Right wing economics today occupies an uncomfortable place in our national life. Uncomfortable for us, the normal majority, who realize it's emphasis on austerity, punishment, and prayer for a gilded age is not good for the 99%; and uncomfortable for right-wingers, who are beside themselves with America's so called 'thieving' taxation rates and their own deep-down, internal knowledge that the chances of implementation of their favored policies are hampered by the political unpopularity of their most-strident electoral messengers.
What is/are right-wing economics (RWE)? Sounds like a question with a lengthy answer, but it's really not. RWE are essentially 'supply-side economics' which can basically be summarized as a belief
that producers and their willingness to create goods and services set the pace of economic growth.
That willingness is, according to RWE, inverseley proportional to tax rates i.e. the lower the tax rate the more 'willing' or 'incentivized' the supplier/job creator is to 'set the pace of economic' activity.
But, surely, the tax base needed by the state (or states, to give a nod to political institutions the RW says they admire) operates on an opposing principle, which is to say that its tax revenue is directly proportional to tax rates.
How can we rectify this tension, this clash of goals?
As our own Jon Perr wrote in an outstanding diary last week, RWEs invariably preaches that
"tax cuts pay for themselves" because the extra economic activity they incentivize will produce tax revenues at least as great as they otherwise would have been.
This tax cut argument is theoretically backed up by a famous (
? infamous ) graph, the
'formal' Laffer curve which looks like this
It is a perfect parabola, rotated neatly onto its side, which may, upon reflection, be our first clue that something is probably amiss with the theoretical foundations of the thing; real world economic scribblings never have looked like it. This is how they look:
But let's be credulous toward old Arthur Laffer and take his word for it. One can see on the curve that maybe, maybe we max out tax revenue around 50% or so, right? Not so fast; we need to remember the era during which this was 'discovered': The 'curve' was, per
wikipedia
popularized with policymakers following an afternoon meeting with Ford Administration officials Dick Cheney and Donald Rumsfeld in 1974
As you might have suspected, the 50% figure was probably plucked out of the air that surrounded the 70% top
marginal tax rate that was in effect at the time. So we must be closer to the sweeti-spot level now, since marginal tax rates are lower, right?
The. Evidence. Does. Not. Appear. Promising. No matter when or what the top marginal tax rate, taxes are too high.
Well how about government revenue? First of all, for those of us who monitor today's right wing radio, Fox news, or right wing digital media, one thing seems to sound dissonant: Right wingers adopting a posture which would lead to increased government revenue.
The right wing does not want increased government revenue. It. Spends. Too. Much., according to a roughly infinite number of RW sources and, as we know, if government takes in more revenue, it's going to spend more- what else would it do with the extra revenue? The very premise of tax-cuts-as-revenue-enhancer is met immediately with real world RW pushback against the propriety of that very notion.
Where then, are we in the era of the Taxed-Enough-Already Tea Party?
We know that, in their fever swamps, lower tax rates spur business, which is good, but tax rates are forever and always too high, which is bad- so they need to be lowered. Lower tax rates increase the amount government of government revenue, which should be good, but we STILL run deficits (i.e. we don't have adequate tax money) so we need to lower the tax rate even more to ostensibly increase revenue (Remember, the Laffer curve doesn't address spending cuts).
We also know that in this era, Republicans-as-tea-partiers are becoming- in their economic philosopy at least- more libertarian and libertarians, no matter who, when, or where believe taxes are not only always and forever too high, but confiscatory. In fact:
Reductio ad absurdum
So how in the world can we reconcile this? The world the RW wants- and says it wants- has absolutely no internal coherence with one in which the Laffer curve picture above could abide. That's because, silly, the so-called Laffer curve above isn't the one RWers are referencing when they spout about it. My 'curve', the REAL Laffer 'curve' is what they're talking about.
It's the only model that can possibly make sense in the economic rubber-room they've created for themselves-and for us. There was never, is not, and will never be a realistic tax rate that conservatives will endorse or adopt. The REAL Laffer 'curve' picture is worth a billions words of bloviating radio shows, articles and Fox News reports. It behooves all of us to remember this and disseminate it.