MALCOLM Turnbull argues that we should lower the top tax rate because it reduces the incentive of high-income earners to work hard and invest in productive activities.This is a promising start. There are no factually incorrect statements here. However, her good run doesn't continue.
If you thought the argument sounded familiar, you're right: it is a rehash of supply-side economics which has been in disrepute since Ronald Reagan tried it in the 1980s.When you don't agree with something, it's a rehash. However, I'm sure bringing back free university would be considered a revival.
The results of that experiment discredited the theory once and for all, except among diehards who use it as a convenient rationale for tax cuts for the rich.It did? That's why there's still a large number of so-called Reagan Democrats, and a huge number of people using forms of supply-side economics - like John Howard, who's continually brought in tax cuts for the rich, and watched the benefits for this country roll in.
Reagan's experiment assumed higher incomes resulting from tax cuts would be spent by entrepreneurs on investment that would increase production and create jobs. As a result more taxes would be collected, despite being paid at a lower rate.Which is what they did.
This was because profits would be higher and more workers would be paying taxes.More workers indeed - unemployment peaked at 10.8% in November 1982, just after Reagan's second budget, and by the end of his final budget, it had more than halved at 5.3%.
Supply-siders argued that taxes and regulations raise the cost of entrepreneurship, reducing the returns that can be made from economic ventures.They don't argue this - this is a fact.
This reduces the willingness of entrepreneurs to take risks, causing the economy to stagnate.This is the argument. It appears mixing up an argument with the facts is a common tactic of the delusional.
Supply-side arguments did not have much credence among economists but they were politically popular among higher-income earners and businesses for obvious reasons. It was primarily promoted by a group of journalists at The Wall Street Journal. Other advocates included Irving Kristol, editor of the neo-conservative journal The Public Interest, some congressional staffers, a few consulting firms and many conservative think tanks.But it worked. However, you can just tell who's about to be quoted when it comes to economists that don't agree with Reagan...
Looking back on the supply-side era, The New York Times columnist Paul Krugman has pointed out that supply-side economics had been supported by "a handful of wealthy cranks" and "an impressive-looking array of think tanks, research institutes, foundations, and so on", which are in turn funded by the rich and powerful.Yes, Krugman's against it. So it must be good. This guy has been listing Krugman's errors for years, and it's a huge, huge bank of errors. Krugman's made some hilarious claims over recent years, including that Donald Luskin stalked him in person once (he didn't), and that a full manual recount in 2000 would have made Gore President (it wouldn't). Even a public editor at Krugman's own paper said that he liked to distort and destroy facts and statistics to suit his agenda.
Similarly, Sidney Blumenthal, in his book The Rise of the Counter-Establishment, argued that supply-side economics "travelled from lunatic panacea to official catechism in a few short years". It had popular appeal because of its "have your cake and eat it too" message. Blumenthal said "the gnostic supply-siders made claims to knowing the secret of endless wealth: the magic of the market place, a theory for the multitude of go-getters, promising that the cornucopia was bottomless"."Sidney Blumenthal, a former senior adviser to President Clinton, is author of The Clinton Wars". Heh.
This optimism helped Reagan to get elected, despite George Bush snr labelling supply-side theories "voodoo economics" when he was a rival candidate for presidential nomination in the 1980 primaries.And of course, Reagan's huge landslide had nothing to do with the sheer incompetence of Jimmy Carter. Nope. Not at all. Let's just talk about Reagan peddling eeeeeeeeevil lies to AmeriKKKa.
Reagan's campaign advertisements promised tax cuts that would make everyone better off. The ads said: "Ronald Reagan believes that when you tax something, you get less of it. We're taxing work, savings, and investment like never before. As a result, we have less work, less savings, and less invested."And people were better off - between 1982 and 1989, the median family income rose 12% in real dollars, and average household income up in across all five quintiles when measured in real dollars. Yet despite the facts, the left-wing lunacy is about to shine through, as the article continues.
Supply-side economics failed to deliver.Wait for it. Wait for it. This'll be a good explanation, surely.
Reagan's tax cuts did not lead to higher incomes, greater economic growth, increased employment or increased savings. Therefore less taxes were collected and budget deficits increased with a tripling of the national debt.Where do we start with this one?
1) We've already established that incomes were higher across the board. Wrong on count one.
2) Real economic growth averaged 3.2 per cent under Reagan - higher than during the Ford/Carter period, or the Bush 41/Clinton period. The economy increased in size by almost a third under Reagan, and thus economic growth was greater. Wrong on count two.
3) We've already established that the unemployment rate was cut in half between Reagan's second budget starting and his final budget ending. Wrong on count three.
4) The savings rate actually did fall under Reagan - she got one right!
5) Taxes received in real dollars went up dramatically after the tax cuts were passed. Wrong on count five.
6) Congress controls spending; anyone who has done anything on American politics at high school level should know this. Is this wrong? I'd like to give her the benefit of the doubt here.
7) The national debt doubled, not tripled. Wrong on count seven.
So in Beder's "disprove-Reaganomics-super-sentence", she only gets one claim out of six right, and she makes a possible error in her efforts to blame Reagan. Oops?
Reagan's budget director, David Stockman, later told The Atlantic Monthly the 1981 tax cut was a "Trojan Horse to bring down the top [tax] rate" for the wealthy.Which just so happened to also cut tax rates for everyone else. Amazing that.
Supply-side theory was a reformulated version of the "trickle-down" theory that if the rich are richer they will invest more and the extra wealth created will "trickle down" to the poor. Describing this theory J.K. Galbraith said: "If one feeds the horse enough oats, some will pass through to the road for the sparrows."It's good that she resorts to stating what an idea is all about, and we'll forgive the disparaging remark. But...
However the reality was that 80 per cent of the workforce experienced a decline in real wages after Reagan was elected, while the wealthiest 20 per cent of families had spectacular increases in wealth - 100 per cent increases for the top 1 per cent and 30 per cent increases for the top 5 per cent.Wrong again. We've already established the errors in the first half of this claim here, but as for the second half, it looks fairly accurate to me. However, when everyone gets richer, that puts the rich getting richer too into perspective.
There is no reason to believe that tax cuts for the wealthy in Australia will benefit anyone but the rich.Other than the Reagan years, of course.
It is the latest bid to destroy progressive taxation and with it any lingering ideal of Australian egalitarianism, in order to line the pockets of those who already have large incomes.Yawn. You can't make a grand argument, and then back it up with distorted facts, outright lies and blatant falsehoods. It's very rare that there's a column worse than Alan Ramsey's in the Herald, but this is it.
(Cross-posted to The House Of Wheels.)