`Dynamic' Scoring Finally Ends Debate On Taxes, Revenue

Wall Street Journal | April 1, 2003 | Alan Murray (CNBC)

[Steve Schulin]

Although I'm disappointed in the output of the models, I hope it doesn't dampen the spirits of those championing tax cuts. The New York Times article on this last week mentioned that "Holtz-Eakin said the new analysis did not necessarily refute claims about tax cuts because the report examined the economic impact of Bush's spending increases as well as his tax proposals. 'It's apples and oranges,' Holtz-Eakin said Tuesday, after testifying before the House Budget Committee. 'We looked at the whole budget here.'"

"'They did not analyze the impact of the tax cuts by themselves,' said William Beach, chief economist at the Heritage Foundation, a conservative research group."

I understand that Congress' Joint Committee on Taxation is hiring four folks to work full time on "dynamic scoring". I look forward to seeing not just estimates on proposed tax cuts, but studies running historical data through the various models with an eye on the "tax rate - revenue" connection.

[GovernmentShrinker]

It matters little whether or not the tax cuts cause economic growth -- what's really important is that they'll increase the percentage of wealth that remains in the hands of free citizens, and decrease the percentage that is grabbed by the socialist government for its own purposes.

[MattinNJ]

Fascinating. Both conservatives and socialists should be trying to compete to see who could cut taxes the most. Conservatives obviously advocating keeping what you produced, and socialists (assuming tax cuts increased revenues) would be championing them so there would be more money to dole out to their constituents.

I never could understand their position on that. Of course, I can never understand their position on anything.

[Publius]

Ah, Arthur Laffer. That's a name I haven't heard for a few years. I remembered how he eviscerated Mitch Rogovin during a debate on PBS in 1980 when the staffs of the presidential campaigns went at it, rather than the candidates themselves. It was a lot more educational than the staged appearances known as "presidential debates".

I almost met Dr. Laffer.

When I worked in LA during the mid-Nineties, I spotted the investor relations VP of my company in the fine Italian seafood restaurant across the street talking with someone who was a ringer for Art Laffer. After lunch I dropped in at the VP's office.

ME: Was that Arthur Laffer with you across the street?

VP: Yeah. You should have come over and introduced yourself. Art's pretty approachable. He was my economics prof at USC.

ME: I remember how he ripped Mitchell Rogovin a new one in 1980 on TV.

VP: Art would have liked someone remembering that. We were finishing a debate we'd started last night at Chris Cox's house.

ME: You know Christopher Cox?!

VP: Yeah, I've known him for years. Dan Quayle was in town, and Chris threw a dinner party for him. I hadn't talked to Dan in years, and then I ran into Art.

ME: You know Dan Quayle?!

Needless to say, I was blown away.

[Eaglefixer]

Having done my masters thesis on a large computer simulation I can say that without full validation with actual past data the computer models mean less than nothing.

[Lunatic Fringe]

Of course, this all assumes that the budget will continue to grow at 3-5% per year, which we do not need.... It is time for REAL budget cuts, to spur REAL economic growth and create REAL long-lasting jobs. If the budget were cut by 1/3, a TRILLION dollars could be returned to the people, or it can be directed to true debt reduction, strenghtening the dollar and securing America's future as an economic super power...

Sadly, this nation is not willing to do what it takes to make us strong... they can only think as far ahead as how to buy their next new car or $500 leather jacket...

[fooman]

Consider the source. Alan Murray is a dem hack who has a wife lobbying dems on Cap hill.

He is insidious in that he is selectively pulling out elements of the model without giving us sensitivites and elasticities.

I bet Kudlow would chew him up.

[RAT Patrol]

The government takes my money in complicated ways, spends it on complicated programs, also spends it on complicated "studies" that prove whatever the freak they want it to prove, then they spend more money on more studies that prove exactly the opposite thing as the last study, then they tell me that they cannot afford to let me keep more of my money because I'm not earning enough for the both of us.

[LTCJ]

Having done my masters thesis on a large computer simulation I can say that without full validation with actual past data the computer models mean less than nothing.

Very good. A one line refutation of global warming.

We were taking about global warming, weren't we?

[Libertarianize the GOP]

http://www.freerepublic.com/perl/bump-list

[KarlInOhio]

socialists (assuming tax cuts increased revenues) would be championing them

Socialists aren't interesting in maximizing government revenue. They are interested in maximizing control. This is done by maximizing goverment revenue as a fraction of all revenue. They would be happy to live in a pig sty, so long as they get the spot with the best mud and control who gets how much slop.

[Ernest_at_the_Beach]

I want to see Kudlow take him on!

I quit watching the Capital Report after I finally figured out he was partial to the Dems. He had me fooled for awhile though!

[Eaglefixer]

I am talking about any computer model used to predict the future.

If the shoe fits!

[RAT Patrol]

Exactly. Total control is the only way they can ensure total "equity."

[MattinNJ]

They would be happy to live in a pig sty, so long as they get the spot with the best mud and control who gets how much slop.

Ah, therein lies the fault with my reasoning. I was analyzing the socialists using logic. My bad.

I think you nailed it on the head. They are an amazing bunch.

[Myrddin]

I'm in the middle of a conference call with one of Art Laffer's best friends right now. My co-worker went to school with Laffer. He has a PhD in mathematics and does the digital signal processing work for my current project.

[fooman]

He had me fooled too, until he became more and more partisan after the elections.

He even did stories about how Lott was mean to dem lobbyists after the election.

One thing to bear in mind about this 1.3 trillion dollar tax cut. The economy will make 150 trillion over the same ten year or so time frame. So the effects are small and the cuts may have to be bigger to have a bigger postive effect.

Also macro econ (especially kenyesian) types like to say that one dollar of gov spending is the same as a dollar tax cut, whereas supply siders like to say that there is a feedback effect (like in a PID loop for you electrical engineers out there).

So one dollar only costs the government 60 to 70 cents or so depending on how one 'tunes' the model.

This is due to a higher velocity of economic activity through individual initiative, than if the gov just spent the money on welfare cheese.

[Publius]

Six degrees of separation.

[LTCJ]

I am talking about any computer model used to predict the future.

I knew that. And my computer predicted you would say it.

[fooman]

For dynamic scoring to be wrong, you have to believe that micro econ is wrong.

In other words, if you tax or charge more for a good, demand must be perfectly inelastic.

Of course we all know intuitively this is wrong. If you double the price of gas people will use less of it.

And so it goes. If you tax people's wages more, they will work less and consume more 'leisure time' instead like they do in Europe.