it doesn't invalidate the analysis performed.

In fact, the first figure seems to account for the number of people in each bracket and their average tax rate.

2. Calculating simple correlations like this for any policy action (stimulus, tax cuts, spendings cuts etc) with GDP changes is problematic due to the fact that certain policies are tend to be exercised in certain economic circumstances. Tax cuts and stimulus are usually used when the economy is weak to boost the economy, which might mislead people to think that the cuts and stimulus are the cause of the weak economy as they occur more often during low GDP growth periods.

The reason no one cares is because this report could've been constructed by a first year undergraduate. How anyone here thinks you should draw any conclusions from it is beyond me.

I'm not entirely certain what they mean by 'Potential GDP' and the graphics from figure onward are not labelled well, but it is striking to notice that the data points are well-varied. The resulting trends are rather weak, albeit in the direction that would reinforce the OP's claim. It's worth pointing out the criticisms of potential confounding, but there are extended periods of a steady top marginal rate.

Since policy actions are typically reactive in nature, it may be more informative to look at the annual change in savings as a percent of GDP or some time lag variable. I'm not an economist - but there may even be a delay in when tax relief is realized versus when the additional savings (if any) is realized. All those deeper issues aside, the report certainly leaves us all with more questions than answers. None of which, however, bodes well for the hypothesis that a lower top marginal tax rate acts in a manner that increases the average savings as a % of 'Potential GDP'.

[Deleted]

Since policy actions are typically reactive in nature, it may be more informative to look at the annual change in savings as a percent of GDP or some time lag variable. I'm not an economist - but there may even be a delay in when tax relief is realized versus when the additional savings (if any) is realized. All those deeper issues aside, the report certainly leaves us all with more questions than answers. None of which, however, bodes well for the hypothesis that a lower top marginal tax rate acts in a manner that increases the average savings as a % of 'Potential GDP'.

This is really just a simple correlation chart. The "report" is completely useless unless it's created to be incorporated in some deeper study as a source.

[Wells]

This is really just a simple correlation chart. The "report" is completely useless unless it's created to be incorporated in some deeper study as a source.

Except when its being used to disprove the notion that raising the top tax rate hurts the economy a simple correlation to the contrary is all that is required.

[Deleted]

Except when its being used to disprove the notion that raising the top tax rate hurts the economy a simple correlation to the contrary is all that is required.

Well, except it isn't. One because changing the marginal rate hasn't been consistent throughout time as the limit for when the top rate kicks in has been very different. Two because the taxes are often decreased during certain macroeconomic conditions, which means the causal relationship is the other way around (low growth causes lower taxes). Three because the top marginal rate hasn't actually been raised (the raises during Reagan era weren't really raises per se as the limit for when the top rate kicks in was also raised).

Also Wells, this isn't a case of "All swans are white"-free market argument that can be disproven by showing one black swan. Mostly because there are too many other factors to just disprove or prove anything with this simple analysis.

[Wells]

Where the top tax rate kicks in doesn't really matter to the point though. You bump it up or down and the rich are still going to be paying more or less.

[Deleted]

Where the top tax rate kicks in doesn't really matter to the point though. You bump it up or down and the rich are still going to be paying more or less.

The effects counteract eachother. There are also fewer people paying the higher rates when you push the limit upwards. So it definitely effects savings, investment and thus also GDP.

[Torq]

Indeed, much like everyone tells low-level employees to "work harder" if they want better pay, you should be rewarded for what you do accomplish, not rewarded for possible future accomplishments.

That's what telling an employee to "work harder" means...

[Xenofreak]

That's what telling an employee to "work harder" means...

What he meant by that is that rich people should be held to the same standard. In other words rewarded when they actually participate in making jobs, not just given a break in hopes that they will make jobs. Which, even as someone who leans towards the "republican free market ideology" is something I agree with.

[Phokas]

You were right until you referenced Austrian economists. Austrian economics is dead, and it's dead because it has been roundly disproven repeatedly over the last eighty years. At this point, arguing for Austrian economics is no different than arguing that the Earth is flat or that germ theory is wrong. Austrian economics made a lot of sense when we only had small datasets and very limited information about economies to work from. Those days are long over, and the gigantic amount of data we have access to today renders the Austrian argument that we can't scientifically analyze economies completely moot. That neuters the whole school and leaves it as just an empty husk made out of appeals to morality.

Keynesians, Keynesians everywhere. :P No economic theory is disproved, that's why they are all still theories.

[Wells]

Keynesians, Keynesians everywhere. :P No economic theory is disproved, that's why they are all still theories.

You just made your high school science tear up and he doesn't know why.

[Phokas]

You just made your high school science tear up and he doesn't know why.

awwww muffin <3

---------- Post added 2012-11-01 at 06:45 PM ----------

Relevant: http://www.youtube.com/watch?v=d0nERTFo-Sk