Posted on 06/10/2016 5:05:50 PM PDT by Hojczyk
“Overthrow the establishment. Now's the time,” said the CNBC senior contributor who also hosts a syndicated radio-talk show. "Overthrow the establishment," urged Kudlow, who was a former economic adviser to President Ronald Reagan.
“We need a different model. In other words, zero interest rates, or negative interest rates, and tons and tons of government spending for all these G-7 countries have not worked,” he said.
“We have global stagnation, a virtual global recession. And we have virtually no inflation,” he said “Something's got to change here,” he said.
He offered his own solution to right the sinking U.S. economic ship.
“I recommend an across-the-board slashing of corporate tax rates for large and small businesses in the U.S. I would start right there to reignite growth and then give the Fed a chance to normalize their interest rates," he said.
"I do not approve of what the Fed or these other central banks are doing. I have never favored it, QE, negative rates even worse. The trick is how to get out of this with minimal damage. Let's cut the corporate tax, that will pick up business investment and it will pick up productivity,” he said.
"I think one of the candidates, Donald Trump, has a very significant business tax cut for large and small companies. And I favor that. He also is a de-regulator, and I favor that,” he said.
(Excerpt) Read more at newsmax.com ...
At least if deficit spending is eliminated, the existing debt can be refinanced while interest rates are zero. Although there is nothing keeping the Fed from refinancing at 0% for “special clients” like the Treasury anytime no matter what the rate is to everyone else.
Import tariffs will make imports more expensive with no guarantee that manufacturing will return.
Why not simply require that 80% of all manufactured goods sold in America be manufactured here ? Give it a year’s lead time, start at 10% then ramp up the percentage each year until the 80% is reached in 5 years.
Congrats. You just took $1 out of my wallet for every $5 I spend (or thereabouts). I feel more prosperous already.
Life has no guarantees. But in this case it will work because the greed factor of a built in 20% margin for domestic manufactures is too good to resist.Why not simply require that 80% of all manufactured goods sold in America be manufactured here ? Give it a year’s lead time, start at 10% then ramp up the percentage each year until the 80% is reached in 5 years.
Tariffs are Constitutional what you are calling for is not. But a good idea non the less even though I oppose you solution.
Dah. Never happen anywhere else. Between the gutless, the mindless and the shameless, it will never happen again.
Larry has the problem most thinkers on the right have, he thinks the dim’s have the wrong model. He thinks the dim’s want to fix the economy they just have the wrong idea about how to do it. In reality they want to destroy the economy and with it the United States raising a Marxist nation in its place. The dim’s are actively supporting sedition and revolution. Larry Wake Up!
The most important thing that Trump can do is wage war on the regulatory agencies. The EPA, BLM, HUD, and the rest. Those agencies have been waging war against American business for years and winning.
They do far more damage to the economy than most people realize because they primarily attack businesses and isolated individuals.
These agencies are revolving doors for radical academics. They use their sabbatical years to go work inside these agencies and implement their agenda. I learned this from one of my neighbors who did exactly this. They don’t even bother to hide it.
” As it turns out, lower taxes actually increased receipts.”
Lowered them by one third. The cuts were only predicted to recoup 2/3 of each dollar cut and that’s what they did.
Martin Anderson in ‘Revolution’ describes the goals of the Reagan program from the POV of an insider who helped design it and he explicitly rejects the idea that the cuts generated an increase in receipts. They asked Tip O’Neill for spending cuts because they knew receipts would fall off.
Total receipts grew over eight years but that includes factors other than rate cuts. The data can be found in Lawrence Lindsey’s ‘The Growth Experiment’, a sophisticated regression analysis of the effect of the rate cuts. Lindsey is a GOP economist and a fan of Reagan so it’s a friendly study. The sole rate cut that increased revenue was the capital gains cut which ironically was signed by Jimmy Carter.
Larry Kudlow began his political life as an SDS radical in the 60s. He doesn’t have a good excuse for not knowing what his old comrades are like.
The impact is sensitive to the years selected. The mishandling of the economy by Carter and the high interest rates (e.g., a prime of 21%) severely dampened the effect of the tax cuts for years. They asked Tip for the cuts for political purposes, not economic ones. The idea was to sell the idea that the tax cuts would cause a deficit if spending wasn’t cut; something that was part of the Reagan plan. Milton Friedman worked closely (albeit secretly) with Reagan on all of this economic plans and he did suggest to Reagan that tax cuts would increase revenues, but it wouldn’t be overnight. Tax cuts versus spending increases is like the difference between pushing or pulling on a string.
“They asked Tip for the cuts for political purposes, not economic ones. “
The budget cuts were economic to offset the projected 30% reduction in revenue expected for each dollar cut. You can find this in Anderson’s book, Anderson being one of maybe four principal architects of the Reagan economic program.
The goal was to stimulate economic growth, not to maximize income to the Treasury. Ergo the title of Lindsey’s book ‘The Growth Experiment’, a nod to that goal.
Despite common misperceptions the ideal tax rate for maximizing tax revenue is quite a bit higher than the ideal tax rate for economic growth in the private sector. Lindsey wrote a monograph on that issue as well.
The gov’t will pull in more money while constricting the private economy. It’s not like what that famous economist Rush Limbaugh likes believe where the lower price brings in more money. It’s not Walmart. The tax rate you set depends upon what your goal is. Economic growth like the Reagan team, or maximizing the tax haul like Obama.
Some folks are/were true believers. Per Lennin they are useful idiots. Many of them never figure the left out.
Actually, he's quite right. If the current price is in the elastic segment of the demand curve, lowering the price will raise total revenue. Indeed, that's how you define the elastic segment of the demand curve. That's right out of Econ 101.
I know about elasticity curves. As per the Lindsey study the marginal rates were not set at a point that would increase tax revenue. That wasn’t their goal. The desire was to shift the Production Possibility Frontier, another familiar econ 101 graph, to the right so that the economy could grow. And that’s what happened, as designed.
Then why did you criticize Rush for saying a price decrease can raise revenues? I've taught econ at a Big Ten university and I've never heard of "elasticity curves". If you understand elasticity of demand (not "elasticity curves") you wouldn't have said that.
You need to read additional sources. If you read what I wrote earlier, they knew it would take time for the cuts to offset the disaster that was the result of Carter's policies. They were counting on growth to offset the rate decrease. As shown in the Cato Report:
This [increase in tax revenues] happened because the U.S. economy grew by more than one-third in real terms (34.3%), much faster than the 24.3% rate expected even by economists within the Reagan administration. Thus, by the time President Reagan left office, the economy was generating more tax revenue at a maximum 28% rate than many on the left forecast it to generate at a maximum 70% rate.
The Reagan tax-rate reductions did, in fact, pay for themselves — but it took about seven years.
http://www.cato.org/publications/commentary/tax-cuts-revenue-what-we-learned-1980s
“Then why did you criticize Rush for saying a price decrease can raise revenues?”
Because Martin Anderson, who was instrumental in designing and implementing Reagan’s program, expressly disavows this claim and says it was not their goal and it didn’t happen. It’s in his book ‘Revolution’.
And to follow that there is Lindsey’s book based upon a regression analysis that he had his Harvard students run to isolate the effect of the marginal rate cuts from the other factors that served to increase gross tax revenues. It matches what Anderson wrote. I’ll take Lindsey and Anderson over Limbaugh. I don’t find that a hard choice.
” and I’ve never heard of “elasticity curves”.”
Yeah, well maybe academics need to get out more where people use verbal shorthand. Google doesn’t seem to have as much trouble with the term as you are having. ‘Elasticity’ curve pulls up hundreds of images.
“You need to read additional sources”
I think I’m familiar with the subject. This is a list of just the books on the subject on my own bookshelf.
Revolution-Anderson
Reaganomics-Niskanen
The Growth Experiment-Lindsey
Supply-Side Revolution-Paul Craig Roberts
Reaganomics-Bruce Bartlett
How the World Works-Jude Wanniski
Seven Fat Years-Bartley
The increase in gross tax revenues were the result of more than the tax cuts which is what the Lindsey study accounts for. Moreover TEFRA in 1982 rescinded some of the cuts passed only a year before under ERTA, the Kemp-Roth bill.
And I'll take the Cato Institute and the GAO statistics over both of them.
As to your hundreds of images for "elasticity curves", if you read the annotation for them they are properly called elasticity of demand curves in the narrative. Your term brings up 6960 hits, whereas "elasticity of demand" produces 540,000 hits. Clearly, most people use the proper term...academic or not.
I have no problem with the Cato piece. I suspect you failed to read it closely.
Richard Rahn in the Cato piece refers to “the revenue gains of the 1978 and 1997 capital-gains rate cuts”. He refers to the “economic gains from the Reagan era tax cuts”.
This accords with Lindsey and Anderson, who note that the sole tax rate cut that generated greater tax revenue was the capital gains cut of Carter. The Reagan marginal rate cuts on income didn’t. They did what they were intended to do- spur economic growth.
Rahn himself makes the distinction in his piece. Revenue gains in the one instance and economic gains in the other.
Not a surprise because he’s undoubtedly familiar with Lindsey’s study and wouldn’t conflate gross revenue numbers with the effect of the marginal rate cuts themselves. Had it been that easy Lindsey could have saved a lot of trees by subtracting the gross revenues of 1981 of 1988 and his book could have been one page long. It wasn’t of course because it was a complex regression analysis that is described in the book, and gives a breakdown of the contribution of the rate cuts alone after accounting for other factors that contributed to tax revenue gains.
If you were confused by my substitution of ‘elasticity curve’ for ‘elasticity of demand’ it makes me wonder if you insist on employing technically correct physics terms as well in conversation or manage to make yourself known in colloquial English.
Agree. On the other hand, saying that the Reagan tax cuts on personal income didn't impact economic growth and, hence, tax revenues is simply wrong.
...if you insist on employing technically correct physics terms ...
Physics terms? Where did that come into the conversation? Elasticity of demand has nothing to do with physics. And, yes, I do prefer proper English to the alternative. I cringe when I hear something like: "The man that entered the elevator." instead of the correct: "The man who entered the elevator." I see examples all the time of writers who confuse "then" and "that". I don't like hearing things like: "Him and me are friends." Poorly spoken English is probably linked to a poorly education person.
There’s no argument over the Reagan tax cuts resulting in economic growth. That was what the income tax cuts were intended to do and they performed as predicted by the Reagan team. Maybe even better than forecast. In fact the Reagan program killed inflation much faster than expected which oddly enough contributed to the rising deficit IIRC.
But the tax cuts weren’t the only factors that contributed to economic growth and the resulting increase in gross tax receipts by the end of the Reagan administration. There were ITC credits, deficit spending (albeit unplanned), regulatory relief, population growth and probably a few other items that I can’t recall offhand. Lindsey’s study was designed to remove these other factors so that the effect of the marginal rates alone could be determined.
The original claim by the Reagan team was that dynamic effects would recoup a portion of each dollar ‘lost’ in the tax cuts. Static analysis by contrast argued that each dollar in rate cuts would result in one dollar lost. The Reagan team predicted that the amount recouped would be around 2/3 of each dollar, and according to Lindsey’s study that prediction turned out to be accurate. The rest of the increase in gross tax revenue came from the other factors.
The one tax cut that actually did result in an increase in actual receipts was the capital gains cut. A high rate provokes people to simply sit on their capital gains and the gov’t gets nothing. But that doesn’t diminish the importance of lowering marginal income rates in order to let the private economy grow. Racking up high gross tax receipts shouldn’t be the main goal of setting tax rates. It’s important for Congress to understand that lowering rates is going to result in a drop in gross receipts and plan accordingly. If they in good faith predict an increase and it doesn’t happen then it serves to discredit cutting rates and can weaken public support for it.
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