Who, Indeed?

One can try to argue, I suppose, that it's per se illegitimate to mount any kind of argument about historical counterfactuals. This will, however, render it impossible to make any claims about causation.

Isn't there a school of causation that denies the possibility of counterfactuals, that the stuff that did happen is the only stuff that could have happened? Things are still being caused, but there's no indeterminacy.

The rot that has infested Republicanism really is both appalling and magnificent to behold.

you would think kudlow would know that real gdp growth under bush, post-recession and tax cuts, has been lower than real gdp growth under clinton, post-tax hikes.

but then we get into the whole issue of whether kudlow "knows" anything, since the evidence is that he doesn't.

The point is that under normal circumstances the claim that "X caused Y" can be rephrased as the claim that "had X not happened, Y wouldn't have happened." There are some special circumstances under which this breaks down, but the causation/counterfactuals llink is always tight.

It is common sense to think that the revenue raised at 0% and 100% might both be $0. It is common sense to assume that there is a rate somewhere between the two extremes that would raise the maximum amount of revenue.

It SHOULD be common sense to realize that we are on the part of the curve where higher taxes would result in higher revenue and lower taxes would result in lower revenue.

Why not ask the former drug addict, Mr. Kudlow, what tax rate would, in his super-intelligent opinion, would produce the maximum amount of revenue?

There are disagreements about the order of explanation here -- is causation supposed to be explained in terms of counterfactuals, as David Lewis and Matt Yglesias think? Or is the order of explanation the other way around, with particular counterfactual claims being grounded in the causal order of things? Either way, as Matt says, the connection between counterfactuals and causation is a tight one.

Well, aren't a lot of people going to object to the claim that "had X not happened, Y would not have happened" even usually means that X caused Y? There's the counterexamples of the form "His birth caused his death" and like that.

Anyway, since Kudlow baldly asserts that "Economic growth would’ve been slower" he's obviously not in the business of rejecting counterfactuals. More the business of making NRO readers stupider about economics.

It's curious that conservative economists and pundits can always tell that we are on the downward-sloping part of the Laffer Curve. It must be some kind of psychic power, like Spider Sense.

Basically, except for the trivial statement that 0 * x = 0, the Laffer Curve has no predictive use. A tax rate of 100% generates boocoo taxes.

"Who, indeed, other than, perhaps, the staff economists at the Congressional Budget Office who are trained to make such calculations."

Of course, Kudlow would point out that the CBO is instructed by Congress not to use "dynamic scoring" of tax cuts, which he maintains better represents reality.

"Neither the CBO nor any other credible individual or institution has produced such a model"

I'm sure one can find some conservative think tank with an aggressive enough Laffler model to have numbers that back up Kudlow's assertion. Macroeconomics is fuzzy enough to permit badly wrong models to appear somewhat credible.

-----

I'm in perfect agreement with you that Kudlow is full of shit on this topic, (as he generally tends to be), but I don't think your rationale here is shooting his rationale down as conclusively as you might think.

There are two separate issues here.

1. The Laffer curve: At some point you can raise a tax rate so high that revenues decline because people flee the taxed activity. Yes, tax rates are probably not in that part of the curve for most taxes. (Though I can think of one or two taxes which are deliberately set that high.) This is a relatively short term effect, which can be assessed in a few years.

2. Effect on growth. Theoretically, if a lower tax rate short of zero increases growth, no matter HOW low it is, eventually the growth in the taxed base will yield more revenue. Of course, discount rates apply here. But when this issue is analyzed, you always have to consider how long a time frame to look at. Too short a timeframe, and you're not going to find the effect of growth compounding.

There's a third issue, of course: Taxation also negatively impacts the public welfare, directly: It takes money away from people! Taking this into account, not every possible expenditure is worth the cost in taxes to fund it.

We shouldn't be aiming to maximize revenues. We should be aiming for the lowest rate of taxation that will fund everything that's significantly more beneficial than letting people keep their money. In a society where government funds all sorts of things which have negligable or even negative benefits, that could be a pretty low rate of taxation...

A good point MY has brought up before:

Revenue has been higher than expected because of 1 dynamic change: the rich earn more money as part of Bush's economic policy. Since the rich pay higher taxes (even after a tax cut), part of this effect is to raise revenues relative to the same economic pie.

"Since the rich pay higher taxes (even after a tax cut)"

Untrue. We've currently got a basically flat system, if you except the poor.

In fact, the very rich pay a lower effective tax rate than the upper-middle class, and about an equivalent rate to the middle-middle class.

In other words, Bill Gates pays the same effective tax rate as the median American, and a lower tax rate than Al.

Where's Lev Bronstein when you need him?

Petey, the last time the CBO "dynamically scored" the Pres. tax cuts, it suggested the opposite of supply-sider predictions.

http://www.freerepublic.com/focus/f-news/882137/posts

"Petey, the last time the CBO "dynamically scored" the Pres. tax cuts, it suggested the opposite of supply-sider predictions."

All I'm saying is that if you keep plugging different numbers into your model for "dynamic scoring", you'll eventually get results that agree with Kudlow's faith based assumptions.

Alan Murray is part of the reality based community. One wouldn't expect him to agree with Kudlow.

dave, petey isn't talking about objective reality, he's talking about kudlow reality. kudlow would claim that dynamic scoring would prove his point.

as for objective reality, the best study i've seen on the matter is here:

http://www.cbo.gov/ftpdocs/69xx/doc6908/12-01-10PercentTaxCut.pdf

it, of course, does not support kudlow.

meanwhile, petey is also correct that the american tax system in aggregate (inclusive of state, local, and FICA) is quite flat; however the income tax system is still somewhat progressive, so when it comes to federal revenues and higher incomes, yes, revenues increase when income concentrates in the upper 1% of household by income.

as for brett, he is correct: the point of the tax system is to raise the necessary level of revenues to fund government in a balanced way across the business cycle (run deficits in times of recession and low growth, run surpluses in times of higher growths).

where he's wrong is in assuming that welfare is harmed by higher taxes. As the public keeps telling pollsters, if we had a rational, national health-care system replacing our patchwork system, taxes would be higher but welfare would be positively affected....

"meanwhile, petey is also correct that the american tax system in aggregate (inclusive of state, local, and FICA) is quite flat"

I don't have my references handy, but I have a pretty high level of confidence that I've seen data that indicates the current tax system is flat (when you exclude the poor) at the federal level alone.

As one of our '08 Presidential candidates has said, a CEO pays a lower tax rate to Washington than his secretary, and that ain't right.

Maybe the coke that cokehead Kudlow snorted should have been taxed.

"where he's wrong is in assuming that welfare is harmed by higher taxes."

Nah, I'd say I'm on pretty firm ground in saying that welfare is harmed by higher taxes. The spending taxes pay for may, in some instances, result in benefits great enough to justify that harm, but the harm is there. If we didn't need taxes to pay for the spending, only people consumed by malevolent envy and spite would insist on having the taxes anyway.

It's a rather serious falacy to believe, that because a harm may on net be justified in some instances, it's not really a harm. Once you decide necessary evils aren't really evils, you start resorting to them where they aren't actually necessary. Just evil...

Petey, when you take into account income taxes and FICA, federal taxes are relatively flat; in addition, effective tax rates are different than tax rates because of clever strategizing by the well-paid tax accountants of the well-paid.

but only when you get to including state and local taxes, which tend to be highly regressive, like FICA, do you get to the range of where 80% of so of the american public pretty much pays the same tax rate. (i was just checking around my "useful reference articles" folder for a cite of a nice writeup in the christian science monitor on this in the last couple of years, but i don't seem to have saved it, or i stuck it in another folder, but if you're in the mood for hunting around....)

brett, we the people formed the united states "in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity." When you start calling the funding mechanism that supports that "evil," i think you have a problem of word selection: the promiscuous misuse of the term "evil" isn't quite at Godwin's Law status, but it's not far off.

you are of course welcome to campaign for the dissolution of the united states and its replacement by a libertarian paradise in which taxes are regarded, ipso facto, as "evil," but until then....

Counterfactuals are never evidence; they are always, at base, a priori analytical argument, even if they do not appear to be, on the surface. There's nothing wrong about that. It is not possible to "observe" causation; cause and effect are the children of narrative fathered by analysis. What analysis can actually establish is the logical relationship among various parameters and variables. When we apply that analysis to the interpretation of what actually happens in the world, we compose narratives of cause and effect, and counterfactual narratives are just a form for returning to analysis.

We get into difficulty, when we start looking for evidence to support the counterfactual, when, in fact, history only happens one way.

It would be more effective to attack Kudlow where he lives: on the conviction that higher taxes would lead to lower growth. Maybe, higher taxes (i.e. sounder fiscal policy and higher savings and investment) would lead to higher growth. Maybe, acting to reform corporate governance and increase marginal income tax rates on high earners would curb the migration of ruthless psycopaths thru the executive suite, and improve corporate performance and efficiency.

Rather than join Kudlow, even for a moment, in his fantasy world, challenge him with interpretations of the real world, which directly contradict his every treasured prejudice.

Howard, you're exibit #1 for the willful failure on the left to understand the idea of "necessary evils".

Take vaccination. It's a great example of a necessary evil: If we didn't need to in order to prevent epidemics, would we go around shoving needles into people's asses? No, because shoving needles into peoples' asses is an evil, which can be justified only because it's necessary to accomplishing a good which is greater than the evil inherent in the act.

Government is a necessary evil. If there were other, less evil ways to accomplish the good government does, we'd damn to the deepest pit of hell anybody who foisted government on us.

The biggest intellectual failure on the left, IMO, is this willful rejection of the idea of necessary evil. With the inevitable result that you embrace the use of government to achieve ends, even when there are non-evil ways of achieving them.

brett, your 3:08 is (in somebody's phrase!) exhibit #1 for the right's willful failure to understand that everything you don't like isn't inherently evil: sometimes it's just something you don't like or are opposed to.

Howard: Are you hung up on the semantics of the word "evil" or are you disputing Brett's general point that taxes and government intervention are things that we only do because their benefits outweigh their costs? I'm a fairly liberal guy, but I can't imagine anyone would think of taxation as an end in itself.

"I'm a fairly liberal guy, but I can't imagine anyone would think of taxation as an end in itself."

In my experience, you'll find plenty of people on the left who don't so much think taxation is an end in itself, as they do that taxation would be justified for purposes of egalitarian leveling even if the government didn't need the money. That's close enough to an end in itself for "government work".

"taxation would be justified for purposes of egalitarian leveling even if the government didn't need the money"

I actually agree with this with respect to the estate tax (as did Teddy Roosevelt) for pragmatic, instrumental reasons. Massive amounts of inherited wealth are bad for democracy (and probably not that great for capitalism). But I think that's a special case.

Led: there's a difference between looking at a cost-benefit analysis and deciding to do something despite its cost and claiming, as Brett seems to, that the mere existence of a cost makes something evil.

It's so true as to be almost tautological that if the same benefit can be achieved at a lower cost, the lower cost option should be chosen. It's a mind-boggling leap to go from that to the assertion that the fact than a course of action has a cost is a fundamental problem.

Like I say, it's been my experience that a lot of people on the left just have this gut reaction to the very concept of "necessary evils", and that's very much on display here.

"the mere existence of a cost makes something evil"

So it is just semantics, then. Cost, harm, evil...same thing. It's just a negative value on one side of the scale. I wasn't interpreting Brett as referring to "evil" in any theological or manichean sense. Given the current regime I can undestand the increased sensitivity to abuse of the word "evil," but I don't think the phrase "necessary evil" is particularly insidious. In fact, I think it's useful as a reminder for us libs that when government takes action there are negative consequences that need to be taken into account.

Milind, in this context, (And I didn't invent the term, it's been around for ages.) an "evil" simply means something which, taken in isolation, is bad. We're not talking about a character in Time Bandits.

Perhaps you just don't like the idea that requiring somebody to hand a fraction of their income over to the government on pain of imprisonment if they refuse exists on the same continuum as torturing a terrorist to find out where the bomb is, or stealing a car to get a dying person to the emergency room? Tough, they're still points on the same scale, acts you can only justify doing if you've got a damn good reason.

Maybe you've got the reason. But if you forget the nature of what you're doing, you'll steal that car to go to the store for a gallon of milk. And that's where a lot of people are right now, when it comes to taxation. They've gotten so caloused about it that they don't stop to think about whether it's justified in each specific instance.

Brett, Its not the particular content of your argument that I object to, but the specific phrasing. The Republican effort to change our very language operates at both a broad and deep level.

"Nah, I'd say I'm on pretty firm ground in saying that welfare is harmed by higher taxes. The spending taxes pay for may, in some instances, result in benefits great enough to justify that harm, but the harm is there."

Lets examine this claim. The second sentence makes plenty of sense. Obviously, you are pretty dubious about the benefit of government provided services, but then you aren't poor, so why would you appreciate them? But does the second sentence justify the first? Well, only in the very specific sense that ignores the benefit a government provided service funded by that tax generates. And why is this relevant? Well, first, as I said, phrasing. I can't let you get away with this phrasing because its just not the case that taxes (+services) are a net negative. This phrasing implies that they are, even though you know full well that you can't universally make that claim. Secondly, you will later perform a bait and switch:

"2. Effect on growth. Theoretically, if a lower tax rate short of zero increases growth, no matter HOW low it is, eventually the growth in the taxed base will yield more revenue. Of course, discount rates apply here. But when this issue is analyzed, you always have to consider how long a time frame to look at. Too short a timeframe, and you're not going to find the effect of growth compounding."

See here, your analysis has completely excluded the potential benefit of a government provided services on long term economic growth. It is not reasonable in this kind of argument to specifically exclude the loss in government provided services that a tax cut must include. Where that service is public education, public transportation, public healthcare, police protection, fire departments, business regulation... all of these have compounding effects on general wellfare and even, specifically, economic growth in many cases.

So I can't let you get away with your "taxes are a harm on general wellfare" phrasing because you will try and use it to dupe the public and make false arguments.

Brett, perhaps you just don't like thinking about the way that circumstances of birth dictate that one person grows up in a slum with no possessions and another grows up with all the wealth they'll ever need, with both families paying taxes to enforce laws that protect the latter's property. You don't like the idea that this exists on the same continuum as a regime that awards benefits to party members and leaves the rest in poverty and chains. Tough. They're still points on the same scale, injustices that it's damn hard to defend on any moral or rational grounds.

Maybe you've some reasonable grounds for preferring one system over the other. But if you forget the nature of this system you're benefiting from, you'll begin to think that your successes in life were entirely the result of your own labor, rather than that of fortunate circumstance and an economic infrastructure that was largely built with other people's tax dollars. And that's where a lot of people are right now when it comes to inequality. They've gotten so calloused about it they've started to think that they're entitled to be privileged from cradle to grave.

Also worth noting that Kudlow has Laffer on his TV show almost every night. It's one of those old you-scratch-my-balls-I-pretend-your-crackpot-theory-isn't-discredited type of deals.

"Obviously, you are pretty dubious about the benefit of government provided services, but then you aren't poor,"

Or a drug warrior, or an owner of a corporate farm sucking down agricultural subsidies, or living in Nowhere, Alaska, and wanting a bridge, or a sports team owner who doesn't want to pay for a stadium...

It's a bait and switch: You justify taxation on the basis of vaccinating poor orphans, and then figure, taxation is justified, let's collect as much money as humanly possible, and spend it on whatever strikes our fancy.

How much of the budget is actually spent on things which are so important that they're worth doing even if the only way to fund them is by threatening to throw people in jail if they don't ante up? And what percentage of those things are being done through government because it's convenient, and could be funded privately if you really tried?

"How much of the budget is actually spent on things which are so important that they're worth doing even if the only way to fund them is by threatening to throw people in jail if they don't ante up?"

I give up. How much, Brett?

It's times like these when I suspect that libertarianism is just a way to excuse being selfish.

Kudlow is a Republican ideologue, nothing more. He has gotten where he has by mouthing the Wall Street/Republican line, which is based on narrow self-interest. Even discussing his ideas as "economics" debases the term.

Yeah, and presuming that you have the right to spend other people's money, so that you can buy "feel good about yourself" without spending too much of your own, isn't selfish. LOL! Income redistribution plus the progressive income tax? "Let's you and him uplift the poor!"

brett bellmore, your point is completely inconsequential, but also completely batshit crazy: somehow i don't think all the ayn rand fans championing the "morality of selfishness" are pushing for HIGHER social spending. or maybe i was reading the wrong copy of atlas shrugged.

I think you're more reacting to a left-wing parody of Randroid thought, than the genuine article. (Not that I'm one, but I'm at least well aquainted with the philosophy.) According to Rand's philosophy, if you genuinely get off on doing good for others, (Instead of just doing it out of some misplaced sense of guilt.) then doing good for others is "selfish"; Rand was a proponent of enlightened selfishness, not a war of all against all.

The problem isn't, of course, that you're being selfish by engaging in charity. It's that you want to do it with other people's money.

Go, always, money, there, be disgraced,

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