Laffer is best known as the architect (along with Robert Mundell) of "supply side economics," which was popularized by Jude Wanniski. The argument was that the GOP was being hampered from its agenda of lower taxes by fear of deficits. The supply siders argued that deficits from lowering taxes should not be feared since it would stimulate investment and increase tax revenue, preventing debt from growing faster than GDP. Deficits from spending, however, result in unsustainable debt accumulation since government is doing the spending rather than firms, hence there is no addition to capital stock.
This was made famous by Dick Cheney's assertion that Ronald Reagan proved that deficits don't matter.
Grover Norquist's drive to force reduced taxation in order to force spending cuts is also part of the policy design.
Based on "Soft Currency Economics," Laffer would have realized that the function of taxation is to control inflation by reducing demand, so the most effective tax policy would be addressed at limiting consumption. Therefore, the most effective tax would be a consumption tax, which is familiar to all Americans as the sales tax.
True to form Art Laffer is now recommending that taxes be cut on "investment" and transferred to consumption by raising the sales tax. And sure enough, Nanette Byrnes of Reuters reports Income Tax Could Be Eliminated By Many Republican-Controlled States.
The kind of basic shift to sales tax from income tax being eyed by Republicans is informed partly by "trickle-down" or supply-side economics - embraced by Republicans 30 years ago and still a powerful force in the party. Laffer has advised some of the states' activists.
North Carolina's Rucho acknowledged the argument that the poor would be hit disproportionately by higher sales taxes. But he said new sales taxes on services would also hit higher-income taxpayers.
He said low-income people got more government assistance that could help offset higher tax costs. Also, he added, cutting income taxes would spur economic growth, a key supply-side tenet, helping everyone.
In an interview with Reuters, Laffer said states with lower income tax burdens outperformed those with higher taxes.
Some studies, from liberal and non-partisan think tanks, say just the opposite and cite the relative economic strength of high-tax states such as New York.
So next time someone claims that MMT is "left-wing," say, "Really?"
The supply side wing of the GOP, at least, wants to cut taxes on the rich and raise them on the poor, and there is a clear MMT-based rationale for doing so.
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The supply side wing of the GOP, at least, wants to cut taxes on the rich and raise them on the poor, and there is a clear MMT-based rationale for doing so.
Really, Tom? I hope MMT people don't fall into the trap of trying to prove how "not left-wing" they are as the Democratic Party has by endorsing such policies. It is extraordinary that people who are doing everything in their power to eliminate subsidies for the poor could turn around and use them as an argument for regressive taxation. As any Georgist could tell you, such subsidies only accrue to rent in any case. This sort of tax regime turns classical distribution theory on its head. If this can be justified by MMT it only goes to show that monetary theory by itself is insufficient for the goal of making a more just and prosperous society.
The supply side wing of the GOP, at least, wants to cut taxes on the rich and raise them on the poor, and there is a clear MMT-based rationale for doing so. Tom Hickey
So not only are the poor to be taxed by inflation when the banking cartel creates deposits but they are also to be taxed on their consumption in order to control price inflation? Price inflation the banking cartel is responsible for creating?
If this can be justified by MMT it only goes to show that monetary theory by itself is insufficient for the goal of making a more just and prosperous society.
That the point. The soft currency monetary description is value-neutral and policy-neutral. The existing system supports a variety of policies within the policy space it provides.
As neoliberal economic approach, the Laffer suppy side approach uses this monetary description to formulate policy that is right-wing.
As a Post Keynesian macro theory, MMT is demand oriented and focuses on full employment, and that is considered "left-wing." Some specifically MMT policy prescriptions like the MMT JG are also left. But the monetary description itself is policy-neutral.
how about bypassing the wishful bullshit thinking that by cutting taxes on some rich evil fucking prick will somehow eventually make its way down to "we the fucking people" and do some direct spending like increasing the social security benefit to a decent amount, lower the retirement age, provide single payer, provide jobs to all who want to earn a living and provide for thimselves(something that pays enough to raise a family and actually have money to take a goddamn vacation and see this lovely country of ours) the bullshit needs to stop. trickle down "dont piss down my back and tell me its raining" economics needs to be buried and never spoken of again
MMT policy prescriptions like the MMT JG are also left
That's always puzzled me. I've never thought the JG was particularly "left." I knew that MMT attracted Republican supply-sider types, but I always thought such people were in some sense "progressive" in that they were genuinely interested in more fairness and general prosperity. So, when people "split" from MMT over the JG, I was quite disappointed.
I think that the JG is sort of the "gay marriage" of MMT. Many people tend to have a knee jerk reaction against it because it strikes them as "icky." But the more you think about it, you say "why not?" The conservative objection to gay rights and so on was always couched as an objection to a "promiscuous, irresponsible lifestyle." The gays turned this around by saying, "tell you what, we want what you (heterosexuals) have, but right now we can't have the same rights and privileges under the law that you have and take for granted."
Similarly, conservatives have always accused people on "welfare" of not wanting to work. The JG turns this around and says "people are willing to work but there are not enough jobs and it is unjust and economically wasteful to not provide them."
I would say that the JG, like gay marriage, is essentially conservative and not left wing at all. In any case it certainly calls the bluff of the conservatives and forces them to reveal their real agenda.
Warren was employed by Laffer Associates? That's news to me. Is that where the Tom Nugent connection comes from? Full disclosure.... I have a diversified portfolio consisting of Supply Side roots, ties to Austrian school and Ron Paul and strongly influenced by MMT, not to mention that in the checkered past of my youth I was a Marxist. I like to think of it as being well rounded.
As I see it, with MMT size matters when it comes to the deficit, while Supply Side is not deficit phobic as Austrians are but what matters is the quality of the deficit, not the quantity (size) that matters. In other words Supply Siders see tax cuts as good and government spending as bad.
Moreover, not all tax cuts are equal. Some tax cuts provide more incentive to work, save and invest than others which conceptually can create demand for money to offset the extra supply of money resulting from the tax cuts which keeps a check on inflation. In the Supply Side model, the right kind of tax cuts brings forth SUPPLY to offset DEMAND.
Going back to Marx's Theories of Surplus Value, this represents a political give and take between what is paid to LABOR to maintain and increase living standards vs. what is reinvested in CAPITAL to make that LABOR is more productive in the future.
I take it as self evident that 9 times out of 10, the private sector free market can allocate labor and capital far more efficiently than government central planners, which is why I lean more toward tax cuts than government spending. This also explains why it chafes me to hear MMT proclaim that the function of taxes is to regulate aggregate demand. I'm not afraid of the deficit bogeyman, but I am afraid of big government that wants to tax and regulate everything I do. I also wish Warren would lose that metaphor of the guy with a big gun standing at the door to collect your taxes. I understand what he means but I it makes me cringe and I don't think it helps MMT gain traction.
Gold is another story which I'll take up later because it's getting late and I hear my pillow calling me.
Is that where the Tom Nugent connection comes from?
Yes, Nugent was assigned to assist Warren with the preparation according to Warren's account.
This also explains why it chafes me to hear MMT proclaim that the function of taxes is to regulate aggregate demand.
Well, MMT is Keynesian, i.e., demand side, holding that Keynes refuted Say's law as a general case.
MMT economists in general would agree that the quality of the deficit matters as well as the size. The size is established by changing non-govt saving desire but the composition of taxation and spending are policy choices. Policy should be designed to fit specific circumstances, so there is no overarching policy rule regarding deficit composition and quality, only general guidelines for different circumstances.
I would say that in general MMT is center left in that it acknowledges that policy space is political as well as economic, but it places highest priority on employment, as does Keynesian economics in general. Neoliberalism (neoclassical) emphasizes GDP growth and capital formation, and Austrian economics accentuates price stability.
Bravo Dave!!
As Clinton said in the Dem convention "Are we gonna double down on the trickle down?"
Unfortunately Obama only had to refuse to cut any deal and vetoe any bill in front of him. Let all the tax cuts expire, and than put a new bill on the floor in the Senate to IMPLEMENT A NEW TAX CUT FOR ONLY THE MIDDLE CLASS. THE REPUBLICANS WOULD HAVE BEEN TRAPPED. But since everyone in the congress and the president are millionaires and they work for the banks that idea had no chance. As it stands NEW TAX CUTS WERE PERMANANTLY IMPLEMENTED FOR THE RICH AND TEMPORARY TAX CUTS WERE IMPLEMENTED FOR THE MIDDLE CLASS TO EXPIRE IN 5 YEARS, what a loser Obama is "I am a warrior for the middle class" my ass! Voters need to throw the bums out.
I don't think Warren was actually employed by Laffer. I think Laffer Associates provided assistance and published SCE.
"The author would like to thank Arthur B. Laffer and Mark McNary for valuable literary assistance and research with this work. The author is solely responsible for its contents."
http://www.epicoalition.org/docs/soft0004.htm
"I edited Mark McNary’s writing when he was at Laffer as part of the arrangements for them to publish it."
http://moslereconomics.com/mandatory-readings/soft-currency-economics/
"It was then that I began conceiving the academic paper
that would become Soft Currency Economics. I discussed it with my previous boss, Ned Janotta, at William Blair. He suggested I talk to Donald Rumsfeld (his college
roommate, close friend and business associate), who personally knew many of the country’s leading economists, about getting it published... He sent me to Art Laffer who took on the project and assigned Mark McNary to co-author, research and edit the manuscript, which was completed in 1993."
http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
"The supply side wing of the GOP, at least, wants to cut taxes on the rich and raise them on the poor, and there is a clear MMT-based rationale for doing so."
Not really. MMT is 'demand side'. By reducing incomes of the majority to benefit a small wealthy minority, you're undermining sustainable demand.
And states cannot create $NFA in any way.... so proposals to cut state taxes fall outside MMT, etc...
Laffer imo doesnt get it 100% if at all...
Warren says Andy Card at the Bush/Cheney WH got it.
This correlates with the tax cuts/fiscal injections they did in 2003 ("Bush" tax cuts which morons recently let expire) and again in 2008 (twice: bottom-up $650 checks and top-down 350B TARP) in response to output collapses and liquidations...
This knowledge though at this time looks like it is gone from the scene at the current GOP.... and Democrats never had it ... full-on current moron-fest... scary!!!
It's bizarre. States, which ARE revenue constrained are cutting taxes whilt the Fed'l gov't, which IS NOT revenue constrained, is raising taxes. How screwed up are we?????
"The supply side wing of the GOP, at least, wants to cut taxes on the rich and raise them on the poor, and there is a clear MMT-based rationale for doing so."
Not really. MMT is 'demand side'. By reducing incomes of the majority to benefit a small wealthy minority, you're undermining sustainable demand.
It's about the composition of the deficit.
If supply side economics were correct and lowering taxes would bring forth comparable investment it would work, but evidence contradicts that.
The point is that the monetary description works for any type of policy, left or right. But then the policy actually has to be fashioned to work.
The right would say that Laffer's policy proposal works because what is important is GDP growth and capital formation with relatively little price volatility. Unemployment other than transitional is voluntary.
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