[...] Posted by echelon228 Flopping Aces » Blog Archive

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[...] Flopping Aces » Blog Archive

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[...] Business Daily tackled Obama’s ignorance on economics yesterday that I wrote about a few days ago. Here is the exchange in question from the debate: [flv:obamagains.flv 400 [...]

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[...] Business Daily tackled Obama’s ignorance on economics yesterday that I wrote about a few days ago. Here is the exchange in question from the debate: Get the latest Flash Player to [...]

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I disagree with Obama here, but to be fair he usually puts his target at 20% not “close to 30%”. Still not a good idea. Obama has lots of Wall Street friends he goes to for advice. He was citing a Buffett reference about secretary’s tax rates during the debate. Maybe Warren put this idea in his head.

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the Laffer curve doesn’t tell us “that with tax cuts increases revenue”. It tells us that there’s an optimal tax rate that maximizes revenue

And that optimal rate is a low rate, not close to 30% as Obama wants…..hence the post. He most definitely should of been castigated for his answer because the man obviously just wants to get at the rich. 20% of those with capital gains had an income of less then 50 grand in 2005 so his plans to get at the rich will hurt those in the middle also. Typical Socialist.

Maybe it could maybe it wont is not an answer. Its hedging.

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the Laffer curve doesn’t tell us “that with tax cuts increases revenue”. It tells us that there’s an optimal tax rate that maximizes revenue, and rates below this decrease revenue, rates above also decrease revenue. So of course his answer was an answer. It could be shorthand for “if we’re on the lefthand slope revenues will decrease, if we’re on the righthand slope they’ll increase, but we don’t know which side we’re on, so it may or may not go up”, which would be a more pedantic way of saying the same thing, entirely inappropriate for a debate.

Now, does Obama understand this? I have no idea. From the way Gibson phrased the question I doubt that he does. I’m not pro-Obama (probama?) at all, but he definitely shouldn’t have been castigated for that answer, because it all boils down to what the purpose of a tax rate is. For every amount of revenue but the peak of the curve there are two tax rates that will achieve it (assuming a continuous curve and some other hand-waving). Fiscal conservatives want the tax rate to be set to the minimum rate necessary. Liberals want the rate set to the “most fair”.

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Um, I hate to tell you this, but an answer that says it may or may not happen is no answer at all. The Laffer Curve tells us that with tax cuts increases revenue, but to go to zero would mean no money at all going to the government while if the tax rate is 100% the same effect would occur because no one would want to work if all money is seized. I do agree 10-15% is optimal. But Obama wants to double that…hence the post.

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Um, I hate to tell you this, but Obama is actually one hundred percent correct when he says “Well, that might happen or it might not”. Read up on the Laffer Curve – wikipedia has a good writeup, but it’s trivially easy to prove. Set tax rates to zero. That’s a drop, and I guarantee revenues won’t go up.

Now, it’s not particularly easy to figure out where the peak of the Laffer curve is, but a value of 10-15% for capital gains wouldn’t particularly surprise me.

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Barry doesn’t CARE to know how the economy works. He will TELL us how it WILL work under the glorious forward march of the proletariat …..

I know it matters which one of these pols gets elected but I have the nagging feeling that the next 4 years are going to suck as hard, politically and economically, as the Carter years.

Keep your powder dry.

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