[ExI] Free Trade

[spike at rainier66.com]

From: John Clark <johnkclark at gmail.com> 



 

> As such it is still subject to Laffer theory,

 

>…Laffer theory? All Laffer said is that to maximize the amount of money the federal government receives the tax rate should not be too high or too low, and to illustrate that point he drew a curve on a blackboard that is called by some the "Laffer curve" but that I call a keen grasp of the obvious. Laffer never claimed to have derived the equation that produced that curve, and he certainly never came up with a figure of 20% which you mentioned, he never came up with a number at all… John K Clark

 

 

History has established the approximately 20% number with the Reagan tax cuts of the 1980s.

 

Before we debate that however, let us make sure we are using terms the same way.  We start by recognizing the US government has mandatory spending and discretionary spending.  The mandatory stuff is Medicare and Social Security.  Those are funded separately (or they once were (and now it would help us to treat mandatories as a separately-funded expenditure (because Social Security is handled by a 6.2% withholding from the employee and a matching amount from the employer, Medicare is 1.45% plus .9% more if you make a buttload, but those are to be handled as separate items.)

 

The Reagan tax cuts demonstrated that somewhere around 20% is the Laffer maximum.  Congress has never strayed very far from that either direction: the optimal tax structure for the federal government takes about 20% of the GDP (in income tax) out of the economy for discretionary spending.

 

The reason this is critical in our times is that discretionary spending can be divided into three areas (since we are agreeing that Social Security and Medicare are mandatory spending): military, interest on the debt, and everything else in government combined.

 

I don’t see why interest on the current debt is placed under discretionary spending, but that is how economists treat it.

 

Of those three expenditures, interest surpassed military spending recently, and was already ahead of everything else combined.

 

Before I go on, is there anything above you wish to dispute?

 

spike

 

 

 

-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists.extropy.org/pipermail/extropy-chat/attachments/20251010/c4480c42/attachment.htm>