For taxes in the US
The myth and the truth about taxes in the US
Samuel Jackson, an 18th century English author, once proclaimed that “patriotism is the last refuge of a crook.” This was the case before the economic models were created. So, as it turns out, the scammers have found a new shelter. In the past, Republicans would argue in favor of tax cuts, using simple arguments.
That is how the incentive to work increases, that the income tax reduction strengthens GDP. It could even increase tax revenue if you believe Arthur Lavers and the famous curve he painted on a napkin.
Lapfer argues that tax revenues are reduced if tax exceeds one level because no one has the incentive to work.
These kinds of arguments have become known as the economy of supply, or as former President George Bush has called them “economic voodoo”. Repeated tax cuts did not increase tax revenues or boost growth. All they did was raise public debt. However, reality has never really managed to prevent Republicans and the supply economy is coming back dynamically.
In January, the Republicans who now have a majority in Congress have transformed the principles of the economy into a law under the euphemistic title of “graduating dynamic models.” They recruited a new director for the Congressional Budget Office (CBO), Keh Hall, the veteran of the George Bush administration. It will undertake dynamic graduation, in other words, to make economic models to show that tax cuts are amazing.
In order to better assess this move, we must turn to Harvard’s economist Gregory Manchiu. To Mr. Mankiou, who was also a Bush administration, really, but really, do not like taxes. So when Mankiou doubts about an initiative aimed at tax cuts, then it really is a mess.
Mankiou confesses that choosing the economic model and economic parameters on which the model will be based will make the results always controversial, so there are good reasons to doubt this effort. I will be less generous and I will say that the economic models that the Republicans will use will be bad models.
In order to go ahead with dynamic graduation, you need to build a dynamic economic model, a model that shows how the economy behaves over time. We are full of such models. Everyone can choose what they like and in addition each of them includes a number of parameters that show how the economy reacts to different events. The range of parameter values ??is very large, because nobody knows from the outset what the right economic model is.
Congressional Budget Office executives, with Republicans pushing them, are unlikely to choose the models and parameters they will use. It is almost certain that they will choose economic models and parameters that will show that tax cuts will work surprisingly. Based on these models, Republicans will push for more and more tax cuts.
When it turns out that the economic models were wrong, we will have even more debt burdened and in return we will not have gained any significant growth just as it did when the supply economy first became effective. Of course, if that did not bother Republicans 15 years ago, it seems unlikely they will still care today.