To a man whose only tool is a hammer, pretty soon everything begins to look like a nail.

I couldn’t help but be reminded of that aphorism as I read the most popular article on yesterday — Tax Hikes and the 2011 Economic Collapse — a screed on the Laffer curve and Supply Side Economics by none then than Art Laffer.

If either the WSJ OpEd page or Mr. Laffer had foreseen the most recent economic collapse we just lived through, or the credit crisis, or the housing collapse, or the derivatives problem, or any of the other economic disasters that befell the country I might give their warnings some credence. (I give credit to Laffer for discussing the possibility of a recession in Feb 2008 — way ahead of most right wing economists) But considering all this occurred with their man in the White House for 8 years, and they somehow missed it, leads me to one of two conclusions: Either they are extremely bad economists, or they are extremely partisan observers.

Given that so many of the dismal set missed all of the above, we should give them the benefit of the doubt. Let’s not simply assume they are bad economists — instead, this looks like just another money-losing partisan screed.

In his OpEd, Mr. Laffer confuses causation with correlation, ignores market history, makes spurious argument, and simply make up crap as he goes along.

It is, to any thinking person, an embarrassment. Consider:

• “The nine states without an income tax are growing far faster and attracting more people than are the nine states with the highest income tax rates.”

This is mostly true, but misleading.

First, 7 states have no income tax; the other two tax — New Hampshire and Tennessee — only tax dividends and interest income.

Many of the states without income taxes — think Texas, and Alaska — are blessed with natural resources. (Nevada’s blessing is Innumeracy). They don’t have income taxes because the lease licenses to the mining and oil industry throw off so much revenue, that these taxes are not needed. Confusing correlation for causation is a Freshman college error, and we should expect better from Laffer.

Note: 5 of the 9 have a corporate business tax: Alaska has a state corporate income tax, Florida has a corporate income tax (5%); New Hampshire has a Business Profits Tax (8.5%); South Dakota has a financial institutions income tax; Washington has a Business and Occupation Tax. Since these are the fastest growing states according to Laffer, is the lesson to other states to add a corporate tax?

• “Bill Gates and Warren Buffett—hold the bulk of their wealth in the nontaxed form of unrealized capital gains?”

What unmitigated and embarrassing nonsense.

As everyone else in America is well, aware, both Gates and Buffett have committed their vast wealth to charitable foundations. Hence, the issue of “nontaxed unrealized capital gains” is simply irrelevant.

And of course, Laffer is aware of this — he is simply engaging in pedantic rhetoric when he makes this claim. (I believe the vernacular term for this form of argumentation is “full of shit.”)

It really throws a monkey wrench into the ideological dogma when the wealthiest Americans, those who have benefited the most from economic freedom and entrepreneurial opportunities recognize and criticize the growing wealth disparity in America as a very real problem.

• “At the tax boundary of Jan. 1, 1983 the economy took off like a rocket, with average real growth reaching 7.5% in 1983 and 5.5% in 1984.”

Again, factually accurate but totally misleading.

Reagan had the good fortune to take office at the tail end of a 16 year secular bear market, just as Paul Volcker fed the economy its distasteful medicine. Inflation was broken, and interest rates began their 25 year slide towards zero.

To ignore the reality of these factors, and credit tax cuts as the sole cause of the 1980s and 90s expansion is simply to discard reality because it does not fit your neat ideological universe.  That is a surefire recipe for losing money as an investor . . .

• “Today, corporate profits as a share of GDP are way too high given the state of the U.S. economy”

After their many deductions, special legislative favors, un-repatrioted overseas profits, and too clever by half accounting, US corporations pay a very small percentage of their profits as taxes.

Decades of lobbying has created massive loopholes. Consider the total taxes paid to the US Treasury by any of the major banks and brokerages, the special tax treatment for hedge fund managers, the energy industry deductions, inadequate licensing revenue, etc.

This isn’t a question of MORE taxes — but basic Tax fairness. When American firms don’t pay their fair share of taxes, that means American citizens must make up the difference.

If you are against high taxes, you may want to consider what the total corporate tax base of America has looked like over the past 30 years — as profitability continues to go higher.

It is not just me who noticed the absurdity of the OpEd, Northern Trust’s Asha Banglore also calls out Mr. Laffer’s analysis as wanting:

“Assuming the tax cuts are allowed to expire, the forces that may prevent strong economic growth in 2011 are entirely different from tax increases.  The headwinds from the financial sector, by way of a severe credit crunch, lackluster job growth, and housing market challenges are factors that will influence the near term path of the economy.  The evidence presented here suggests that Mr. Laffer’s story is selective and incomplete…”

Basing your investments on “selective and incomplete” analyses is how you lose money in the captial markets.

Indeed, I have railed in these pages against the ideological, fact-free OpEd in the WSJ — not because of the politics, but because they have been such consistent money losers. That would not matter so much if it were the NYT or the Podunk Press, but this is the Journal, for crying out loud, It is supposed to be the paper of record for investors.

That the money losing OpEd page of the WSJ produces its most well read articles goes a long way in explaining one thing: Why 80% of money managers underperfom every year. Filling your head with Ideology, becoming a “magical thinker,” ignoring data, making up your own facts — these are a recipe for under-performing asset managers.

If I were to create a list of questions to ask potential managers of my money, one of them would be: “Do you read the WSJ OpEds?”

If the answer were yes, I would not walk but run in the opposite direction.


Ignore the prior bear market and Paul Volcker — nothing matters but Tax Cuts!


Revisiting “The Obama Economy” (March 4th, 2010)

WSJ Jumps the Shark (January 22nd, 2010)

Tax Hikes and the 2011 Economic Collapse
WSJ, JUNE 7, 2010

Category: Financial Press, Politics, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

111 Responses to “Art Laffer: Make Up Your Own Facts Here”

  1. Cranky? No, just annoyed at money losing bullshit

  2. jmf says:

    Moin from Germany,

    the three stooges on CNBC….. Compared to Altucher the rest of the pack is looking smart…… No wonder the ratings are non existant…..

    Will the tax hikes coming out of Washington result in economic collapse? Arthur Laffer, of Laffer Investments, and James Altucher, of Formula Capital, share their views with CNBC’s Larry Kudlow.

  3. rks625 says:


    I am completely 100% with you. I subscribe to the WSJ and have done so for years, yet I read only the news and stopped reading the Op-ed pages a long time ago. Recently (post Murdoch) even the reporting is deteriorating, as is the editing. Some day I might just switch to the FT. Thanks for calling out the WSJ – it is losing the position of respect it was automatically accorded.

  4. quints says:

    I could not agree more.
    Mr. Laffer may be intelligent, but he’s a partisan. And I am amazed when I watch CNN, Fox, CNBC, etc at the lack of reason and honesty whenever a partisan (from either party) discusses cause and effects in economics.
    I disregard all those with an obvious polar political bent. Unfortunately it is difficult to find non-partisan opinions anywhere these days.

  5. Tarkus says:

    Arthur Laughable makes his money by pushing the same drivel. And cable stations wonder why their ratings are so low. The only reason some of them have any viewers at all is to look at the nice babes some of them pick to read the teleprompter. Fortunately, you can leave the sound off.

  6. PDS says:

    Mr R….your political skirt is showing…….me thinks you lived in NYC too long… suggest that Maximus Ronaldus had “the good fortune” to inherit a market at the “tail end” of a secular bear market is incorrect…he like the current POTUS inherited a mess…..but unlike the current occupant of White House he promoted pro growth policies that worked….you suggest that his supply side policies had nothing to do with the subsequent booming economy and bull equity markets…that is misleading…it was only after Clinton and house democrat tinkering, aided an abetted by “voodoo economics” Bush 41, that the wheels started to fall off….I am always amazed at what short memories people have….much of the success of money managers like yourself over the past 30 years can be attributed to the pro growth policies of the Reagan years….it is unfortunate that Mr Obama does not take a page from two termer President Reagan’s supply side play book as his anti growth policies are not working and he will pay a heavy price at the polls this November……afterall….”it is the economy stupid”!!!

  7. Guambat says:

    Thank you, thank you, thank you. I got probably less than 2 sentences into the article, began skimming, then clicked away, perturbed too much to formulate a critique. You’ve once again saved me from a lot of mental work, and done a better job to boot.

  8. Gnatman- says:

    I guess WSJ does no fact check…

    In all but two (Mexico and Korea) OECD countries, taxes make up a larger percentage of gross domestic product (GDP) than in the United States.

  9. KidDynamite says:

    Laffer and partisanship aside, Barry – true or false: higher taxes impede/impair growth ???

  10. d4winds says:

    One of the reasons I respected Bush Sr., although did not agree with him on many things, was that he at least labeled this Laugher nonsense for what it is, Voodoo Economics. The WSJ editorial page used to be, many, many years ago, a place where one could find conservatively biased but sensible arguments. Now it has only the bias.

  11. Chief Tomahawk says:

    Can hardly wait to see who picks up this blog post…

  12. beatstreet says:

    Lower taxes >>>>> Higher taxes. End of story.

  13. royrogers says:

    ” KidDynamite Says:

    June 8th, 2010 at 8:05 am
    Laffer and partisanship aside, Barry – true or false: higher taxes impede/impair growth ???

    this is a Kudlow type of a lame argument, there is an optimum point at which tax rates have
    the most benefit to the economy and the country or middle class success.
    Obviously, society cannot function without taxes nor can society function with 100% taxes.

  14. royrogers says:

    Forgot to mention that higher taxes are good if used to bail out wall street !!
    keeps the stockmarkets from tanking

  15. call me ahab says:

    you kill me BR-

    as if you alone are not partisan- I don’t buy it-

    and also- we should tax the shit out of corporations- they won’t pass it on to their customers- I am certain of it- lol

  16. dead hobo says:

    KidDynamite Says:
    June 8th, 2010 at 8:05 am

    Laffer and partisanship aside, Barry – true or false: higher taxes impede/impair growth ???

    The prohibition of slavery impedes/impairs growth. Ditto with impeding/impairing the waves of illegal Mexicans who want to live in the shadows and work for low wages and essentially kick back social security withholding to the US govt. Any fucking bastard who says I can’t dispose of waste in the way best for me is impeding/impairing growth. Inspecting meat costs money and, thus, impedes/impairs growth.

    Taxes are a national menace. They should be abolished completely since so many of us would rather live on borrowed money and because so many are willing to exchange their cash for US debt. The fair tax (national sales tax) isn’t fair. It’s still a tax, although, thankfully, it will be imposed most significantly on those who consume the most as a percentage of wages. This is yet another reason to import illegal Mexicans and keep them illegal. God must love rich people because He’s given us so many poor to exploit.

    KD, tell me, without taxes, who eventually pays the bill?

  17. IdahoSpud says:


    I’ve advocated for a long time that we stop pretending to “tax” corporations. We all know who pays the price when we “tax” a company. I have never seen a company’s profits get hurt by taxes. Just their feelings (companies have feelings. The supreme court says they are in fact people with all the rights of a human being).

  18. Ahab,

    My calling out a naked partisan for his blatant partisan arguments is somehow — wait for it — partisan?

    Me thinks the lady doth protesteth too much!

  19. dead hobo says:

    Barry Ritholtz Says:
    June 8th, 2010 at 8:41 am

    My calling out a naked partisan for his blatant partisan arguments is somehow — wait for it — partisan?

    In which category on Red Tube would you find naked partisans?

  20. Marcus says:


    Talk about misleading. In your attempt to trash Laffer, you used exactly the criticism you leveled at Arthur to attack him. You took one parameter (out of many) and myopically made a sweeping conclusion, natural resources supplant state income tax. If that’s true what happened to California, Pennsylvania, Louisiana, Colorado, and Minnesota, all rich in natural resources with punishing state income tax. What about Florida with little in natural resources but a very healthy economy (ex real estate.

    You are normally “fair and balanced”, but occasionally your set of personal biases show. As such you alienate a portion of your readership and waste our time. For what purpose?

    Your politics are showing.

  21. KidDynamite says:

    DH – Helicopter Ben and Turbo Tim pick up the check when it comes. duh. ;-)

  22. drewburn says:

    Thanks Barry. I read that piece yesterday and felt the same way. But you elucidated very nicely. Your point is, simply, that not showing all the inputs and externalities can allow statistics to show anything you want. Laffer didn’t show much at all; very weak arguement.

  23. louiswi says:

    Mr. Laffer is aptly named.

    WSJ has become the print version of Fox and no longer provides value. There are many other sources of good reliable economic information out there. After being a 4 decade subscriber, I’ve tossed it for good.

    Good job BR.

  24. MikeinMass says:

    @rks625: You stopped reading the OpEd pages? Why? Since the Journal doesn’t have a comics section, you need something to make you chuckle, no?

    Oh, and “pedantic rhetoric”… new favorite phrase. I cannot wait to begin using it at meetings where decorum prevents me from saying someone is full of shit.

  25. inthewoods says:

    Agreed Barry – that’s why I stopped subscribing to the paper.

    @Marcus – you missed his point – his point was that any argument that uses single causation was bad – he was just pointing out another factor that could have influenced the growth of states.

    @KidDynamite – taxes at the extreme inhibit growth – but what we’re generally talking about, in terms of taxes, is small amounts. For example, capital gains taxes were higher during the Clinton administration, but that did not seem to hinder growth. The argument that Laffer makes, which is that government income goes up as taxes come down, has been shown to be incorrect – the Bush tax cuts were revenue negative and significantly added to the deficit.

  26. call me ahab says:


    here some blatant partisanship- from the Bloomberg Poll yesterday-

    “Almost 4 of 10 respondents picked the U.S. as the market presenting the best opportunities in the year ahead. That’s more than double the portion who said so last October, when the U.S. was rated the market posing the greatest downside risk by a plurality of respondents.

    Lawrence Summers, director of the White House National Economic Council, said this attests to Obama’s success in “restoring the United States to strong economic fundamentals.” He added that “while there remains much to do, the U.S. economy is growing.”

    hahahahahahaha- now that some funny shit there-

    and thank you for calling me a lady- nicest compliment you ever threw my way :D

  27. flipspiceland says:

    Can’t believe any financial blogger would think for a second that Corporations pay any income tax, no matter what the rate, state, or country.

    Unbelievable .


  28. Barry said, “When American firms don’t pay their fair share of taxes, that means American citizens must make up the difference.”

    Classic debt hawk nonsense. Where does Barry think American firms get the money to pay taxes? Employees, share holders and customers — i.e. American citizens.

    Barry ended with a question. I’ll end this with a question for Barry: “What is a monetarily sovereign nation and how is it different from our states, counties, cities, companies, you and me?”

    I’ll bet he can’t answer it.

    Rodger Malcolm Mitchell

  29. catman says:

    Arthur Laffer is actually Newt Gingrich standing on his head with his pants down. Talk about bright!

  30. call me ahab says:

    . . . and where the hell are these strong economic fundamentals that Obama was so successful with?

    Summers must have them hidden somewhere- a secret closet maybe- a lock box possibly- that he peeks into once in awhile so he can believe his own bullshit-

    but I know that you BR- wouldn’t buy into that nonsense- right?

  31. subscriptionblocker says:

    Thank you Barry

    Can’t tell you how sick I am of “true believers”. Wish we could maroon all of em somewhere…….

    Away from us

    Miserable times are made more miserable by “critics”. Bet he also shouts at his cellphone in public.

  32. wunsacon says:

    >> Dead Hobo @ 8:25 am

    Hey, Barry, speaking of buffoons, did you see the most recent instance of Ben Steinery? Denninger did a nice write-up:

  33. beatstreet says:

    Yeah, Laffer is an idiot. Tax rates have zero influence on people’s actions. Reason #3578390 why raising rates never produces the additional income its sponsors would have you believe …


    BR: How do you get from “factually accurate but totally misleading” in a discussion of other factors as well (tail end of a 16 year secular bear market, Paul Volcker breaking Inflation) to “zero influence on people’s actions.” ?

    Your type of argument is silly nonsense — come back wirth something stronger and better argued — but dont waste our time with that weak ass shit . . .

  34. wunsacon says:

    Sorry, BR. Maybe this is why you didn’t link to KD’s post:

    Okay. Mum’s the word!


    BR: Or, maybe I didnt see it?

  35. Mannwich says:

    The fact that we’re even still listening to these partisan hacks is one sure sign the apocalypse isn’t far off. ;-)

    Seriously though, WTF?

  36. gman says:

    Another huge component of the state by state tax analysis is the fed component. The states with higher state taxes tend on average to have huge net outflow of revenue to the federal government and states with the “low tax pro-growth policies” tend to be huge reciepients of net federal subsidies. People like Laffer know this and are hacks or don’t and are stupid!

  37. Mannwich says:

    @Marcus: Florida has a “healthy economy”? Really? And by the way, MN’s unemployment rate is 7%, nearly 3% points below the national average. Trust me, our economy is FAR healthier than FL’s is……..

    And another thing – it’s not just how HIGH the taxes are, it’s HOW THE THEY ARE SPENT, meaning what are our priorities? For me, MN ain’t perfect, but compared to much of the rest of the dysfunction I see in many states, it’s a beacon of light in many respects.

  38. Expat says:

    What’s the big deal? Laffer is as full of shit as any of his peers, any Wall Street analyst or CEO, any elected official, or any stock or mortgage broker.

    I don’t have any problems hurling brickbats at selected asshats, but, frankly, I would rather simply unload truckloads of heavy, pointy brickbats on the whole lot of them (will the DHS interpret that as my desire to drop anvils on Washington? Oh, perish the thought!).

  39. @catman Says: June 8th, 2010 at 9:10 am

    Arthur Laffer is actually Newt Gingrich standing on his head with his pants down. Talk about bright!

    uhhhh….wouldn’t that be with his pants up?

    Just sayin’!

  40. dr.j says:

    I love it. If someone READS an op-ed, they are bad…if someone WRITES what is an op-ed they are a blogger.

  41. The Curmudgeon says:

    I’m w/ Ahab, who I’m pretty sure is not a lady.

    This is laughable partisan hacking at a laffable partisan hack. Pray, is there anyone anywhere left that thinks objectively? So Laffer is wrong about his correlation being causation regarding the relative performances of various states. Maybe he has his causation backward–these states don’t need to impose income taxes because their economies perform well enough to fund government without them. Then of course that gets us back to those states “rich in natural resources”. Like Tennessee, I suppose.

    And really, the argument that Reagan was just the lucky beneficiary of the beginning of a bull market might have some correlation/causation issues pregnant within it.

    So far as taxes go, it’s pretty well clear that zero taxes won’t provide for the essential purpose of government, which is to defend against threats without and hold a monopoly on the imposition of violence within. It’s also pretty well clear that 100% taxation fails to produce enough wealth such that the government can meet even its barest of obligations (see, e.g., the Soviet Union). So the correct level of taxation is somewhere in between. On the margins is where all the politicos do their fighting, thinking it to be a matter of ethics to propound some particular level, where in fact, it should be an objective exercise to find the level that produces the greatest good for the greatest number of participants in the economy that is doing the taxing. Of course, believing that objectivity should trump political beliefs is itself a political belief.

  42. beaufou says:

    US corporations pay less taxes than their counterparts in the rest of the so-called developed world. (13% against a 16% average).
    Friedman needs no introduction as an excrement, Otellini on the other hand makes a good case of what is fundamentally wrong with this picture.
    This stems out of a CEO whose corporation made a $10 billion profit in the last quarter of 2009, and he’s whining in march…wtf?
    I have to move my operations to China because corporate taxes are too high, what a feeble excuse.
    I don’t know if it is partisan or not, but it sure looks like the gangrene of modern times; maximize gains and to hell with the rest of them.
    I don’t have a problem with making money, but destroying everything to make money is a problem.

  43. Jacked says:

    BR, ignore the right wing dingbats — they simply cannot see past ANY criticism of Laffer or Reagan or even Kudlow or any of their gods.

    Curmudgeon, I cannot tell if you are being sarcastic — your defense of Laffer seems to damn him.

  44. beatstreet says:

    @BR … The essential building block of what Laffer aruges is that taxes influence folks. On the margin, higher taxes cause people to take actions which result in those higher tax rates not producing higher tax revenue. Hence, the Laffer Curve.

    The argument in his WSJ column is that income and other tax rates scheduled to take effect in 2011 will have the effect of increasing economic activity in 2010 at the expense of 2011. I’m not sure why you felt the need to rant against this. Its common sense.

    We have examples in front of us every day. Its very clear now that the housing tax credit simply shifted housing activity from future months to months in which the tax credit was available. The article I linked about Lampert shows another real-time example of how Washington’s latest tax hike (carried interest vs earned income) will be a waste of time (except for the lawyers and accountants who will figure out a way around it; that’s a productive way to use our society’s scarce resources).

    As for the other stuff in the article, I’m not sure why you need to make a big deal out of it. Did Reagan (and Thatcher) get lucky with timing … yeah, maybe. But so what. Would everything had been as rosy in the 80s if Carter and then Mondale had remained in power? I’m not so sure. Perhaps Reagan made a bit of his own luck. Would you give him even a tiny bit of credit?

    Lastly, I’m not sure why you feel the need to simply flame in many of your responses.


    BR: When someone makes up stuff in a WSJ OpEd, and does so in a very misleading way, I feel the need to call bullshit on them.

    That’s how I roll.

  45. crankitto11 says:

    Laffer is a shoo-in for the Partisan Hack Hall of Fame, where his picture will hang next to Phil Gramm and Kevin “Dow 36,000″ Hassett.

    In case anyone needed further proof after Barry’s post, check out two devastating articles from Bruce Bartlett, one of the true founding fathers of supply side economics:

    Tasty tidbits:

    “During the George W. Bush years, however, I think SSE became distorted into something that is, frankly, nuts–the ideas that there is no economic problem that cannot be cured with more and bigger tax cuts, that all tax cuts are equally beneficial, and that all tax cuts raise revenue.

    These incorrect ideas led to the enactment of many tax cuts that had no meaningful effect on economic performance. Many were just give-aways to favored Republican constituencies, little different, substantively, from government spending. What, after all, is the difference between a direct spending program and a refundable tax credit? Nothing, really, except that Republicans oppose the first because it represents Big Government while they support the latter because it is a “tax cut.”

    The supply-siders are to a large extent responsible for this mess, myself included. We opened Pandora’s Box when we got the Republican Party to abandon the balanced budget as its signature economic policy and adopt tax cuts as its raison d’être. In particular, the idea that tax cuts will “starve the beast” and automatically shrink the size of government is extremely pernicious.”

    “Conservatives delude themselves that the Bush tax cuts worked and that the best medicine for America’s economic woes is more tax cuts; at a minimum, any tax increase would be economic poison. They forget that Ronald Reagan worked hard to pass one of the largest tax increases in American history in September 1982, the Tax Equity and Fiscal Responsibility Act, even though the nation was still in a recession that didn’t end until November of that year. Indeed, one could easily argue that the enactment of that legislation was a critical prerequisite to recovery because it led to a decline in interest rates. The same could be said of Clinton’s 1993 tax increase, which many conservatives predicted would cause a recession but led to one of the biggest economic booms in history.

    According to the CBO, federal taxes will amount to just 15.5 percent of GDP this year. That’s 2.2 percent of GDP less than last year, 3.3 percent less than in 2007, and 1.8 percent less than the lowest percentage recorded during the Reagan years. If conservatives really believe their own rhetoric, they should be congratulating Obama for being one of the greatest tax cutters in history.”

  46. tawm says:

    It seems very obvious to me that Taxes do matter — when they are too high (as they are now) and going higher, it hurts the productive sectors of the economy. Laffer’s points make sense — in spite of critics’ reducto ad adsurdam attacks.
    Completely agree with PDS and Ahab that this the overly-partisan tone of BR’s tantrum undercuts his points.


    BR: How is what I wrote partisan?

    Sure, it may have called out a folk hero of yours for his blatant bullshit, but how exactly is that a tantrum or partisan?

  47. [...] on the opinion page of the Wall Street Journal. Not long after, money manager Barry Ritholtz landed some serious blows on Laffer’s thoughts. Reagan had the good fortune to take office at the tail end of a 16 year [...]

  48. peter north says:

    Thanks, Barry. Laffer’s BS echoes all over – from otherwise bright (but politically handcuffed) friends, to the dummies on the various TV channels. I wish your dismantlement of his transparent crap would make it stop, but it’s been exposed many times and it persists. [sigh]

  49. herewegoagain says:

    @ Curmudgeon: Objectivity isn’t merely or necessarily political belief. It’s an intellectual stance taken in relation to all experience. In fact, there is a difference between thinking and believing. Political “thought” rarely escapes the confines of opinion, remaining frozen in the realm of belief. Objective thought transcends opinion by regularly questioning established beliefs as new evidence offers itself. With an open mind, and a well tuned B.S. detector it’s not that difficult to do, but for some reason it’s hard to find anyone willing to do it. I enjoy Mr. Ritholtz because, more often than not, that’s what he is doing.

    “If we are wise, we shall apply solvent criticism especially to the beliefs that we find most painful to doubt.” Bertrand Russell

  50. The Curmudgeon says:


    Thanks, great stuff.

  51. Why Barry Ritholtz is a national treasure. This morning’s dissection of Laffer’s op-ed in yesterday’s Wall Street Journal is a work of art.

  52. The Curmudgeon says:

    Yeah, but herewegoagain, I think BR’s rant this time was the “not” part of more often than not. It was emotion-laden partisan hackery, with a few morsels of objectivity thrown in. But why get so upset because you disagree with one person’s view? As Bartlett pointed out, the objective analysis of supply side economics is that lower taxes can help improve economic performance, but not always, and much of what Republicans sell these days as supply-side economics is really just subsidies for business. It’s not a belief system that compels an objective analyst to conclude that tax rates do matter. It is a belief system to conclude that it’s all that matters, or that it doesn’t matter at all.

  53. Zeerasha says:

    I know this. I live in California and am seriously considering a move to Nevada. Many of my friends are also looking at this option. We can commute or work from our homes in Nevada and still save money. The biggest drawback is being under water on our homes. But that does not look to change soon.

    While I do not agree with most of Laffer’s thoughts, this one bears consideration.

  54. me says:

    Thank you BR and thank you for your book Bruce Bartlett, especially the part about the tax cuts NOT paying for themselves.

  55. grlampton says:

    Perhaps against my better judgment, I could not resist leaving a reply to this post.

    First of all, I personally do not buy the classic supply side argument that lowering tax rates will lead to MORE revenue. However, I do believe a strong case can be made that lowering tax rates will cause less of a reduction in revenues than static economic modelling would suggest. I think even Christine Romer would agree with that argument.

    Second, lowering tax rates is morally right because it puts more money in the hands of those who earned it and less in the hands of government bureaucrats to redistribute and spend. In the most simplistic terms, tax cuts INCREASE FREEDOM.

    Third, I think the critique of Laffer and supply side economics that says, basically, that it is all a lie is (along with the thesis that the ’80′s and ’90′s prosperity was fake, was all a bubble, etc., except for during the Clinton administration, of course) part and parcel of an exercise in revisionist history which is, shall we say, very convenient for the Democratic (yes, that is a capital “D”) party and leftist intellectuals. It allows them to discredit the Reagan era specifically and libertarianism more generally and is part of a world view in which only libertarian “ideologues” put their political ideology ahead of a dispationate analysis of the facts, as if the “progessives,” leftists and Democrats did not do exactly the same thing, as if the Left did not have its own set of ideological blinders. (And if you believe, as I do, that Obama is first and foremost a pragmatist, please keep in mind that pragmatism is also an ideology.)

    Fourth, and finally, if you don’t like Art Laffer, then you should positively hate Paul Mundell. Please demonstrate for us how Paul Mundell also got it all wrong, is intellectually dishonest, and is nothing more than an ideological, partisan “hack.”

  56. cosmo says:

    thank goodness we never see any partisan analysis here

  57. The Curmudgeon says:


    no defense of Laffer is intended. He’s a partisan hack. The idea that tax rates matter, and it is utterly myopic to think they don’t, is better left to the defense of others.

  58. me says:

    @grlampton says “tax cuts INCREASE FREEDOM”

    Here in Georgia they give us the FREEDOM to sit in traffic (no roads), the FREEDOM for no education (15% annual college tuition hikes and firing 4000 teacher) and the FREEDOM from job creation (very high unemployment).

    It is history that discredits the Reagan era, not a critique of Laffer and supply side economics. But don’t let facts get in your way.

  59. Mannwich says:

    @me: LOL. ‘Nuff said.

  60. beatstreet says:

    Well, since Bruce Bartlett has shown up, let’s go all BR on his essay which someone posted here …

    “They forget that Ronald Reagan worked hard to pass one of the largest tax increases in American history in September 1982, the Tax Equity and Fiscal Responsibility Act, even though the nation was still in a recession that didn’t end until November of that year. Indeed, one could easily argue that the enactment of that legislation was a critical prerequisite to recovery because it led to a decline in interest rates. The same could be said of Clinton’s 1993 tax increase, which many conservatives predicted would cause a recession but led to one of the biggest economic booms in history.”

    So the 82 tax hike led to a decline in interest rates … hmmm, I thought lower interest rates was Volcker’s doing (BR himself said so). I also seem to remember a grade school lesson about the dangers of confusing commonality w/causality. I mean I started at college in Sept 82 and interest rates began a 28 year decline shortly after – a coincidence, I think not.

    Moving on, we get to the line about the Clinton 93 tax increase “led to one of the biggest economic booms in history”. There’s that pesky commonality vs. causality thing again.

    We could go on, but why. Those two lines alone show Bartlett to have an agenda (I don’t care what letter he has after his name and who he used to work for), and that’s fine. They also show his essay to have no more value than Laffer’s (at least by BR’s standards).

  61. Eagle Eye says:

    Because you critique someone who is a well known partisan, that does not make YOU a partisan. In fact, the only people making such an inane argument are even harder core partisans defending their own from attack. Its horse-shit, and you should be called out for the hacks you are.

    Laffer published a demonstrably false, misleading piece in the WSJ — and BR called him on it. That is called fearless, hard hitting analysis.

    Why do some of the dimmer bulbs around here have a hard time with this?

  62. Mannwich says:

    @Eagle Eye: Because they are partisans.

  63. call me ahab says:


    thanks for coming to BR’s defense- the way you laid it out- showing non-partisans don’t have to put up with goddamn right wing dingbats who always gotta be saying shit-

    who the hell do they think they are?

    I think they should be put down like dogs-

    not even real humans- and not the kind of caring and concerned human such as yourself- who knows best what should be said and not said-

    BR needs more friends just like you

  64. Mannwich says:

    @ahab: But what about BR’s post is wrong? Seriously. Can someone answer this question please?

  65. ToddMPeters says:

    You are spot on about confusing correlation with causation. Former President Clinton made this same error when he claimed he’d raised taxes and yet the economy boomed and a budget surplus was created under his leadership. All true but he conveniently failed to mention that peace dividend that was secured from the end of the Cold War. This along with rising home prices, the tech boom, etc. created a tremendous “tail wind” for Clinton. P.S. I am actually for modestly higher taxes so long as they are combined with spending cuts. If we reign in these ginormous budget deficits, it will reap huge rewards for this country in the years ahead!

  66. scharfy says:

    When Mr Laffer was affecting policy, his prescription for the economy in terms of tax structure was dead nuts on accurate. Coming off the Carter administration, marginal rates were in the stratosphere and significant deregulation was badly needed.

    Fast forward 30 years.

    We are living in different times. The tax code looks nothing like the mess Jimmy Carter made.

    The old approach isn’t warranted right now. Marginal tax rates are reasonable, cap gains are low, and regulation is probably somewhere between not too hot, not too cold.

    I am not in favor of more taxes. The tax code probably could be simplified.

    Laffer was just what the doctor ordered in 1980. Sorry but I believe it to be true. However the world is a different place now.

    I mean would someone implement foreign policy ideas from the 80′s in the modern world and put more ICBM’s in Germany? Or economics from the Gold Standard era by confiscating gold to force cash into the system? No of course not.

    So why would one dig up the playbook from ’83 to see what worked then?

    Did the S&P 500 derive 30-40% of its revenues from overseas in 1983? Was China on the map? Were the boomers facing retirement?

    Laffer is intelligent, but fighting yesterday’s war with old weaponry.

    But I like him because he evokes that seething Sarah Palin response from the liberals :)

  67. Mannwich says:

    Fair points, scharfy. Finally, some reasoned counterpoints. ;-)

  68. call me ahab says:

    manny my man-

    I never said BR was wrong-

    I don’t even care- one way or the other-

    but- as I said- it kills me that BR tries to foist himself on others as impartial and non-partisan- even at times offering that he leans libertarian-

    trust me- I know libertarians- and BR is no libertarian-

    doesn’t mean I don’t value some of his opinions- but the non-partisan tag gets me every time-

    see my second comment on this thread regarding Summers if you want to see someone spewing the party line-

    but in the end BR obviously can self identify anyway he wants

  69. Mannwich says:

    I hear you, ahab. Personally, I try not to get into labels that merely needlessly box us all in. Most people (aside from total partisan hacks) fit neatly into these little boxes.

  70. Mannwich says:

    And we all have SOME partisan (or ideology) in each of us. The hard part is to suppress those biases when thinking critically (and honestly).

  71. Thor says:

    Ahab – but let me ask you this question: Do you think you come across as non-partisan? Do you think other people might see you as partisan, while others see you as non partisan? I’m not saying you are, but what you may see as partisan, others see as valid criticism. . . .

    Just a thought ;-)

  72. Ned Baker says:

    Barry — Thank you!

    Laffer is a complete hack, and the WSJ opinion page is looking pretty sorry these days. One of the great unjustices of our world is that people like Laffer find continued employment despite being flat earth ideologues. All of the research contradicts the Laffer Curve. If you ever run into Laffer or similar, ask them what the ideal tax rate should be. Zero?

  73. Mannwich says:

    “Research?” What’s that? ;-)

  74. call me ahab says:


    I thought my comment was pretty harmless-

    but BR did call me a lady- and that’s the nicest thing anyone’s ever said to me- lol

    it means I am refined and respectable (albeit- a girl)- but i’ll overlook that part :D!!!

  75. Mannwich says:

    @ahab: It was indeed. LOL.

  76. Thor says:

    Ahab – oh yes, very harmless. Didn’t mean to imply that it wasn’t, just that sometimes different people see partisanship in places it might not be appropriate. I’d imagine if BR called out a very liberal economist in the same way, he’d be called a conservative hack . . .

  77. The Curmudgeon says:

    Ahab doesn’t have to defend his lack of partisanship. He’s a lady, and hasn’t claimed to be unbiased. He doesn’t sweat, he glistens.

    BR claims he’s wrapping himself in the flag of objectivity and facts. Yet, the tone is awfully shrill for someone who declaims partisan bias, and substituting your own causation analysis for another’s based on nothing more than a different view of the facts, is well, partisanship. Perhaps his observations are dead on in some respects. But it’s sorta hard to tell. It seems to me that he wished to shout down Laffer’s arguments, and the louder the shouter, the weaker the argument. I’ll discount his opinions in the same manner that I had already discounted and ignored Laffer’s opinions in the WSJ.

  78. beaufou says:

    “Second, lowering tax rates is morally right because it puts more money in the hands of those who earned it and less in the hands of government bureaucrats to redistribute and spend. In the most simplistic terms, tax cuts INCREASE FREEDOM.”

    Definition of freedom:
    # the condition of being free; the power to act or speak or think without externally imposed restraints
    # exemption: immunity from an obligation or duty.

    I think you need to think long and hard about the “externally imposed restraints”.

  79. Thor says:

    Curmudgeon – point taken

  80. NormanB says:

    Barry, Barry, Barry you’ve got a hammer yourself. Laffer maybe mixing up cause and effect but the alarm he’s sounding has historical precedent.

    By Dec 1936 on a real total return basis the US stock market was back to its Aug 1929 peak!! Then along came government interventions in the labot and pricing markets, which were really a tax but not called that, and the stock market proceeded down from there. And in line with the real total return figure did not again reach the Aug 1929 and Dec 1936 peaks until Feb 1945. So, it could easily be argued that the FDR phantom tax extend the Depression and hurt the stock market for an extra 8 years.

    Then there is the Japanese example. Although the Dec 1989 peak has never come challenged there was a major rally that took the Nikkei up to 22,000 in early 1996 at which time the Japanese government raised their VAT tax a lot and that market has never seen the 22,000 level since. It is now about 10,000 down 55% and we are over 14 years past the 1996 peak. (This is to say nothing of 90% capital tax on real estate which caused the Bubble in the first place.)

    So, don’t be so flip about the concept that Laffer brings up. I’m worried even if you aren’t.

  81. Shadowfax says:

    Laffer is always good for a chuckle.

    1) CBO says the Bush tax cuts cost the Treasury about $200-$300 billion per year. Pew estimates they will add $3.1 trillion to the debt over the next decade, if not allowed to expire. Study after study shows that tax cuts increase deficits.

    2) When Bush cut income taxes, they did not return to their Clinton 2000 peak in dollar terms until 2006, at the height of the housing bubble. They have never regained their % GDP peak of 21% under Clinton and in fact are now at 15% of GDP. That 6% gap (peak to trough) is nearly $850 billion dollars in taxes we are not paying right now, if you assume 1% of GDP is about $140 billion.

    3) Reversing the Bush tax cuts is enough to cover the Social Security shortfall AND Obama’s healthcare plan.

    4) The only threat to U.S. solvency out there is Medicare in the long-run. Nothing else comes close. The U.S. could run $1 trillion stimulus programs for the next decade and not get anywhere close to the $38 trillion unfunded liability of Medicare.

    Laffer should be ignored.

  82. covel says:

    The best timing ever to be a U.S. president? Be President when Netscape goes public.

  83. taikodrum says:

    “By Dec 1936 on a real total return basis the US stock market was back to its Aug 1929 peak!! Then along came government interventions in the labot and pricing markets, which were really a tax but not called that, and the stock market proceeded down from there.”

    Between 1933 and 1936 could be considered the peak of New Deal stimulus spending during which the unemployment dropped from 25% in 1933 to 16.9% in 1936. Still high, but an 8% improvement in 4 years is pretty damn good. In 1937 the forces of deficit control convinced the FDR Administration to cut back its stimulus spending. So, could it not also be easily argued the premature ending of stimulus spending hurt the stock market for the next 8 years? Not to mention that markets generally don’t like the uncertainty of war, and the Feb 1945 date you give was when victory in WWII was certainly in sight.

    “Although the Dec 1989 peak has never come challenged there was a major rally that took the Nikkei up to 22,000 in early 1996 at which time the Japanese government raised their VAT tax a lot and that market has never seen the 22,000 level since.”

    It is true that the national consumption tax was raised in 1997, but if IIRC it also coincided with a severe reduction in stimulus spending when Japanese GDP growth hit 2.5% and the govt thought the worse was behind them. Couldn’t this also be a factor?

    The Laffer Curve has its truths in that tax levels do have impacts. But it is to a degree. It’s the absoluteness of LC adherents that I find disturbing. To them, the answer to every economic ill and every budgetary problem is lower taxes. That is not a cognizant theory, it’s ideological dogma.

  84. erebensd says:

    Every time I read an article recently (and its accompanying comments) that even vaguely references the Laffer Curve, I want to jump out of my skin. It’s not that the criticism leveled towards its is unwarranted, it’s just that the underlying theory for these criticisms simply does not understand the derivation of the theory. I’d struggle to find an economist that would argue that the Laffer Curve concludes that the solution to “every economic ill and every budgetary problem is lower taxes.” In fact, it would easily argued be the opposite with regards to budgetary problems. I’ve failed to find any economic research that would indicate that the maximum of the LC would lie anywhere close to 40% tax rate (most studies I have read place that number closer to 70%). Thus, if you were using the LC in such a budgetary argument, you would not say that the LC dictates that taxes must be lower. In fact the opposite would be argued.

    And that argument is just based upon a simple curve. The basis of the theory comes from the interdependent nature between consumers, businesses and the government. This interdependence is what gives the theory a solid foundation. Now, its application is not always appropriately applied and just because of the LC theory does not mean Art Laffer can go through life never making a mistake.

    However, it’s hard to argue with the simple basis of Laffer’s argument. Taxes are going to see a dramatic increase starting in 2011 which invariably will cause a decrease in economic performance. In such an unstable economy, that seems like a poor decision. It seems even weaker to argue something along the lines of “corporations should pay their fair share.” Could someone please explain to me, convincingly, exactly what their “fair share” should be? What’s the exact number? 39%? 38, 37, 70, 70.5%? It seems really dangerous to go down the “fair share” road without having a clear derivation for how fair share is determined. Because, remember, all households own corporations in this country (also remember that interdependent nature between businesses, consumers, and government….) which makes it very risky to say that households need to sacrifice more in taxes (which I assume is the party the “fair share” argument wants to “protect”).

    As for Laffer’s point: ““The nine states without an income tax are growing far faster and attracting more people than are the nine states with the highest income tax rates.” I would assume that this conclusion comes from his Rich State, Poor State study which econometrically determined relationships between economic performance and governmental policies at the state levels (mostly relative to taxes).

  85. NormanB says:

    The 1937 ‘interventions’ were a government mandate to raise the wages of workers and to put controls under prices so they wouldn’t drop to allow more goods to be purchased. This was a huge tax on business. Deficit/GDP did drop by 1-2% but that was minor compared to government controls.

  86. wileycoyote says:

    Shadowfax Says:
    June 8th, 2010 at 5:59 pm

    3) Reversing the Bush tax cuts is enough to cover the Social Security shortfall AND Obama’s healthcare plan.

    Is this with the latest CBO numbers or based on the crap numbers given prior to the health care plan being jammed up our ass? Do you just make this up or do you have actual data to back up this claim? And if it does cover SS shortfall and the health care plan, are they obligated to divert the extra revenue from the cuts that way or will we find some other welfare program to direct it to?

    Seems to me the left, though most in here claim to be non-partisan, are really bitter this week because POTUS is having the worst month of his adult life.

  87. pschaeffer says:


    By the way, no defense of Laffer is stated or implied by my comments…

    Thank you

    Peter Schaeffer

  88. JimRino says:

    [ if you want to build a third world country, with stupid citizens, no roads, high transaction costs, no energy infrastructure, no central government with sufficient funds to build Emergency services, and no Risk Management, with high crime, in the streets and in the business community.]

    Have we learned nothing from the last 8 years?

  89. GrafSchweik says:

    wileycoyote @ 8:24pm and all the other Wingnuts dosey-doeing in Laugherland tonight

    I was probably a Conservative Republican before your parents locked loins. You know…back in those marvelous antediluvian times when many Conservatives were capable of cerebration and ridiculous ideological pandering was the province of the Red Chinese and North Koreans.

    It’s been a long time coming, but—congratulations!—you’ve now supplanted the Red Chinese as the North Koreans’ cell mate in the loony bin of recent world history. Keep it up! You’re well on your way to getting the bottom bunk.

    Don’t believe me? Here’s a clue: ideologues think every issue and every question is an ideological one and that The Answer can be found in the ideology index.

    If you had been part of Hamlet’s Elsinore posse in place of Horatio, you would have heard “There are more things in heaven and earth, Furry Lupine Quadriped, than are dreamt of in your ideology.”

    [Cue futile howl]

  90. GrafSchweik says:

    Post Scriptum:

    In other words stop wacking off in public: it ill becomes you…

  91. SteveBreeze says:

    Lets examine the logic that corporations don’t pay taxes but just pass them on to the public. If they were able to do so would corporation expend so much in lobbying money and campaign donations to fight tax increases? If corporations could raise prices to adjust their profits for a tax increase would they just raise their prices to increase profits? The whole argument that we can’t tax the rich or corporations so their in no point in doing so is stupid, laughable and evidence of the class warfare the wealthy and the corporate have been waging on working people for decades. .

  92. pschaeffer says:

    Mr. Ritholtz,

    Be careful who you criticize for inadequate fact checking… You wrote

    “Many of the states without income taxes — think Texas, and Alaska — are blessed with natural resources. They don’t have income taxes because the lease licenses to the mining and oil industry throw off so much revenue, that these taxes are not needed.”

    Nice argument, but is true? In the case of Alaska, I think it is (no data points). However, you are wrong about Texas. See Revenue by Source for Fiscal Year 2009 –

    Total revenues $84.23 billion. Oil revenue $0.884 billion. Gas revenue $1.41 billion. Note that the oil wells in Texas have mostly dried up. Texas is now producing around 1.087 million barrels per day (see Peak Texas oil production was back in 1973 at around 3.5 million barrels per day (see Gas production has held up better though.

    The state universities do get some lease revenues. They are small compared to the state budget or energy severance tax revenues. See and

    Thank you

    Peter Schaeffer

  93. Peter -

    I did not say the Oil & Gas replaced ALL taxes – I noted its a huge advantage most other states don’t have.

    Based on the links you provided: Texas in 2008 had almost 5% if its revenue (3.1% + 1.7%) from Oil and Nat Gas
    Natural Gas Production Tax produced $2,684,647,510
    Oil Production Tax was $1,436,879,156

    That is >$4 billion that other states dont have, and that much more revenue they don’t have to tax to raise.

    Wyoming is another example — the largest coal producer in the USA, ranked 2nd nationwide for natural gas production. No income taxes, but in fiscal year 2007, Wyoming collected $2.242 billion in taxes, levies, and royalties from the oil and gas industry. The state’s mineral industry, including oil, gas, trona, and coal provided $1.3 billion in property taxes from 2006 mineral production. This is a smaller state with a modest budget, garnering $3.5 billion in mineral and oil revenues. The Wyoming state budget is about $10B.

    The point I was making is that the states blessed with these natural resources have an enormous revenue advantage over states that don’t have it. That is factually true, and I stand by what I wrote.

  94. FrancoisT says:


    About this fallacy that tax increases will doom the economy.
    Please don’t forget to pass the memo to John Mauldin when you see him; he’s a firm believer in that myth.

  95. Shadowfax says:

    @ Wileycoyote:

    Here are the numbers and some sources supporting the claim that the reversal of the Bush tax cuts would generate sufficient revenue to cover both the cost-side of the Obama healthcare plan as well as the shortfall in Social Security.

    1) CBO estimated the cost of the Obama plan at around $100 billion per year; it was a bit less pre-passage and now is about $1 trillion over ten years, assuming no other revenue.

    2) The long-term Social Security shortfall is about 1.2% of GDP. This is about $150-200 billion in a $14 trillion GDP economy. See table IV.B.7.

    3a) The Pew Charitable Trusts estimates that the Bush tax cuts will increase the debt $3.1 trillion over ten years if extended at all income levels:

    3b) CBO estimates extending the Bush tax cuts would cost the Treasury $200 – $300 billion per year over the next decade, in-line with the Pew Estimate. See page 16 of the PDF, page 6 of the document.

    So the math:

    Reverse the Bush tax cuts: $250-300 billion per year.

    The Obama Healthcare Plan: $100 billion per year, just the cost side, latest estimate.

    Social Security: $150-$200 billion per year shortfall.

    QED: Reverse the Bush tax cuts to cover our elderly and uninsured. A great deal if there ever was one, impacting only the top 50% of earners and only with minor marginal rate hikes.

    To your point about using the money for other purposes, I agree. I’d like to see a real lockbox for the money for Social Security so we could see just how huge the real deficit is, as the Social Security surpluses of the past hide the true deficit picture. For example, the deficit was $1.4 trillion in 2009 but we added $1.9 trillion to the national debt.

    Bonus fact: Our public debt is about $8 trillion. Since Social Security has taken in about $2.3 trillion more in dedicated payroll taxes than it has paid out, it is not the cause of our public debt. Further, Medicare B has a small trust fund (about $380 billion). So why do we have the $8 trillion debt? # 1 reason is defense spending, followed by the discretionary categories taken as a whole, welfare, and interest. In fact, the entitlements have very little to do with out debt today. However, this will change in the future.

  96. pschaeffer says:

    Mr. Ritzholz,

    I hate to point this out… But this is what you did say.

    “Many of the states without income taxes — think Texas, and Alaska — are blessed with natural resources. (Nevada’s blessing is Innumeracy). They don’t have income taxes because the lease licenses to the mining and oil industry throw off so much revenue, that these taxes are not needed.”

    According to income taxes (personal and corporate) generated 40% of total state tax revenue in 2009. By contrast, over the last 15 years, oil and gas production taxes have generated 2.8% of revenue in Texas. As you know 2008, was a peak year for energy prices ($145 per barrel in July) and in that year oil and gas accounted 4.8% of total revenues. For 2009 the number was 2.7% and for 2007 3.6%.

    As I noted in my first post, Alaska (and Wyoming) may well be different. However, your assertion does not apply to Texas.

  97. Mr Shiffer:

    Texas collects about $40 billion per year in taxes. Compare that with Pennsylvania, which collects about $30 billion — of which $9.5B is income taxes –or North Carolina, which is a $20 billion tax state, and also collects over $9B.

    If either of those states had >$4 billion in resource revenue that Texas did (2007), they could probably get rid of their income tax also (raise a few other fees, licenses, etc.)

    It is not a coincidence that the states without an income tax have other tax bases — Oil and Natural gas, minerals and coal (Alaska, Texas, Wyoming) Gambling (Nevada) Tourism (Florida), etc.

    Mr. Laffer ignored these other factors, and tried to make the argument that it was the lack of a state income tax that led to their prosperity. I disagreed, and pointed to these other factors.

    You are misunderstanding that part of the discussion: It is a correlation-not-causation critique. It is not the lack of income tax that led to their prosperity — but rather, other factors that allowed prosperity that led them to avoid an income tax.

    You can try to make the argument that Oil and natural gas doesn’t matter to Texas’ budget, but I don’t think too many people are going to be sympathetic to that viewpoint. Their energy revenues might be attenuating today, but they have nearly a century of revenues that allowed them to build their state infrastructure without income taxes.

    And THAT is what Laffer ignored, and what I pointed out.

  98. wileycoyote says:

    Thank you Shadowfox for those numbers.

  99. nl says:

    Laffers piece just says that there are a bunch of tax hikes coming next year, and that these will be bad for the economy. He also says that, in light of this, he expects a “double dip” recession. Big deal. Lots of economists think a “double dip” is coming, and the idea that increasing tax rates are bad is not exactly a wild-hair notion.

    BR’s reaction is ridiculous, and much more political than Laffer’s piece.

    Personally, I think BR should stick to market calls and stop trying to act like he is some kind of economic master. Yo — you ain’t!

  100. Eagle Eye says:

    I appreciate your hard-edged analysis of bullshit where ever you find it. Whether its Laffer, Boskin, Obama, Summers — your work is read by people in my office (a government regulator) and appreciated.

    Some of the commenters want to pick your brain for money making market calls, but don’t care about the rest of what you have to say. I say the hell with them — let’em pony up the big dough and pay a fee to your firm. (I’m talking to you NL).

    As to BR’s economic calls –I would say he is in the top 2% of all economists who look at markets, who dissect the data, who understand the overall economy, and can contextualize what is really going on. (Again, this applies to NL).

    We have access to any professor at any university we want; We can pretty much ask for testimony from any fund manager. I know my boss puts more stock in what you say then any of the rest of the pointy headed clowns who work in ivory towers.

    Please do not let the winguts dissuade you from doing what you do best.