Torture versus collateral damage; the bigger evil?

[carl]

Instead of collective sacrifice, we gave our citizens a tax cut for political expediency at the start of two wars and wonder why we can't manage our budget.

Bill:

This brings up a very important point that I try to keep raising. The Americans were not averse to something like a war tax being imposed. We would have gone for it. The political elites were afraid to ask us to do it. They lacked any real backbone or moral courage as evidenced by all their defense of torture. Hell they lack any real moral base.

The Americans do have a moral base (Fuchs, restrain yourself). We are much as we were as far as willing to sacrifice for a war goes. It is the elites who have changed. If they are morally adrift, as I think they are, they will never see the need to sacrifice for anything for there isn't anything really good. Because they only know themselves, they figure everybody is like them and since they don't recognize there is anything worth sacrificing for they figure the rest of us feel the same way. So they won't even ask.

I am convinced it is the same thing when people say Americans are casualty averse. We aren't. The elites are. In their morally relativistic world they see nothing worth dying for so they figure the rest of us are like that.

We have a big problem now and will get bigger if we can't figure some way to address this cultural disconnect between the elites and the rest of us.

p.s. Tax rates don't matter. You can't spend rates, you can only spend revenue. And revenue goes up when you lower rates, generally. We still should have had a war tax though.

[Fuchs]

(...)revenue goes up when you lower rates, generally.

Trust an economist: That's nonsense.
It has never been observed since the Laffer curve argument has been brought forward that lowering a tax increases its or even only total revenue. The opposite is being observed every single time.

Lower taxes = less revenue. All else is nonsensical propaganda. Period.


There's a theoretical special case in which theoretically lowering the tax rate might increase revenue - this applies to ridiculously high tax rates, far above 50%.
A reduction of a tax rate from say 50% to 49% or 40% or 30% will inevitably deliver a loss of revenue not much smaller than the reduction of the tax rate (reduction from 50% to 40% would yield almost 20% less revenue).



The Laffer curve myth is one of those anglophone speciality myths - the rest of the world is laughing at you (if it knows or learns about he myth) for it.
My whole microeconomics class of more than 60 students laughed heartily, for sure.
That's because we haven't been indoctrinated with big lie propaganda abut the Laffer curve for three decades, of course.

[Entropy]

Torture versus collateral damage; the bigger evil?

The obvious and biggest difference is intent. With torture you are knowingly engaging in, at best, a morally questionable activity. Your intention is to deliberately cause pain.

"Collateral damage" by contrast is usually unintentional, and often unavoidable.

[carl]

Trust an economist: That's nonsense.
It has never been observed since the Laffer curve argument has been brought forward that lowering a tax increases its or even only total revenue. The opposite is being observed every single time.

Lower taxes = less revenue. All else is nonsensical propaganda. Period.


There's a theoretical special case in which theoretically lowering the tax rate might increase revenue - this applies to ridiculously high tax rates, far above 50%.
A reduction of a tax rate from say 50% to 49% or 40% or 30% will inevitably deliver a loss of revenue not much smaller than the reduction of the tax rate (reduction from 50% to 40% would yield almost 20% less revenue).



The Laffer curve myth is one of those anglophone speciality myths - the rest of the world is laughing at you (if it knows or learns about he myth) for it.
My whole microeconomics class of more than 60 students laughed heartily, for sure.
That's because we haven't been indoctrinated with big lie propaganda abut the Laffer curve for three decades, of course.

Trust a European economist to tout the conventional wisdom; no its not, as you yourself say above. It has happened several times in American history. IIRC Thomas Sowell say it happened in the Coolidge admin, the Kennedy admin, the Reagan admin and I believe that devil Bush's admin.

Just because a rate is ridiculously high doesn't mean it isn't applied. So if you knock down a ridiculously high rate revenue goes up because economic activity goes up. Which you said. So lower taxes don't equal lower revenues period. Viola.

As far as a bunch of Euroweenie students laughing at the US, weelllll....

[Fuchs]

It's not relevant what the guy says. It's relevant what happened.

Reagan did cut taxes a lot, lost revenue, had to raise the tax again multiple times. Why do you think did he do so?

I tell you: His best trait was his ability to recognize some of his errors. That's why he ran from Lebanon, that's why he raised taxes.

The only ways how reducing a normal tax rate could increase revenues are
* one-time effects with taxes such as capital gains taxes where the tax subjects have the ability to determine the period in which to pay taxes (they move tax payment into a low-rate period fearing a later rates hike).
* A revenue increase not ceteris paribus, but caused by economic growth from period to period, overcompensating a small rates reduction.

At a very, very high tax rate you cold gain a revenue increase by reducing tax evasion a lot and making the taxed activity substantially more attractive. This is the Laffer curve special case which is pure theory, for such stupidly high effective tax rates are excessively rare. They're even outlawed by constitutional court in Germany, when it said that the Legislative shall ban activities or items it wants to disappear, not strangulate them.

A look at the item to be taxed shows that it never expands nearly as much as required to compensate for the reduced rates.
For example, incomes don't double when you cut income tax by half.

Reagan's tax effects on revenues:

http://en.wikipedia.org/wiki/Reaganomics#Tax_revenue
Vast reduction of revenue by big cut (first tax law), clear gains of revenue by increasing the effective rates again by closing loopholes (second one), gains by increased gasoline tax.

_________


This stuff is actually quite relevant to the torture topic, for the U.S. shows the (a certainly not unique) human susceptibility to the big lie; repeated wrong and seemingly unbelievable assertions begin to accumulate believers over time, and this supports some horrible policies.

I suppose it's especially troublesome in the U.S. because the U.S. has the critical mass to justify the required effort by special interests and it's large enough to sustain an alternate reality in public discourse. "The Netherlands could not sustain an alternate reality such as "torture is fine" or "cut taxes to increase revenues" because it's a smaller country and its people watch a lot of German TV. Dutch special interests would need to manipulate Dutch AND German perceptions, and they cannot muster the money and access for this.


There are not only horrible policies, but also discussions about horrible policies between big lie believers and the unconvinced. The conflict goes on and on and on and the end result is that the U.S. is still discussing or unable to fix problems which have been closed cases in many European countries for between 20 and 110 years.
I suppose these discussions and policies could not be sustained if there were more interactions with non-anglophone countries.


Again; to discuss costs and benefits or torture alone is already a sign of failure. It means one is discussing something which shouldn't even get any attention, but be dismissed because the correct answer should be obvious by now (and probably has been for a long time; one of Reagan's primaries competitors already called the Laffer Curve "Voodoo economics").

[carl]

It's not relevant what the guy says. It's relevant what happened.

What happened is relevant. And after the tax rates were lowered, tax revenues went up.

In 1982, the top individual rate was lowered from 70% to 50%. Individual tax receipts were just under 300 billion in that year. In the years that followed, individual tax receipts climbed until they were right around 400 billion. That year the top rate was again lowered from 50% to 28% and individual tax receipts continued to climb until in 1990 they were around 450 billion.

In 2003, the top rate was lowered from 39.8% to 35%. No effect on individual receipts that year and the next but climbing receipts every year until 2007.

And the same thing happened in the Kennedy admin, and according to Mr. Sowell in the Coolidge admin.

The only ways how reducing a normal tax rate could increase revenues are
* one-time effects with taxes such as capital gains taxes where the tax subjects have the ability to determine the period in which to pay taxes (they move tax payment into a low-rate period fearing a later rates hike).
* A revenue increase not ceteris paribus, but caused by economic growth from period to period, overcompensating a small rates reduction.

No. I think you are wrong. What you are assuming is that people don't react to stimuli. People do more when they are not penalized for it. Taxes are a penalty on economic activity. It stands to reason that if you penalize economic activity, you get less of it. If there is less economic activity there is less money available to tax, so over time revenues won't go up. The converse is true too. The less you penalize economic activity, the more there of it there will tend to be so over time revenues go up. That can't not be if people act as people and react to stimuli. If people were mindless drones, then you would be right.

A look at the item to be taxed shows that it never expands nearly as much as required to compensate for the reduced rates.

I disagree.

For example, incomes don't double when you cut income tax by half

We're not talking about incomes, we're talking about revenues.

The conflict goes on and on and on and the end result is that the U.S. is still discussing or unable to fix problems which have been closed cases in many European countries for between 20 and 110 years.

A bit of editorial advice here. You can take or leave it. You probably won't get far with American audiences by telling them how the Europeans have been getting it right for "between 20 and 110 years" and boy are those Yanks thickheaded. We remember too much European history over the past 20 to 110 years for that to be a good approach.

Again; to discuss costs and benefits or torture alone is already a sign of failure.

That I fully agree with.

[Fuchs]

We're not talking about incomes, we're talking about revenues.

income + tax rate = revenues.

Halve the tax rate and you'll ceteris paribus only have increased revenues with more than doubled incomes. Likewise with other changes of tax rates.

In 1982, the top individual rate was lowered from 70% to 50%. Individual tax receipts were just under 300 billion in that year. In the years that followed, individual tax receipts climbed until they were right around 400 billion. That year the top rate was again lowered from 50% to 28% and individual tax receipts continued to climb until in 1990 they were around 450 billion.

In 2003, the top rate was lowered from 39.8% to 35%. No effect on individual receipts that year and the next but climbing receipts every year until 2007.

Income taxes are very much pro-cyclic, and it wouldn't surprise to see revenues soar after a recession, especially nominal revenues. That's what I meant to cover with

"* A revenue increase not ceteris paribus, but caused by economic growth from period to period, overcompensating a small rates reduction."


Look, discussing counterfactuals is only fun for so long.
Feel free to read some more on the subject (such as studies), and feel even more free to take into account that there's an economic cycle, tax base and deduction changes play a role as well and taxes don't exist in isolation, but are interacting with other regulation and economic activities. Don't forget inflation, either.

You should also get your figures right. The 70% top marginal rate was lowered in a 1981 bill ( Economic Recovery Tax Act of 1981).

Meanwhile, feel free to show the boom in tax revenue in %GDP, that is without lots of GDP change and inflation influences - for I see an income tax revenue slump in the early 80's here.

You probably won't get far with American audiences by telling them how the Europeans have been getting it right for "between 20 and 110 years" and boy are those Yanks thickheaded.

Come back with that when all people in the U.S. have a health insurance and when there's no museum showing human and dinosaur puppets in the same diorama any more.
We left those issues in the 19th century, where they belong.
(Adding more examples wouldn't make it prettier.)

Besides,

There are not only horrible policies, but also discussions about horrible policies between big lie believers and the unconvinced. The conflict goes on and on and on and the end result is that the U.S. is still discussing or unable to fix problems which have been closed cases in many European countries for between 20 and 110 years.
I suppose these discussions and policies could not be sustained if there were more interactions with non-anglophone countries.

was meant as a factual statement.
I don't bend or omit facts to please. I'm no entertainer.

People who don't like to be told facts aren't on my list of people who make me shut up about unpopular facts. That list is occupied by only a single female at a time, and no males.

[carl]

First things first.

Like I said, you will get farther with American audiences if you don't use the snooty European approach like the following.

Come back with that when all people in the U.S. have a health insurance and when there's no museum showing human and dinosaur puppets in the same diorama any more.
We left those issues in the 19th century, where they belong.
(Adding more examples wouldn't make it prettier.)

That scores points mainly with other Europeans. Those bumptious bumpkin Americans might point out some salient events in European history in return.

income + tax rate = revenues.

Halve the tax rate and you'll ceteris paribus only have increased revenues with more than doubled incomes. Likewise with other changes of tax rates.

Ceteris paribus...ok repair to the internet...all other things being equal...well why didn't you say so? That is just the point, all other things won't be equal. Human nature decrees that all other things won't be equal.

No, income + tax rate does not equal revenues. 5 + 5% doesn't equal anything. It doesn't make any sense.

Look, discussing counterfactuals is only fun for so long.
Feel free to read some more on the subject (such as studies), and feel even more free to take into account that there's an economic cycle, tax base and deduction changes play a role as well and taxes don't exist in isolation, but are interacting with other regulation and economic activities. Don't forget inflation, either.

I get all that. Remember too that in the 70s we had stagflation. Then Reagan came along and Voila! We didn't.

You should also get your figures right. The 70% top marginal rate was lowered in a 1981 bill ( Economic Recovery Tax Act of 1981).

Yes, being off by a year is a fatal flaw isn't it?

Meanwhile, feel free to show the boom in tax revenue in %GDP, that is without lots of GDP change and inflation influences - for I see an income tax revenue slump in the early 80's here.

If the tax rate cut causes an increase in the GDP, you can have an increase in revenue while at the same time reducing the % of revenue to GDP. You spend revenue, not %. I figure that low tax revenue as a % of GDP is a good thing. More money in the pocket of them that made it.

Besides,

"There are not only horrible policies, but also discussions about horrible policies between big lie believers and the unconvinced. The conflict goes on and on and on and the end result is that the U.S. is still discussing or unable to fix problems which have been closed cases in many European countries for between 20 and 110 years.
I suppose these discussions and policies could not be sustained if there were more interactions with non-anglophone countries"

was meant as a factual statement.
I don't bend or omit facts to please. I'm no entertainer.

Saying it don't make it so.

[Entropy]

You should also get your figures right. The 70% top marginal rate was lowered in a 1981 bill ( Economic Recovery Tax Act of 1981).

Meanwhile, feel free to show the boom in tax revenue in %GDP, that is without lots of GDP change and inflation influences - for I see an income tax revenue slump in the early 80's here.

The dip in the early 80's was due to a recession. The dip in the early 90's was due to a recession, the dip in the early 2000's...you get the picture.

I don't know how familiar you are with the complex morass called the US tax code Fuchs, much less its sordid history, but what the Reagan reforms did was lower rates, consolidate brackets and eliminate deductions. The result was that revenue did not change at all and effective tax rates (which is what really matters) barely budged. You can look at the effective tax rate tables here and see for yourself.

[Dayuhan]

What happened is relevant. And after the tax rates were lowered, tax revenues went up.

In 1982, the top individual rate was lowered from 70% to 50%. Individual tax receipts were just under 300 billion in that year. In the years that followed, individual tax receipts climbed until they were right around 400 billion. That year the top rate was again lowered from 50% to 28% and individual tax receipts continued to climb until in 1990 they were around 450 billion.

In 2003, the top rate was lowered from 39.8% to 35%. No effect on individual receipts that year and the next but climbing receipts every year until 2007.

The problem with these formulations is that tax policy is only one among many variables. Just for example, in the 1970s the baby boom generation was in college, consuming much and producing little. In the 1980s they got jobs and started paying taxes. In the 1990s they started earning seriously and investing seriously. The movement of that demographic bulge into a fully productive role was not a function of tax policy, but it certainly had a large impact on government revenues.

In 2003 the country was moving from recession into recovery, a recovery that accelerated (for dubious reasons, but that's another issue) through 2008. The extent to which tax policy alone was responsible for either the recovery or the increase in revenues is highly debatable. As one factor among many, that period was characterized by extremely low interest rates, so it's hard to determine whether an increase in business activity was due to lower taxes or cheap money.

Assigning a causative role to a single variable in a complex system is always a questionable practice.

[carl]

The problem with these formulations is that tax policy is only one among many variables. Just for example, in the 1970s the baby boom generation was in college, consuming much and producing little.

No question there were a lot of variables. But, and just a minor point, the baby boom is figured from the end of WWII to about 20 years later, give or take. That would mean a lot of baby boomers were in the start of their productive years in the 70s.

[Surferbeetle]

Just because a rate is ridiculously high doesn't mean it isn't applied. So if you knock down a ridiculously high rate revenue goes up because economic activity goes up. Which you said. So lower taxes don't equal lower revenues period. Viola.

Just to stir the pot a bit...and please keep in mind that I am a fan of the scientific method, not a keynesian, nor am I a fan of either of our currently 'ascendent' political parties...

Note to neo-liberals: Earth orbits the sun, John Ross, 24 Nov 2012, Key Trends in Globalization, http://ablog.typepad.com/keytrendsin...s-the-sun.html

H/T to Gavyn Davies, FT Macroeconomics Blogger and Goldman Sachs Alum

As for torture...it's a tool of the twisted & weak....karma catches us all in the long run...

[Bill Moore]

Posted by Carl

This brings up a very important point that I try to keep raising. The Americans were not averse to something like a war tax being imposed. We would have gone for it. The political elites were afraid to ask us to do it. They lacked any real backbone or moral courage as evidenced by all their defense of torture. Hell they lack any real moral base.

I tend to agree, since conservations with most people outside of the self-appointed political elite point to agreement on many of the moral issues we're discussing. However, we have a system that allows us to purge the politically elite and yet we re-elect the same batch of clowns repeatedly. Can we be both moral and apathetic?

As for lowering taxes to raise revenues I'm in strong agreement with Fuchs. I have done a fair amount of reading on this topic, and I tend to believe that big business propaganda is pushing that line, but the numbers don't add up. I'm also of the belief the government should spend less, but that is a different argument altogether. I think we're in agreement that when we go to war the nation goes to war, so everyone should sacrifice. Putting a "I support the troops" sticker on your car isn't sacrifice. Paying additional taxes to support the war effort is, and it should motivate the nation (populace) to more closely watch how the government spends that money in support of the war and put a stop to the multi-million dollar contracts to political croonies who are getting rich off the war and providing no value in return.

This gets back to my previous point can we really be moral if we're apathetic? The political elite count on us being sheep, in military terms it gives them considerable freedom of movement.

[Entropy]

This brings up a very important point that I try to keep raising. The Americans were not averse to something like a war tax being imposed. We would have gone for it. The political elites were afraid to ask us to do it.

You should go back and look at the debates at the time. In the case of Iraq, the argument was that a tax was unnecessary because the war would be short, of modest cost, and that most of that cost would be paid for by Iraqi oil revenues after the war. It's a similar story with Afghanistan, except the cost was modest (15-20 billion a year for the first five years) so a tax wasn't deemed necessary. Tax increases were not considered after that because we were always just a Friedman Unit or two away from winning or leaving....

[carl]

You should go back and look at the debates at the time. In the case of Iraq, the argument was that a tax was unnecessary because the war would be short, of modest cost, and that most of that cost would be paid for by Iraqi oil revenues after the war. It's a similar story with Afghanistan, except the cost was modest (15-20 billion a year for the first five years) so a tax wasn't deemed necessary. Tax increases were not considered after that because we were always just a Friedman Unit or two away from winning or leaving....

I remember those debates just fine. But your comment doesn't address my point. Those arguments were made by chicken hearted elites, which was my point.

[carl]

I tend to agree, since conservations with most people outside of the self-appointed political elite point to agreement on many of the moral issues we're discussing. However, we have a system that allows us to purge the politically elite and yet we re-elect the same batch of clowns repeatedly. Can we be both moral and apathetic?

I think we can. I don't think we have fully realized the impact of TV on our democratic structure. The Constitution was made when political discourse was conducted face to face or via the written word. Both of those methods allowed more detail and complexity to be presented. More importantly in my view is that both required the people to pay more attention to what was going on. They had to make an effort to follow a whole speech or discussion just as they had to make an effort to read a written argument.

TV has changed all that. It is easier to get most of what passes for news from the tube. It is normal enough that people will do what is easier. So it is normal for many people to make decisions based upon the ad or the sound bite. That is a huge difference from when the Constitution was written. Centuries of history went into the making of Constitution. TV has only been around for 60 years. I don't think we know how it is going to fully affect our politics yet.

Another thing, 220 years ago there wasn't all that much around in the way or entertainment compared to today. So politics was part of the entertainment available so I think for that reason people paid more attention to it. Nowadays, there are many more things easily available to catch your eye.

As for lowering taxes to raise revenues I'm in strong agreement with Fuchs. I have done a fair amount of reading on this topic, and I tend to believe that big business propaganda is pushing that line, but the numbers don't add up.

Ah but they do. People being people, it can't not be so. I figure if the tax rate were raised to 100% on somebody, tax revenue would soon be zero or close to it. If you lowered that rate, even a little, revenue would go up. If you lowered it a lot, revenue would skyrocket. If you take everything from somebody, they aren't going to work at all. That's normal. If you don't steal so much from them, they get more for working, so they work. People react to the situation.

This gets back to my previous point can we really be moral if we're apathetic? The political elite count on us being sheep, in military terms it gives them considerable freedom of movement.

Like I said, I think we can be moral and apathetic. That is bad because there is no check on the superzips, who have no moral foundation at all beyond what is good for the superzips.

[carl]

As for torture...it's a tool of the twisted & weak...

That is a wonderful sentence. I am hereby informing you that I will use it frequently in the future, probably without attribution.

[carl]

Note to neo-liberals: Earth orbits the sun, John Ross, 24 Nov 2012, Key Trends in Globalization, http://ablog.typepad.com/keytrendsin...s-the-sun.html

There are rather a lot of problems with that article.

[Surferbeetle]

That is a wonderful sentence. I am hereby informing you that I will use it frequently in the future, probably without attribution.

Feel free

There are rather a lot of problems with that article.

It has it's problems, but if you look past the political blather:

• there are some interesting numbers in there with respect to the US economy over time
  
• there is the interesting point regarding China's forecasted GDP per capita
  
• there are some interesting quantitative criticisms regarding shock therapy, privatization, etc which fall under his definition of neo-liberalism

I wish he had shown his work/footnotes...gotta do that to receive full credit.... ...then we could take a look under the hood, kick the tires, and check the control surfaces and see if his argument can actually fly...

By the way...some of your statements/opinions regarding taxation/spending levels would be bolstered by some links. This one from the Peterson Institute for International Economics might be of interest to you but perhaps you have some better ones?

http://www.petersoninstitute.org/pub...pb/pb12-15.pdf

In a very general way, given some of the places that I have served I personally feel that I receive good value for my tax money...I would pay more if asked...home is better than Baghdad any day of the week.