I wrote about it last week as I do find Wanniski's theory of the Laffer Curve-it was Laffer's Curve though Wanniski named it-quite intuitive. Of course, that a model is intuitive doesn't necessarily mean it's right.
http://diaryofarepublicanhater.blogspot.com/2013/07/jude-wanniski-on-difference-between.html
One thing that interested me is the difference between SS and Keynesianism. There are some interesting areas of overlap. Both are fiscal theories of stimulating the economy. Wanniski argued that Keynesianism can work to stimulate the economy if it argues for tax cuts as it did in the 60s. However, according to him Keynesians wrongly ascribe this to bond illusion-successfully fulling people that taxes won't have to go up later. The real reason it works according to Wanniski is that Point E on the Laffer Curve requires tax rates to come down; an interesting point about the LC is that Wanniski admits that there are times that E requires that taxes actually go up.
It seems to me that this is where we are today: the electorate-who Wanniski believed always makes the correct choice based on what their two choices are at least-seems to be indicating that taxes are too low-on the rich-and that we need the government to provide more goods and services. Again, LC can accomodate this analysis-certainly based on Wanniski's analysis in The Way the World Works. In his lifetime, Wanniski showed himself capable of some adaption-he largely predicted what positions Clinton would take in winning in 1992.
http://diaryofarepublicanhater.blogspot.com/2013/07/wanniski-on-democratic-partys-chances.html
Laffer, today, seems considerably less adaptable. He refuses to consider the possibility that maybe E now shows that taxes are too low-certainly were in the 2012 election before the fiscal cliff deal-and can come up further as Democrats are urging.
http://diaryofarepublicanhater.blogspot.com/2013/07/jude-wanniski-laffer-curve-and-battle.html
http://diaryofarepublicanhater.blogspot.com/2013/07/speaking-of-tax-reform-harry-reid-just.html
What was interesting is the way that Bush marketed his tax cuts in the 2000 election. In 1999, he was already arguing for them based on the big worry that if they didn't pay out the surplus in tax cuts, they would fund more government spending-I admit that I would have liked at least some of it go there.
Larry LIndsey himself was already bearish on the economy in 1999, interestingly. However, the tax cut was being packaged in classic SS fashion-as insurance just in case there ever is a problem; then Greenspan actually reversed himself and testified to Congress that the surplus had to be spent or the government might start buying up the economy-buying bonds and lots of equity in firms, next, Greenspan and company warned, Uncle Sam would be running the Board of Directors.
So we went from the need for surpluses during a Democratic Administration to needing to get rid of it immediately before it burns a hole in our pockets and the government takes over half the Fortune 500. Then of course, the economy fell into recession and Bush fell back on Keynesian logic: it was needed to bring us recovery.
So the tax cuts were argued for on both Keynesian and SS grounds-and a few others as well .It's like Friedman says-any reason, any excuse.
Yet in principle, while both Keynesianism and SS are theories of stimulating the economy, there are two major differences:
1.) Keynesianism is counter-cyclical stimulus, while SS is largely pro-cyclical. SS theory basically doesn't believe that we can do anything about the business cycle-it's basically Classical on this point-the price of labor supply is too high, the market needs to correct for this and bring it down.
2). Both theories seek to increase spending in the economy; however the goal of SS is, naturally the supply-side, which means it seeks to increase investment spending, whereas Keynesianism is demand-side and seeks to increase consumption.
What SS theorists never demonstrate is that the economy in normal times has any trouble coming up with capital spending.
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