Armey Throws Us A “Curve”

February 4, 2009

As part of the seemingly endless “piling on” exercise by our corporate media in response to the Obama stimulus plan, I present selected excerpts (as much as can be tolerated, anyway) of today’s opinion column by former House Repug Dick (“Barney Fag”) Armey from Texas (go figure, huh?); this is his rationale for criticizing Obama’s proposal to spend up to about a trillion dollars to put this country back on its feet (in the Murdoch Street Journal, of course)…

Years ago I developed the “Armey Curve” to explain the negative burden government has on prosperity. The idea, borrowing liberally from Arthur Laffer’s curve (which demonstrates that tax revenues fall when the tax burden gets so high that it no longer pays to work), is that at some point the burden of government spending exceeds the private economy’s ability to carry it. “Stimulus” spending often does more harm than good, because it takes more money out of the system than it creates and thereby destroys jobs and leads to stagnation and diminished prosperity for all.

Oh yes, the “Laffer Curve”; Armey and the Journal argue that the curve theory proves that U.S. business tax rates are so high that they discourage the type of investment that creates jobs, and merely lowering the rate would have the same effect as the proposed stimulus (two caveats: 1) This is a variation of all the crappy “supply side” economics hokum we’ve been fed for about the last 30 years or so, and 2) I am not an economist and am merely paraphrasing from this article, which also tells us that)…

I don’t know where we fit on the Laffer curve (concerning corporate tax rates). Frankly, I think our tax code is so distorted by random loopholes that it’s probably impossible to make a blanket statement; for some businesses, we’re probably taxing them enough effectively reduce the tax revenues received from them; for many others (can you say oil company?), we’re clearly not.

But the idea that (the curve referenced in the article) produced by the WSJ folks has any meaning at all is simply laughable.

And as noted here…

Taken together, (Dubya’s) tax cuts were even bigger than the ones Ronald Reagan introduced in his first term. In 1981, Reagan slashed income-tax rates by about a quarter, claiming that the government’s revenues would actually rise as the tax cuts unleashed the economy’s potential. This claim, which Arthur Laffer, one of the originators of supply-side economics, formalized in his famous “Laffer curve,” turned out to be wildly optimistic, and the budget deficit soared. In the ensuing years, a panicked Congress reversed some of Reagan’s tax cuts, and the White House quietly accepted the rollbacks, which increased tax revenues. When the International Monetary Fund recently compared Bush’s fiscal record with Reagan’s, it concluded that “the revenue effect of the Reagan tax cuts was considerably smaller than in the current period.”

According to the White House, in fiscal 2004 the three Bush tax cuts will cost the United States Treasury about $241 billion in revenues, which is about two per cent of the gross domestic product. (The Congressional Budget Office, which is nonpartisan, puts the 2004 cost of the tax cuts at closer to three hundred billion dollars.) The lost revenue has wreaked havoc with the budget. In 1999, the federal government had a surplus of $125.6 billion; this year, according to the latest official forecast, it will have a deficit of about $450 billion. The 2001 recession and the jump in spending on defense and homeland security since 9/11 are responsible for some of this reversal, but even the Bush Administration concedes that tax cuts caused about a third of it.

Oh, and Armey also brings us this lovely bit of language…

It’s clear why Keynes’s popularity endures in Congress (my note: John Maynard Keynes being the economist whose theories served as the basis for to the New Deal programs of FDR, though Obama is actually more of a Milton Friedman disciple, and that would be obvious were we not so bad off at the moment). Intellectual cover for a spending spree will always be appreciated there. But it’s harder to see any justification for the perverse form of fiscal child abuse that heaps massive debts on future generations.

You got that? Armey considers the Obama stimulus “fiscal child abuse” (and aside from being a repugnant choice of words, that ignores the profligate waste that occurred when Armey’s party ran Congress basically unchecked from 2000 to 2006).

But then again, what else can we expect from a character assassin and a chauvinist?

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