More facts to debunk W*GS' right-wing disinformation:
Do the Math:
Michael Kinsley took the statistics off the President's Economic Report from February 04 to compare the economy historically under Democrat and Republican Presidents.
Real GDP Growth:
Democrat: 19.58% of GDP
Republican: 20.87% of GDP
But the Republicans spend a lot on defense, so let's remove that...
Government Spending Without Defense:
Democrat: 13.76% of GDP
Republican: 14.97% of GDP
And it follows...
Democrat: 1.21% of GDP
Republican: 2.74% of GDP
Democrat: 18.39% of GDP
Republican: 18.12% of GDP
There will be many objections to all this, some of them valid. For example, a president can't fairly be held responsible for the economy from the day he takes office. So let's give them all a year. That is, let's allocate each year of an administration to the party that controlled the White House the year before. Guess what. The numbers change, but the bottom-line tally is exactly the same: higher growth, lower unemployment, lower government spending, lower inflation and so on under the Democrats. Lower taxes under the Republicans.
So, an extra .27% of GDP in taxes for Democrats, but better GDP growth, lower unemployment, lower government spending (with or without discounting defense), lower inflation, and much lower inflation.
Need the source? Thought you might:
Invented by Arthur Laffer, this curve shows the relationship between tax rates and tax revenue collected by governments. The chart below shows the Laffer Curve:
The curve suggests that, as taxes increase from low levels, tax revenue collected by the government also increases. It also shows that tax rates increasing after a certain point (T*) would cause people not to work as hard or not at all, thereby reducing tax revenue. Eventually, if tax rates reached 100% (the far right of the curve), then all people would choose not to work because everything they earned would go to the government.
Governments would like to be at point T* a hypothetical and ever-changing figure, because it is the point at which the government collects maximum amount of tax revenue while people continue to work hard. The theory sounds almost too good to be true and it is, well it is at least too simple to be of any value.
The Laffer Curve (see illustration) was supposed to illustrate how reducing taxes could increase the volume of tax revenue, enabling tax cuts to pay for themselves. At a more analytical level, it was part of a hodgepodege of detached curves and diagrams that were supposed to replace the Keynesian IS-LM curve. Since the post-1981 economists were vociferously anti-Keynes (like this scrap of disinformation), to the extent of lying about what Keynes and his associates had actually said, there was a need to reinvent the wheel—to toss out all the rigorous fact-based analysis and replace it with platitudes. The Laffer Curve therefore was supposed to take the place of the ISLM curve.
The Laffer Curve supposedly indicates that if the mean tax rate is greater than T* (some unknown level), then tax cuts increase tax revenues. The problem is that the first derivative of national wealth (viz., GDP) is confused with the second derivative (viz., GDP growth). So suppose we are at some position T* + Te, i.e., we're charging a tax rate which is Te greater than the revenue-maximizing tax rate. And suppose we suddenly slash tax rates from T* + Te to T*- Te. The LC tells us the tax revenue will be the same, although in real life that cannot be true. There must be a time element in the curve. But Laffer was trying to make the case that a change in the faction of wealth creation that is expropriated by the state will lead to an increase in the flow of wealth creation. So the Laffer Curve may be useful for explaining why supply side economics is expected to work, but there's no coherent symbolism in the shape of the LC; unlike the slopes of the ISLM curves, the LC can never be derived with any coefficients, it cannot incorporate other dimensions (such as time), and there can be no method of deriving T*, even theoretically. It's purely polemical.
In practice it works about as well as trickle down economics, and in theory it makes about as much sense as bush's Stem Cell Policy.