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--></style></head><body lang=EN-US link=blue vlink=purple style='word-wrap:break-word'><div class=WordSection1><p class=MsoNormal><span style='font-size:11.0pt;font-family:"Calibri",sans-serif'><o:p> </o:p></span></p><p class=MsoNormal><span style='font-size:11.0pt;font-family:"Calibri",sans-serif'><o:p> </o:p></span></p><div style='border:none;border-top:solid #E1E1E1 1.0pt;padding:3.0pt 0in 0in 0in'><p class=MsoNormal><b><span style='font-size:11.0pt;font-family:"Calibri",sans-serif'>From:</span></b><span style='font-size:11.0pt;font-family:"Calibri",sans-serif'> John Clark <johnkclark@gmail.com> <br><br></span><o:p></o:p></p></div><div><div><div><p class=MsoNormal> <o:p></o:p></p></div><blockquote style='border:none;border-left:solid #CCCCCC 1.0pt;padding:0in 0in 0in 6.0pt;margin-left:4.8pt;margin-right:0in'><div><div><div><div><div><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span class=gmaildefault><i><span style='font-size:13.5pt;font-family:"Arial",sans-serif'>> </span></i></span><span class=m-5994606278935800777gmaildefault><i><span style='font-size:13.5pt;font-family:"Georgia",serif'>As such it is still subject to Laffer theory,</span></i></span><o:p></o:p></p></div></div></div></div></div></blockquote><div><p class=MsoNormal><o:p> </o:p></p></div><p class=MsoNormal><b><span style='font-size:13.5pt;font-family:"Tahoma",sans-serif'>>…Laffer theory? All Laffer said is that to maximize the amount of money the federal government receives <u>the tax rate should not be too high or too low<span class=gmaildefault>,</span></u> and <span class=gmaildefault>to </span>illustrate that point he drew a curve on a blackboard that is called <span class=gmaildefault>by some </span>the <span class=gmaildefault>"</span>Laffer curve<span class=gmaildefault>"</span> <span class=gmaildefault>but that </span>I call a keen grasp of the obvious.<span class=gmaildefault> </span>Laffer<span class=gmaildefault> 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</span></span></b><o:p></o:p></p><p class=MsoNormal><span class=gmaildefault><b><span style='font-size:13.5pt;font-family:"Tahoma",sans-serif'><o:p> </o:p></span></b></span></p><p class=MsoNormal><span class=gmaildefault><b><span style='font-size:13.5pt;font-family:"Tahoma",sans-serif'><o:p> </o:p></span></b></span></p></div><div><div><p class=MsoNormal><span class=gmaildefault><b><span style='font-size:13.5pt;font-family:"Tahoma",sans-serif'>History has established the approximately 20% number with the Reagan tax cuts of the 1980s.<o:p></o:p></span></b></span></p><p class=MsoNormal><span class=gmaildefault><b><span style='font-size:13.5pt;font-family:"Tahoma",sans-serif'><o:p> </o:p></span></b></span></p><p class=MsoNormal><span class=gmaildefault><b><span style='font-size:13.5pt;font-family:"Tahoma",sans-serif'>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.)<o:p></o:p></span></b></span></p><p class=MsoNormal><span class=gmaildefault><b><span style='font-size:13.5pt;font-family:"Tahoma",sans-serif'><o:p> </o:p></span></b></span></p><p class=MsoNormal><span class=gmaildefault><b><span style='font-size:13.5pt;font-family:"Tahoma",sans-serif'>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.<o:p></o:p></span></b></span></p><p class=MsoNormal><span class=gmaildefault><b><span style='font-size:13.5pt;font-family:"Tahoma",sans-serif'><o:p> </o:p></span></b></span></p><p class=MsoNormal><span class=gmaildefault><b><span style='font-size:13.5pt;font-family:"Tahoma",sans-serif'>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.<o:p></o:p></span></b></span></p><p class=MsoNormal><span class=gmaildefault><b><span style='font-size:13.5pt;font-family:"Tahoma",sans-serif'><o:p> </o:p></span></b></span></p><p class=MsoNormal><span class=gmaildefault><b><span style='font-size:13.5pt;font-family:"Tahoma",sans-serif'>I don’t see why interest on the current debt is placed under discretionary spending, but that is how economists treat it.<o:p></o:p></span></b></span></p><p class=MsoNormal><span class=gmaildefault><b><span style='font-size:13.5pt;font-family:"Tahoma",sans-serif'><o:p> </o:p></span></b></span></p><p class=MsoNormal><span class=gmaildefault><b><span style='font-size:13.5pt;font-family:"Tahoma",sans-serif'>Of those three expenditures, interest surpassed military spending recently, and was already ahead of everything else combined.<o:p></o:p></span></b></span></p><p class=MsoNormal><span class=gmaildefault><b><span style='font-size:13.5pt;font-family:"Tahoma",sans-serif'><o:p> </o:p></span></b></span></p><p class=MsoNormal><span class=gmaildefault><b><span style='font-size:13.5pt;font-family:"Tahoma",sans-serif'>Before I go on, is there anything above you wish to dispute?<o:p></o:p></span></b></span></p><p class=MsoNormal><span class=gmaildefault><b><span style='font-size:13.5pt;font-family:"Tahoma",sans-serif'><o:p> </o:p></span></b></span></p><p class=MsoNormal><span class=gmaildefault><b><span style='font-size:13.5pt;font-family:"Tahoma",sans-serif'>spike<o:p></o:p></span></b></span></p><p class=MsoNormal><span style='font-size:11.0pt;font-family:"Calibri",sans-serif'><o:p> </o:p></span></p></div><div><p class=MsoNormal><o:p> </o:p></p></div></div></div><p class=MsoNormal><o:p> </o:p></p></div></body></html>