Posted on 10/31/2009 4:57:11 PM PDT by reaganaut1
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[T]he signature domestic issue in President Obama’s first year in office — health care reform — is shaping up to be the antithesis of President Reagan’s supply-side economics.
The starting point for Ronald Reagan was the idea that people respond to incentives. The incentives that he most worried about were those provided by the tax system. According to his budget director, David A. Stockman, Mr. Reagan would regale the staff with stories of how he, as an actor, used to alter his work schedule in response to the tax code.
“You could only make four pictures, and then you were in the top bracket,” Mr. Reagan would say. “So we all quit working after four pictures and went off to the country.”
The key economic concept here is the marginal tax rate, which measures the percentage of a family’s incremental income to which the government lays claim. During Mr. Reagan’s time in office, the top marginal tax rate on earned income fell to 28 percent from 50 percent.
The verdict on supply-side economics is mixed. The most striking claim associated with the theory — that cuts in marginal rates could generate so much extra work effort that tax revenue would rise — is unlikely to apply except in extreme cases. But substantial evidence supports the more modest proposition that high marginal tax rates discourage people from working to their full potential. Mr. Reagan’s behavior as a movie actor is a case in point.
President Obama has said he wants to raise marginal tax rates on high-income taxpayers. Yet under his policies, the largest increases in marginal tax rates may well apply not to the rich but to millions of middle-class families.
(Excerpt) Read more at nytimes.com ...
Is this in the New York Times???
The latest from the “Kenynesian.”
Problem for him, though, is that he's failing at that, too. Outside of the "We-love-Obama-just-because-he's-black" crowd, the rest of the world has sized up this lightweight.
” The most striking claim associated with the theory — that cuts in marginal rates could generate so much extra work effort that tax revenue would rise — is unlikely to apply except in extreme cases. “
Neither Reagan nor his economic advisors ever made that claim, which Mankiw should know.
OMG! What a lefty.
“The verdict on supply-side economics is mixed. The most striking claim associated with the theory — that cuts in marginal rates could generate so much extra work effort that tax revenue would rise — is unlikely to apply except in extreme cases.”
Once again the MSM misses the point. The main advantage of lower marginal rates is that the money goes back into the economy either as consumer spending or investment, both far more stimulating to the economy than inefficient government spending.
Mankiw is not a lefty. His Principles of Economics textbook is very supportive of free markets. He is certainly no Keynesian.
Here we go again. There is nothing in the text of this column that indicates that Mankiw thinks Reagan or his advisors made that claim. Let's run the tape:
The verdict on supply-side economics is mixed. The most striking claim associated with the theory — that cuts in marginal rates could generate so much extra work effort that tax revenue would rise — is unlikely to apply except in extreme cases. But substantial evidence supports the more modest proposition that high marginal tax rates discourage people from working to their full potential.I can see (assuming evidence most detrimental to the defendant) that Mankiw is setting-up a strawman by "identifying" the most "striking claim," but what of his immediately following comment about the "substantial evidence support[ing]?"
He’s apparently unaware of the velocity of money. That’s almost as bad as failing to understand what deflation is and why it is so terribly ruinous.
The low income can start getting ready for their 50% tax increase, betcha 0’b will do nothing to prevent it.
What does the velocity of money have to do with this column, and what makes you think Mankiw is “apparently” unaware of it?
What of it? Mankiw never clearly states which position Reagan did believe. My point was to clarify that Reagan didn’t support “the most striking claim”, something that Martin Anderson stressed in his memoir “Revolution”.
Reread the third paragraph, and tell me if you still believe it.
““You could only make four pictures, and then you were in the top bracket,” Mr. Reagan would say. “So we all quit working after four pictures and went off to the country.””
I’m glad you explained that. I can clearly see where that third paragraph describes Mankiw’s understanding of Reagan’s position on the impact of reduced marginal tax rates on gross Treasury revenues. How could I have missed it? Maybe when I get my 1rudeboy magic decoder ring I won’t be so blind.
I wouldn’t call you blind, just stupid. All Mankiw does is illustrate Reagan’s attitude toward the marginal tax rate in Reagan’s own words.
Well I do consider you an expert on stupid, so I do take your opinion as being from the source.
Glad that you were able to find the part where Mankiw cited Reagan on “the most striking claim”. Otherwise it would have been difficult to find.
My comment #9: “There is nothing in the text of this column that indicates that Mankiw thinks Reagan or his advisors made that claim.”
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