The Laffer Curve, Part 3

Dan Mitchell, Senior Fellow at The Cato Institute, has posted Part III (the final installment) of The Center for Economic Prosperity's three-part series on The Laffer Curve on You Tube.

The crux of this tutorial demonstrates why a dynamic-scoring model of tax revenue estimating is much more accurate and realistic than Congress' static-scoring model.

The FDC linked to the first two videos in this series: #1 & #2

But the static vs. dynamic scoring doesn't just apply to economic tax-rate policy and the Laffer Curve. Methinks this static-scoring analysis is the folly of the global warming alarmists climate models, the Peak Oil crowd predictions of oil drying up, Paul Ehrlich and the population control advocates predictions of chaos, and so on.

H/T: Larry Kudlow

More McCain

Despite the fact that Sen. John McCain was The FDC's fifth or sixth pick for the Republican nomination, we are finding that rallying behind McCain has been easier than we'd ever thought possible, as discussed on The FDC's post, here and here.

Larry Kudlow agrees.

More on the Laffer Curve

The FDC has talked about the importance of the Laffer Curve and the role tax rates play in tax revenue. Today, Larry Kudlow has posted on the National Review's blog, The Corner, a video explaining the Laffer Curve.

The video is presented by Dan Mitchell of the Cato Institute.

Lessons for Liberals:

1. The Laffer Curve does exist (this is likely new territory for our liberal friends)
2. Tax policy does affect the economy, and there's often be increased revenue with tax rate cuts

Lessons for Conservatives:

1. Many, but not all tax cuts pay for themselves.

Bill Gates says capitalism doesn't work. Huh?

This from the guy who has been probably the single biggest beneficiary of capitalism's rewards - ever.

His idea is "creative capitalism". Its sounds more like socialized capitalism to me, which sounds more like just another form of wealth redistribution.

One problem I have is with Gates terms. Capitalism is creative, period. Creative capitalism is just plain capitalism.

If you read his speech at the World Economic Forum in Davos, Switzerland, he seems to have a firm grasp of the mechanisms and benefits of free-market capitalism.

Gates:

"The genius of capitalism lies in its ability to make self-interest serve the wider interest."

Bill, so if it serves "the wider interest" please tell me again why we need this so-called "creative capitalism"?

Gates also agrees with The FDC that life is good, and getting better all the time.

Gates:

"The world is getting better. In significant and far-reaching ways, the world is a better place to live than it has ever been."

But, Gates says the crux of the issue for him is that he is impatient. Despite improving conditions for even the poorest on this earth, he wants prosperity to happen quicker. It's a noble idea that hardly anyone would disagree with, but his high-minded solution will undoubtedly devolve into just another run-of-the-mill wealth distribution scheme administered by the government.

Gates gives some examples of recent "creative capitalism", and to me it's just good ol' capitalism. Capitalists have always looked for their niche to make a profit. Just because a new product or service benefits the poor doesn't make it "creative capitalism", it's just regular capitalism.

To help make his point Gates trots out a quote from Adam Smith:

"How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it."

When you consider this quote was written more than 225 years ago, you realize that Gates brand of "creative capitalism" was thought of a long time ago. Gates uses this quote to strengthen his point, but it only proves my point that "creative capitalism" or capitalism coupled with philanthropy is not a new idea.

No Mr. Gates, everyone can't be as wealthy as you. You went from being just another college drop-out to the wealthiest man in the world. Count your blessings, not your guilt.

Gates has gone through many phases in his life. As he was sitting on top of the most valuable company in the world several years ago he was enjoying life and all of the fruits of his accomplishments. He enjoyed his stature for awhile and bought everything he'd ever wanted, then, looking for more meaning in his life, he transitioned into his philanthropy phase(The Gates Foundation). That must have left him unfulfilled, so then the guilt set in. Guilt over how much money he has versus well, every single other person in the world. Don't sweat it Bill, I'm not jealous of you. I admire you. You provide inspiration to me. Anyway, Gates is now guilt-ridden, and that guilt must be assuaged. Hence, his view of the same capitalism that made him what he is today.

Larry Kudlow read Gates speech too, and points out that:

"free-market capitalism is the greatest anti-poverty program ever devised by man."

"Reduced marginal tax rates have stood the test of time...."

" They are an effective economic stimulant...."

Larry Kudlow goes on to point out that most of Eastern Europe has adopted a flat tax, and not surprisingly, their economies have taken off like a rocket.

Since Kudlow, brings up Eastern Europe, that reminds me...

Estonia is one of the fastest growing economies in the world (the annual GDP growth rate in 2006 amounted again 11.4%!) After their young Prime Minister, Mart Laar, read Milton Friedman's Free to Choose, Laar was inspired enough to reform Esonia's economy by adopting a flat tax. Now Estonia is known as "The Baltic Tiger".

I like the idea of a flat tax in the US, but when will it happen? When hell freezes over. But that's another post for another day.