There are several continual lies from the RWNW (Right Wing Noise Machine) about economics. Regardless of the actual facts that clearly contradict these statements, the RWNM continues to spew them out. So, below is a list of the most common lies from the RWNM with an explanation of why they are wrong.
The Laffer (Laugher) Curve
First, here is a picture of the laffer curve which has dominated Republican economic thinking and discourse over the last 25 years. It stipulates that as tax rates decrease people will be more inclined to make more money because they keep more of their money. Hence we get the phrase "tax cuts pay for themselves."
This has formed the intellectual bedrock of Republican economic policy for the last 25 years. There are two problems association with this curve.
First, there is no way to derive this curve from any existing data set. Compare this to other bedrocks of economic thinking - supply and demand, marginal cost equals marginal revenue - which can be derived from data readily available to analysis. If you can't get a curve from existing data, maybe it doesn't exist.
Secondly, Republicans always assume that current tax rates are to the right of the curve's apex. Therefore,, the only direction for tax rates is down. It never occurs to anybody that rates are to the left and therefore a tax cut will decrease government revenues. My first point makes the second point that much more dangerous. There is no way someone who disagrees with the curve to empirically prove that a tax cut will decrease revenue. In addition, because there is no way to empirically discount the tax cut argument, the tax increase argument is easily attacked, discounted and placed at an extreme political disadvantage.
Tax cuts pay for themselves; or, tax cuts increase revenues
Go to the CBO website. Reagan cuts taxes in 1981 and raised them in 1983. From 1981 - 1983, tax revenue was 599 billion, 617 billion and 600 billion respectively. It wasn't until 1984 - after Regan raised taxes and the economy entered an expansion - that tax revenue increased.
The same thing happened with Bush II. He cut taxes in 2001. From 2001-2005, total tax revenue (in billions) was 1,991, 1,853, 1,782, 1,880 and 2,142 respectively. In addition, these figures are not adjusted for inflation.
If you want another source to quoute, how about the IRS? Go to page 18 of the previously liked report, where you will find a graph of inflation adjusted tax receipts. Notice that in 1981, individual tax receipts were a little over 300 billion. This number dropped to 275 billion in 1983. It wasn't until 1986 when tax receipts under Reagan's plan actually increased to pre-Reagan levels. The individual tax receipts under Bush II took a precipitous drop, falling from 575 billion in 2000 to 425 billion in 2003.
The facts are clear: tax cuts do not increase revenue.
Tax cuts create economic growth
I explained this in depth in this diary. The reality is interest rates have a much stronger impact on economic growth. Lower rates, and the economy grows. Raise them and the economy slow. In addition, this relationship existed long before the laffer curve came into existence and formed the bedrock of Republican economic thinking for the last 25 years.
I should disclose I am more of a monetarist than some of my other center-left economic brethren. This may be because of my previous job trading bonds or the fact that I agree in part with some of Milton Friedman's analysis.
Tax cuts create jobs.
Clinton raised taxes. Bush cut them. Clinton's economy created 22 million jobs. To date, Bush's has created a little under 5 million. Any questions?
The reality of Bush's economy is corporations have instead decided to horde cash instead of using the their increased revenue from tax cuts to fund job creation. Take a look at savings figures on page 14 from the Flow of Funds report. You will notice that corporations are actually the only economic sector to have a net positive savings for the last 5 years. Instead of using their increased cash to increase their payrolls, corporations are using their savings to either buyback stock or go on a purchasing spree.
Tax increases lead to recession.
Clinton raised taxes in 1994. That was followed by 6 years of economic expansion. Reagan raised taxes in 1984. That led to 6 years of expansion.
It's very important to remember that when tax increases are supposedly aimed at deficit reduction, the markets will typically purchase longer-dated Treasuries, lowering yields, making the cost of borrowing cheaper, increasing growth. Look at this chart. After Reagan raised taxes (in theory to reduce the deficit), the bond market reacted as previously described. The same is true of Clinton's increases.
Tax cuts for the rich and/or corporations "trickle down" to the middle class.
Corporations are the only constituent part of the economy with any meaningful savings over the last 5 years. At the same time, wages for non-supervisory employees after inflation have increased .5% over the last 5 years. Someone is getting richer, and someone isn't.
Another way to look at this situation is to look at the inflation adjusted wages for non-supervisory employees, which have risen a paltry .5% since 2005. In short, the money is not trickling down to 80% of the population in the form of higher wages.
Conclusion
The above mentioned lines of reasoning are constantly used in the discourse of Republican Economic talking heads (Kudlow, Luskin, Cavuto). The problem is none of these lines of reasoning has any basis in reality; a simply look at readily available public information would tell any of these people that their policies are not working.
Not that they will let something silly as facts get in the way of their talking head status.