mml

I would recommend this post from CondeNast Porfolio.com. It takes a good look at Mr. Ranson's article and Mr. Hauser's Law.

http://www.portfolio.com/views/blogs...ts-wsj-edition

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dc_dux

Yep...that sums it up.

I particularly agree with the conclusion:

Hauser's Law, which is really the Laffer Curve by another name, depends on very Democrat-friendly programs for its validity.

Where would Hauser be w/o Social Security/Medicare taxes?

Would it be appropriate to rename ace's chart Hauser's Flaw rather than Hauser's Law.

I think so.

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loquitur

No, it's not an issue of bias. It's an issue of having had an awareness of multiple factors going on at the same time, as distinct from readin about something and reconstructing it. The conclusions gleaned from the latter process are highly dependent on the reader's choice of sources and assignment of significance.

And btw, Will, by your logic the Bush I tax hike should have triggered prosperity like the Clinton tax hike did. But it didn't. In fact it was partly responsible for Bush's loss in '92 and partly responsible for the 91-92 slowdown.

As far as the total tax burden thing goes: what the federal government has been doing with SS money is reprehensible. But if it treats SS contributions as taxes, which it does now and always has, then it's fair to consider them as taxes when assessing how much gets taken out of the economy as taxes. The money flows out of private hands anyway, and is part of the gross burden no matter how you slice it. If people have an incentive to plan their affairs (which most people do) and the ability to do so effectively (which rises as you go up the income ladder) then there is certainly a correlation between top rate and total tax burden. It's not totally linear, of course, but it's there.

The other thing is, people (me included) who think SS is getting a raw deal from the govt should be screaming about taking the thing out of the govt's hands, where politicians can put their hands on it, and putting it into regulated investment accounts where it can't be touched. People would be MUCH better off with mandatory retirement contribution accounts and a choice of vehicles than with the current Ponzi scheme. At the very least, if you have a superstitious belief that retirement MUST be handled by the govt, you should be agitating to take it off the regular budget. Right now the govt is stealing from future generations.

aceventura3

To those of you who don't accept Hauser's graph. I agree that you can not perfectly correlate top marginal tax rates with total taxes collected. The complexity of our tax code would not allow for that type of a clear correlation. But, I think there is something to be gained and that is that the top marginal tax rate is not correlated to total taxes collected. Kinda circular, isn't it. Well some believe that if you raise marginal tax rates on the rich, total taxes collected increase. This is clearly false. Hauser's graph shows that. So as Democrats obsess over top marginal rates, you folks know better, Right?

Second, the point of my OP is that you can not "soak" the rich through income tax policy. No one has responded to that yet, in fact many of you have turned tail and have run as far as you can from responding to that point. No one has addressed the issue that a guy like Warren Buffet can accumulate an additional $10 billion in wealth and pay no additional taxes on it. Buffet is not the only one who does it, check in with the Kennedy's, Kerry, Gore, Pelosi, etc., etc., etc. Rich people manage their income tax burden, social security taxes cap and Medicare taxes are an accepted cost but also managed.

Let me ask a question, especially for those outraged by CEO salaries.

Let's say we have CEO - A who is paid a $4,000,000 per year salary with the same benefits package as all of his employees. He/she pays income tax on $4,000,000 income and pays for what he/she consumes with after tax dollars.

Let's say we have CEO - B who is paid $250,000 per year salary, gets the rights to stock options, deferred compensation and other perks, net values of $4,000,000. He/she consumes mostly with pre-tax or non-taxed dollars.

Which is better for the government from a tax collection point of view? Don't you actually want CEO taxable income to be high or at least an accurate reflection of their total compensation in current dollars?

Here is something on the subject easy to digest. Keep in mind the average Joe's compensation is pretty simple, W2 income where taxes are taken out before Joe gets his portion. CEO's and their companies spend, who knows how much in money, time and other resources to come up with compensation packages that are tax efficient.

http://www.marvquin.com/blog/ceo-sal...sation-defined

Again, I am beginning to think the value of the information shared is being lost on some of you. For me this exercise was valuable because I think I have a better understanding of Warren Buffet. I think he uses the rules to his maximum advantage, doesn't try to change public perception, actually goes along with public perception, while he smiles all the way to the bank. Goodness, the man is brilliant.

Go ahead raise the top marginal income tax rate to 100% if you want.

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Willravel

The statistics I quoted are valid.
Bush had to clean up the massive debt that Reagan had amassed (something like $220B, which is paltry compared to today). But, if you remember, he decision to raise taxes falls on the collective shoulders of the Democratic Congress. Reagan's policies had created a more partisan air in Congress and with it Democratically controlled, Bush 1 was basically screwed either way.

1990-1991? The S&L market collapsed due to what I would consider the eventual fault of capitalism (but that's for another thread). The fact is that the late 80s/early 90s recession was technically worse than the great depression, but somehow the effect was no where near as bad.

I'm not sure how you can expect the tax hikes to perform miracles.
If you'd like we can study what happened to SS under Reagan, Bush 1, Clinton, and Dubuyuh. That may shed some light on your concerns about it's mismanagement.

loquitur

Actually the S&L market collapsed due to regulatory bungling, bait-and-switch by the federal govt and a few shady operators. I worked on some of the clean up from that mess and it was ugly.

Bush raised taxes because he was politically boxed in. The purported huge debt was not, as a percentage of GDP, all that big. But irrespective of the REASONS, if your theory is that raising taxes leads to prosperity a la Clinton in '93, you still have to explain Bush I.

SS is now and has been for many years a Ponzi scheme.

Sorry Will, but that is totally incoherent.

dc_dux

If Hauser can make broad sweeping conclusions in his chart, I wanna do the same:

Call it Dux Deduces...that supply side economics is a FAILED economic theory...each time it was applied (1981-1989, 2001-2008) with massive tax cuts, US national debt as a percent of GDP rose significantly:

It is as clear as black and red.... as income tax rates are adjusted down on the top wage earners, national debt increases as percent of GDP.

Further supported by a 2005 CBO study (pdf)

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Willravel

Wait, can you clarify who you're blaming?
I just did. Applying the model can't work when outside circumstances, such as the S&L collapse, corrupted the market and caused a recession.

hunnychile

That is the worst, most inaccurate statement you have made YET on this site! It's appalling. Yuck. How CAN you say that democrats promote race divides....isn't Obama a black man? You won't ever see a black person or woman running for Prez on the Republican ticket.

Nope, never.

And which party gives more to those who earn less, it sure isn't the Republicans! They always protect the rich. Hence the oil crisis. Those guys are all Republicans.

I could go on & on but I'm certain you are a Republican droogy & it's not worth my time.

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aceventura3

Your attempts at confusing Hauser's data is pretty funny. I think you can understand the point, but you choose to attempt to add confusion because you don't seem to agree with the implications of the data.

To be clear, all Hauser's graph is showing is that there is no correlation between top marginal income tax rates and tax revenues as a percentage of GDP. However, there is a correlation between tax revenues collected and GDP. If you grow the economy, you can grow government spending without amassing debt.

I will give you a hint. If you want to prove something that contradicts the implications of Hauser's graph - you need to show there is no correlation between tax revenues and GDP. Which you can not do. Or, you need to show that high marginal tax rates are more correlated to GDP growth than the inverse. You can not do that either. And since we know you can not do it, please find your most liberal minded, anti-supply side economist and have him or her join the discussion then perhaps we can move away from the humor. "Dux Deduces", ha, ha, ha, you are pretty funny.

{added} Just to show I read your link.

Here is a tidbit from the CBO analysis:

Why would they assume that??? Perhaps to make the math easier?

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dc_dux

Well, damn, ace....I guess that means no Nobel Prize for economics for Dux Deduces.

I knew I should not have been as simplistic as Hauser.

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roachboy

correlation is not causation, ace.
you can show correlation between any two variables and even produce a nifty graph that makes it appear o-so-objective.

but your entire information source is a wsj editorial.
you are defending a hopeless economic theory.
this does not speak well to credibility of your arguments.

i was hoping to find hauser's paper in which this model was developed, but so far my intermittent net access (one of the real treats of moving house) has gotten in the way--from what i have found, however, i am more than suspicious of everything about the infotainment you provided.

so do you have the research behind this ace?
have you looked into how the modelling was done, what the methodology was?
if so, care to explain it? or post a link?

because so far as i can see, all you've got behind your supply-side cant is an editorial that presents NO information that you believe because it fits with your metaphysical understanding of markets.

if you don't have the information, and given that anyone can generate correlations using a regression analysis or any number of other relatively simple statistical models, and that no chart bit in a wsj editorial without any reference to method, without any reference to context can possibly be seen by anyone--not even a believer like yourself--to prove fuck all, i don't really see what you've got to be so cocky about, nor do i see on what basis you get to set the criteria for refutation of hauser's "law"--PARTICULARLY given that there is already information in the thread that takes it apart.

do let me know when you find that data, ace.

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aceventura3

Perhaps one for humor or loyalty to your party's empty rhetoric.

What I did was A) show the correlation or lack of correlation and B) I gave an analysis of real world behavior that supports my conclusion. I have not seen nor have I done the math or research to show causation, nor have I been saying there is causation. At this point, I could still be wrong in my conclusion. However, no one has taken a serious approach to contradict my conclusion. Hauser's chart, is real data put in graphic form. The graphic supports "supply side" economics. Real world activities support "supply side". "Supply siders" know there is a point where marginal tax rates will have a big impact on GDP if reduced and a point where marginal tax rates will have no impact on GDP if reduced. There is a theoretical equilibrium point, given the complexities of our economy we will never know what that point is exactly.

I am not sure what takes Hauser's chart apart, please show me. All he does is show marginal tax rates (factual data) and tax revenues as a percentage of GDP (factual data).

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"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

roachboy

i could just as easily correlate the number of letters in your posts with the fluctuations of the price of oil, present it in a little graphic and make the same claims about it. that you can plot two lines and juxtapose them, and claim they both are "real world data" means nothing, ace. you should know this. i'm surprised that you're even trying to make these claims float.

as for what's not there---read host's or dc's posts above.
look at the blog entry linked above--all operating at a level of reduced information, but enough to show that the lines hauser draws are more interesting for the process of isolating them than they are for what they say, particularly in relation to each other, and even more as the basis for the claims that are reproduced in the wsj edito by some guy.

(it's hard to tell much about him, btw, as his company's website requires you to subscribe to find out much of anything about it. they are freer with their press releases, but they're press releases.)


on your more curious claims:

supply side exists as a body of pseudo-theory, that is real-world information.
the performance of american neoliberal regimes influenced by supplyside has been abysmal. there's already information in the thread--nice objective seeming graphics, if you like, that makes that case. ignoring it and repeating that "supply side is real world data" is meaningless.

everything is real-world data.
your posts are. my posts are. everything anyone writes is. all information in the world. not necessarily information about the world, but in it.

there's a difference.

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loquitur

I'm blaming a bunch of people. But basically, my memory of what happened with the S&Ls was that the govt had a soft spot for local banks that lent people money to buy homes with. That's what S&Ls were. [What you should be thinking now is "There is nothing new under the sun."] IIRC (and this is public record, so if you really want to check you can - I don't have the patience for it right now) the accounting rules were changed to permit purchasers of S&Ls to treat goodwill as an asset for purposes of calculating capital for regulatory purposes, which of course purchasers did. Then the govt decided, well, maybe that wasn't such a good idea after all, and it changed the rules again, which suddenly left a bunch of S&Ls undercapitalized due to accounting changes. All of a sudden there is a crisis. At the same time you got some slick operators who understood that you can do some nifty things with goodwill and creative accounting. So in effect the S&L crisis was a massive case of governmental bungling, with a bit of Enron thrown in for good measure.

The case I worked on had to do with what happens if the govt seizes a bank that it had no legal right to seize - does the old owner get the bank back? a claim for damages? both? up the creek with no paddle? Stuff like that happened, and Congress never considered what might happen if the bureaucrats it was empowering abused their power - which is pretty typical of how government operates; it can't think of everything and usually doesn't. It did keep lawyers occupied, though.

Roachboy, is it your position that people don't respond to incentives? At its essence, "supply side" is just a jargon reference to the concept that incentives matter. And they really do.

Willravel

Yes and no. The recent problem was the responsibility of the lenders and the lend-ees. The government didn't really facilitate the sub-prime thing. The government does bear some responsibility for the S&L, though.

I did get that "when will people learn" feeling though, so I get what you're saying. Ultimately the investor does have to take responsibility for his or her investment.
I'd call it equal measures of governmental mismanagement and sheyters taking advantage of people who probably shouldn't have been investing in the first place, but ultimately it's not really a big deal. We both agree on the fundamental causes, which is all that matters.

I still believe my point still stands regarding the change in economic policy under Bush1. Saying that removing supply-side policies didn't work during the 1991 recession is a refusal of looking at the big picture, something you claimed to have a particularly better handle on due to your age and involvement in all this. In all honesty, you probably do know more about it than I do, but I suspect that your normal biases (biases that we all have in one way or another) are coloring your memories a tiny bit. We clearly both come from different schools of thought on the subject.
I can imagine.

loquitur

Actually, Will, our views are sort of mirrors: you think the 93 tax hike caused the subsequent prosperity, and that if not for the S&L crisis the 91 tax hike would have also. My view is that, although both tax hikes were small, so that the effects were marginal, the 91 tax hike did harm the economy; the S&L crisis by itself wasn't enough to do it, but there was an accumulation of things, including the normal cycle of business after 7 years of prosperity. The 93 hike was small, and was so overwhelmed by the huge rush of technology-driven productivity and investment (plus the uptick from the start of the recovery) that it ultimately had almost no effect at all on the larger economy.

Willravel

Well the S&L is just the biggest of the causes of the recession. The deficit, unemployment, poor GDP performance, etc. all contributed.

BTW, the totally incoherent thing was me referring to the 1987 stock market collapse, which was technically larger than the crash in 1929.

loquitur

depends what you're measuring, will.

roachboy

that is not an accurate restatement-as-a-question of my position.
the celtics are losing, so i'm not going to address the stuff about supply side at the moment. displacement in action, it'd be, methinks.

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Willravel

The Dow Jones dropped over 22% in one day in 1987, as I recall. That same drop happened over two days during the 1929 crash.

loquitur

But in the '29 crash it kept dropping, and within two years (or thereabouts) bottomed. The day after the '87 crash the Dow recovered something on the order of 350 points, and there was no economic downturn until years later. That's why it depends what you're measuring.

TheNasty

You know, I grew up in the late 80's and early 90's, and my grandfather, who I dearly miss, grew up in the 20's and was shipped off to war in Europe at the age of 19.

From the stories he told me, I'm surprised a country boy from Arkansas lived long enough to be shipped off to war.

Will, the late 80's and early 90's weren't any where near the great depression. It doesn't matter how you measure it.

You can lose sight of the forest amongst all the trees.

I'm honestly not smart enough to contribute to a discussion about economic theory, but when it comes to my money, I know how to spend it better than the government does. I'm no where near rich, and probably never will be, but I know the same principle would apply if I ever was.

Willravel

In one way, the way I measured it, it was worse. The math is simple.

I was demonstrating that the market in the late 80s was effected greatly, so much so that the tax hike wouldn't and couldn't have compensated for it. I was not suggesting that the 80s recession was tantamount to the 20s depression.

Just a quick question: you suggest that you know how to spend your money better than the government... how much would you be willing to spend on the military? Roads? Fire protection? Police? Regulatory bodies like the FDA, which can prevent poisons from being sold in our food?

Let's not pretend that the government's jobs are simple.

loquitur

Tell you what, Will. Limit the govt to the functions you talked about, and then you might have a point. Otherwise, yes, I know how to spend my money better than the govt. Starting with Social Security.

TheNasty

You're a master at framing a debate, I'll give you that.

If anyone feels like they aren't being taxed enough and they should contribute more, I doubt the IRS would turn away a personal check. Feel free to make a donation. I'd pay more taxes to support fundamental societal needs like roads, fire protection, and police. Beyond that I want to work for myself, not for the collective.

Willravel

I simply was suggesting that if you think you're paying to much taxes, you should be sure you're willing to do without those things your taxes pay for, good and bad.

I'd absolutely LOVE not to pay for the Iraq War. I'd love not paying a certain president's salary. Still, more than that I feel the responsibility of making sure that I contribute to police and fire pensions. I feel the responsibility of paying to make sure that highways are maintained and are safe to drive on. I even feel the responsibility to help build and upkeep local parks and such.

TheNasty

All of us are being taxed to much, plain and simple. The government tax free day this year is going to be some time in July. The average American going to work on Monday is still working to put $$ in the pockets of the government.

That's ludicrous.

loquitur

Will, you're ducking...............

Willravel

Bush won in 2004. What makes you think a majority won't do privately what they did publicly?

Moreover, what constitutes something the government should be doing vs. what it shouldn't? I suspect that my preferred government would look different than yours. We may agree about police, roads, and parks, but what don't we agree on? And what happens if one of us gets our wish? The other would be just as unhappy if not more so under the new government. I'm guessing you're a libertarian (clearly a wild guess), but I'm a democratic socialist. That could make for some awkward concessions on either side.

loquitur

absolutely right - but then you have to justify vesting power in the government each time you do it. The problem I have with the left-leaners is that they naturally assume every social issue has to have a governmental solution, which is precisely wrong. Some problems might, but deciding which is which requires thought and analysis, not reflexive responses.

dc_dux

loquitor...it is actually the left-leaners and the center....the majority of the country?

Although I wouldnt go as far as to say either group (left or center) believes it applies to "every social issue."

Its reinforced to some degree by a recent survey from the Pew Research Center....hell, even a growing number of conservatives have seen the light:

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Willravel

So your assumption is that we believe that all social programs should rest with the government by default? Why would we assume that? Could it be because there's very rarely profit in social programs, and as such they simply wouldn't get done in the free market? Will I ever stop asking questions?

loquitur

Is it your assumption that social problems are necessarily remediable by government programs? Are you sure that many government programs don't exacerbate social problems? Are you sure that market forces won't solve many of the problems you perceive without creating sclerotic, inflexible, antidemocratic bureaucracies? Have you considered that many programs place self-perpetuation as a goal ahead of any useful societal purpose? Are you convincingly able to discount the law of unintended consequences, which arises because planning will never be able to anticipate and account for the effects of its implementation?

Will I ever stop asking questions?

Willravel

What has a greater chance of success, a market that doesn't even try, or a government who tries?
And if I can name one that doesn't? The public library system, for example? If we vote for Democrats, then their programs are democratic. Of course the US isn't a democracy, so I fail to see the relevance.
According to whom?
A variant on Murphy's Law? Comon, you can do better than that.

What harmful effects could come from providing libraries to the public?

dc_dux

loquitor...I would never suggest that government social programs are not without abuse or unintended consequences.

But I would also suggest that the vast majority of the tens of millions of Americans who benefit from these programs every year do so in a responsible manner and quietly go about their lives with a little more dignity until they no longer need a government safety net.

I honestly cannot think of any country, any time in history, that cared for its citizens most in need by relying on market forces. What makes you think such an approach would work?

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loquitur

the best social program is a job. Governments don't create jobs. Not real ones, anyway. That's how.

You'll also have to define "most in need." Short of a debilitating handicap, pretty much everyone is able to do some kind of work.

dc_dux

A job with no health insurance wont help with a serious illness of a child....a minimum wage job wont put food on the table.....

Or someone who is living from paycheck to paycheck and recently let go because of downsizing and suddenly finds himself between jobs....how does he pay next month's rent w/o unemployment comp?

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Willravel

Wow. I should really reconsider being a public defender, what with it not being a real job and all. I wish they'd told me it wasn't a real job on career day.
What about people born into extreme poverty? I'm assuming you've seen Bowling for Columbine. Do you remember the situation in Flint, Michigan?

loquitur

will, you keep defaulting back to core govt functions to defend social programs. That's bait-and-switch. Cut it out, it's intellectually dishonest and beneath you.

People born into extreme poverty have been making it out of poverty for a long time, will. Being born poor isn't a lifetime sentence. And putting people in the tender hands of govt isn't the way out, either. Or have the last 40 years of evidence not shown you anything?