Talk:Supply-side economics

Aggregate Supply Curve

There is no discussion of whether the AS curve is vertical. And I think that's stereotypical of people who have not studied either supply side or Keynesian economics.

Put GDP on the x-axis and price on the y-axis. Draw a vertical AS curve and a down-curved aggregate demand (AD) curve that levels off.

In this case, the only question that matters IS whether the AS curve is vertical. Because if it is, then the only way to improve GDP is to change aggregate supply. There is no discussion of any of this in the article, and it just amazes me.

Neutral Point of View: Reaganomics

It doesn't seem very encyclopedic. Words like smokescreen and the like are frequently used. Gillesp (talk) 02:34, 4 May 2014 (UTC)

Article too focused on arguing

This article needs an overhaul throughout because it lacks a clear description of the supply side proposal. It seems so focused on trying to argue against supply side perspectives that it constantly interrupts itself before it can really lay out the concepts.

After reading the whole article I remain confused about what supply side economics IS, mainly getting the message that whatever it is, it's rejected by many/most.

Some people in the talk sections below have tried to express this, I think, and are met with an echo of the page itself, a responder arguing against supply side economics instead of making an effort to better inform about what it is. Crcarlin (talk) 15:53, 14 April 2013 (UTC)

Geographical bias

As far as I was aware, supply side economics is not something that only applies to the United States, yet the opening paragraphs make it seem like the article is discussing American fiscal policy rather than the concept of supply side economics as a whole. Can someone fix this? — Preceding unsigned comment added by 2.27.51.226 (talk) 16:40, 25 January 2012 (UTC)

A layman's view of this article's deficiencies

Pluviosilla (talk) 16:45, 28 October 2008 (UTC)

I am not an economist, but I am deeply interested in economics; I have been reading The Economist magazine assiduously since 1978, and I want to offer an opinion.

Supply-side economics was never more than an economic heuristic that was intended to communicate republican tax policy in simple terms that the public could understand. It was not an economic system like Keynesianism or Monetarism, so attempts to refute the rigor of supply-side economics are out of place here. It would be like trying to refute "deficit spending" as a legitimate policy tool. Sometimes deficit spending is good policy, sometimes it isn't. And even the very best economic policy tools are routinely used by politicians at precisely the wrong moment for all the wrong reasons.

The thrust of this article is to *refute* supply side economics as an economic theory, and I argue that this approach is flawed. Thus the Wikipedia representative who defended the article as reflecting the majority report among academic economists is missing the point. Supply-side economics could not possibly be true, if you extrapolated tax cuts to 100%. Obviously, at some point, reducing taxes will make revenues go *down*. Supply-siders simply argue that some tax reductions under certain circumstances make revenues go up, and I would be surprised if any serious economist, even Paul Krugman, would refute that.

If the author of this article really wanted to broach the substance of the economic issues, then to be fair he would have had to broaden the scope of the discussion to examine the effect of tax policy, more generally speaking, on tax revenues. For instance, he should have included some material on comparative economics. What has been the effect on tax revenues of tax reform in Russian and the Baltic republics? Revenues have clearly increased in all of these countries under a flat tax regime, because of dynamics very similar to those Laffer was describing. When you quote the criticisms that Paul Krugman made of supply side economics, is it possible that you are not aware that Krugman was engaged in a polemic with a specific set of people in a specific context? I defy you to find any quotation by Krugman or anyone of his stature that denies that tax revenues have increased in Eastern European nations due to effects of what could be roughly called "supply-side" reforms.

Several people have criticized the lopsided use that the author makes of academic authorities. His selection of authorities clearly is lopsided, but I don't think this is the most egregious flaw in his use of quotations. He does something much worse: he subtlely and indirectly misrepresents the very people he quotes. So even when he quotes correctly, his quotes are deeply tendentious in that they invite the reader to make false inferences.

In particular, when the author wants to refute supply-side ideas, he adduces quotations that are critical and suggests that consensus opinion is dismissive of supply-side ideas. But when he makes reference to ideas that most economists embrace but he is uncomfortable with, he circumvents his references with qualifying expressions which imply the ideas are controversial.

For instance, about free trade and the law of comparative advantage, which *does* reflect consensus opinion among probably 98% of all economists, including Paul Krugman, he says, "Crucial to the operation of supply-side theory is the expansion of free trade and free movement of capital. It is argued that free capital movement, in addition to the classical reasoning of comparative advantage, frequently allows an economic expansion."

Notice the use of passive voice, "It is argued ...". Economists disagree about almost everything, but noone except Marxists and Nazis deny the importance of the law of comparative advantage. Economists might assign different levels of importance to free trade, but it is very rare indeed to find a professional economist who disputes that free trade is good for most people, most of the time. Paul Krugman and several other leading economists made news very recently by questioning some of the benefits of globalization for blue collar workers, but what was most newsworthy was that all of these economists, including democrats like Krugman, have a track record of supporting free trade (which is based on comparative advantage) for years, and if they criticize it now, their criticisms are hedged all about with qualifications and NOBODY recommends trade protection as a solution. But from this article, you would almost think that supply-side economics is disreputable with professional economists precisely because it adheres to the discredited "classical reasoning of comparative advantage." If so, then Paul Krugman is a classical economist, and who knows, maybe even a crypto supply-sider!!!

Finally, the author makes selective quotations alleging that republican tax policy is nothing but an attempt to relieve the tax burden of high earners. Why does he think this is an appropriate venue for imputing motives behind the tax policies of one of the two major political parties? Would the Wiki editors think it is appropriate to insert a sentence like, "Democrats mounted a campaign to expand government assistance to the elderly. Many economists speculate that this was in an attempt to buy votes." Does the second sentence belong in an encyclopedia article? One of the key characteristics of political religion is the dynamic of competing stigmatizations, where each side tries to portray the other as being venally motivated. Please.

The article has a defensive tone that makes it unclear who the intended audience is. Is he talking to the readership of an encyclopedia or is he trying to make points in a bar or a college bull session? In my humble opinion, the entire article should be deleted.

Pluviosilla (talk) 16:45, 28 October 2008 (UTC)

You've got lots of stuff there. First, remember that WP is user-edited. If you feel the article needs improving, then improve it. (I suggest starting slow, to get used to how things work, and be ready to have your edits undone and argued here.) The article's been around for a long time and has many authors.

A second point of more substance, Krugman's work significantly undercuts the importance of comparative advantage brief explanation. In spite of that, he and most economists mostly support free trade. Of the economists who support free trade in goods & services, many are more hesitant about free flow of investment capital. CRETOG8(t/c) 19:55, 28 October 2008 (UTC)

I —Preceding unsigned comment added by 68.206.206.228 (talk) 15:39, 5 November 2008 (UTC)

I agree wholeheartedly with Pluviosilla.

Let me reference what has motivated me to participate here: The new book "The End Of Prosperity" by Laffer, et.al.

My concern as a non-economist patriot is that it is crucial to educate, SOMEHOW, the voting public in basic economics. However, this article is a case in point. The whole area is predominated by myriad views, myriad underlying agendas, intellectual competition, bickering, and jealousy; in other words, a Tower of Babel. How on earth is this country going to come together without some intellectual consensus and resolution on this subject?

A crucial problem in this country is the naïveté and outright simple-mindedness of 90% of the electorate about how the economy works. That is, in turn, due to a profound failure of the education system in this country regarding that area of knowledge. I can remember when I was a senior engineering student in college, after having developed a fascination for political philosophy and economics that I stumbled across a sophomore economics text-book. As I thumbed through it, I encountered two facing pages – the left side was a treatment of socialism, and the right side was about capitalism, presented in such a way that the average college sophomore would perceive it all as eminently fair and balanced. The gist of the presentation was that each was equally valid, and this was accomplished with some of the most outrageous claims of the “benefits” of socialism. Having recently come through the period when we had “hide-under-your-desk” drills to help us survive a nuclear attack by the Soviet Union, I was outraged.

It is undeniably true that the left has dominated all levels of the field of education in this country since the 1930’s. Furthermore, it is fair to say that the left in this country is immensely indoctrinated to socialist ideas, starting with welfare-state-ism.

I believe that if a careful analysis of the American electorate were to be made, we would discover that the left is populated predominantly by individuals who have never participated in “capitalism”; i.e., people who have never started and/or run a successful business and learned the realities of “making payroll” every month, who have never been successful enough to become a member of the investment class, and who have no concept of the theory of money. Given that lack of insight from the left, and assuming that most of us have been exposed to the Christian concept of charity, we should be patient with those in our country who think a) there’s an infinite money supply somewhere, and b) the government should merely give money to the poor and bring them into the middle class. That's how we’d prove we’re a caring society, nobody would be wanting for the bare necessities in life, and we would all live happily ever after.

Whenever anyone tries to argue with that point of view without first making a successful attempt to create an awareness of just how an economy actually works, it precipitates hatred from the left. That results in accusations that the right is merely selfish, greedy and cruel, and, by God, DESERVES to have whatever wealth it has accumulated to be expropriated for others because it doesn't DESERVE to keep it and spend it as each sees fit.

You guys need go back to ground zero and get your act together. This nation and the world need it.

I would really like to see authoritative works like “Beyond Prosperity” become popular and appear on the best seller list. It (so far as I’ve read) has done an incredible job of, step by step, revealing economic realities that have been demonstrated over and over with our economy. If we could just get our electorate interested in and familiarized with the realities of economics, we might succeed in becoming One Nation again.

Sschale (talk) 16:56, 5 November 2008 (UTC)

Sschale, welcome. Like Pluviosilla, I encourage you to find specific points of this article which can be improved, with the same caveats about going slow and expecting argument. You make a lot of points, but you risk getting into a broad discussion not clearly related to this article. Check out Wikipedia:Talk_page and guidelines, and make sure this doesn't become a discussion forum. CRETOG8(t/c) 17:27, 5 November 2008 (UTC)

The Forgotten Interest Rate

It is widely known that raising and lowering the interst rate has a strong impact on economic activity. Yet, most discussions surrounding the impact of US tax cuts on economic activity fail to mention that those periods of economic growth which followed US tax cuts under both Reagan and Bush were accompanied by strong cuts in interest rates. If the increase in the tax base is largely the result of lowering interest rates, then the tax cuts have done nothing more than to cut tax revenue. —Preceding unsigned comment added by 72.152.83.127 (talk) 14:34, 31 October 2008 (UTC)

This article is laughably biased

It doesn't even accurately describe the theories it's trying to discredit. Reagan always called for spending cuts. He did not believe in running deficits, and he did not believe the tax cuts would COMPLETELY pay for themselves. He wanted to cut spending, but could not because he didn't have control of Congress.—Preceding unsigned comment added by 67.142.130.17 (talk • contribs) 08:27, November 13, 2008 UTC

(It must be wonderful to claim to know the mind of a master politician such as Reagan. Reagan had enough votes to be veto-proof so he could have vetoed the budget until Congress passed a balance budget. He was first and foremost a politician not an economist. He was also practical and knew the benefits of government spending having lived through the '30's so he never fully believed his own campaign rhetoric.). The notion the 'supply' creates its own 'demand' is incredulous. If that were the case then where is the demand for the millions of unsold American cars that people don't want to buy? It is and will always be, 'demand' creates 'supply'. Keep taxes low on lower and middle class and they will vote with their dollars for the products and indusrties that meet demands. Government spends for the future in infrastructure (US jobs) and public research that spins off private industry such as the transistor, microprocessor, computer, and internet. Supplyside economics did not produce those jobs... it was Keynesian economics.)—Preceding unsigned comment added by 67.162.147.39 (talk • contribs) 17:19, November 20, 2008 UTC

It must be wonderful to start a paragraph with "It must be wonderful to claim to know...", and then follow it with claims to know. I've never made such an idiotic argument, and never will, so I can never know the pleasure.

--OBloodyHell (talk) 04:16, 1 December 2009 (UTC)

"Supply creates it's own demand" is an incomplete summation of supply side economics, but works in many instances. It's a macroeconomic concept and therefore, in your example, you would need to look at the car industry long term as opposed to one cherry picked point. If it were possible to produce cars for $1,000 each, I suspect the volume would be higher than it is now. Supply-side economics attempts to allow people to produce more goods at cheaper prices. What's so hard to understand about that? 38.96.15.64 (talk) 22:11, 7 June 2011 (UTC)

Even the first paragraph makes me suspicious where it uses the deceptive euphemism of "adjusting" where it really means "reducing". Also, the word "your" that immediately follows is ungrammatical. —Preceding unsigned comment added by 68.223.154.18 (talk) 16:16, 7 October 2009 (UTC)

Rising Tide Lifts All Boats

The article incorrectly attributes this to "the Reagan Administration"

Missed it by 20 years - it was JFK. SEE Wikipedia entry on RTLAB:

http://en.wikipedia.org/wiki/A_rising_tide_lifts_all_boats[1] —Preceding unsigned comment added by BoerumHillJo (talk • contribs) 01:55, 12 January 2009 (UTC)

After reading several econ WP articles including Keynesian, I was stunned how opponents of this particular theory seem highly motivated to marginalize it as much as possible. Rather than fully presenting a coherent explanation of the theory and its virtues before exposing its flaws (as is typical with articles on controversial topics), the opponents seem intent on sprinkling counterpoints like land mines throughout the entire text. The theory isn't developed fully enough for me to understand before the attacks start, leaving me to believe that the article presents only a weak straw man. I don't have confidence in what is presented here, so I will seek enlightenment elsewhere. I want to hear both sides, but this is no way to do it. It's a shame when WP articles devolve like this. It only hurts WP as a whole. —Preceding unsigned comment added by 71.198.209.35 (talk) 08:36, 9 February 2009 (UTC)

Tax

Most of supply-side economics is not about increasing tax revenues. It's about unemployment, economic growth, and inflation. The Laffer curve is incidental (and/or long term) and this article concentrates far too much on it. Larklight (talk) 12:58, 9 February 2009 (UTC)

What's So Hard About Reorganizing?

Why don't we just have two articles (or two sections within a single article)?

One part could discuss supply-side economic theory, whereas the other part could discuss applications of supply-side economics and the outcomes of those applications.

That way, we could have the *facts* about supply-side economic theory (who said what, and the thought processes behind what was said) in one bloc, then we could have the *facts* about applications of supply-side economics (who did what, and the outcomes of those doings) in another.

It's not the responsiblity of Wikipedia to prove or disprove any theories. It is the responsibility of Wikipedia to provide the information pertaining to those theories.

If the information is properly and accurately presented, then the reader will be able to absorb and process the information and judge the effectiveness of the theory themselves. —Preceding unsigned comment added by 74.137.25.150 (talk) 04:36, 26 March 2009 (UTC)

--Monetarist Economics vs. Supply Side Economics--

This section is ridiculous. Ronald Reagan was a clear supply sider, but he was also a monetarist. The two are not mutually exclusive, and this section should be removed. —Preceding unsigned comment added by 70.177.246.46 (talk) 19:54, 29 March 2009 (UTC)

Reaganomics

I need some help with this topic as I am have some difficulty in economics is there anyone that can assist. Please?? —Preceding unsigned comment added by 162.119.68.249 (talk) 17:00, 9 May 2009 (UTC)

This is the place to discuss improvements to the Supply-side economics article. If you have questions about economics, one place to ask them is Wikipedia's Reference Desk. Tempshill (talk) 17:00, 8 June 2009 (UTC)

What empirical evidence exists?

A questioner at the Reference Desk asked the simple question: What empirical evidence, if any, supports the principles of supply-side and trickle-down economics? This article doesn't answer the question squarely; it has a great deal of talk about theory, but glosses over all of the observations that led to all the theory. There is some (disputed) evidence in the "Reaganomics" section — but I think the article would be greatly improved by a specific discussion of what events are taken to be evidence (disputed or not). Tempshill (talk) 16:59, 8 June 2009 (UTC)

Historical Origins

First sentence of the section: "Supply-side economics developed during the 1970s in response to the failure of Keynesian economic policy, and in particular the failure of demand management to stabilize Western economies during the stagflation of the 1970s, in the wake of the oil crisis in 1973.[6]"

I had know idea that it is a complete, straight-up fact that Keynesian economic policy is a failure! And here we are, in a world where economics has become a hard science like physics, and a bunch of jerk economists are recommending Keynesian economic policy to full us!

No, I'm just kidding--all in fun. Anyway, that seems like a bit of a generalization; surely it is more of a "response to Keynesian economic policy" than it is a response to the "failure" (as if it were an absolute, universally agreed upon fact among mainstream economists) of it. I do not have access to the book that is cited, so could someone check that? It seems a bit strange to me, seeing that this book is a textbook and all, that they would declare it a "failure" when that is by no means a definitive fact (of course, nothing in macroeconomic policy theories is a definitive fact).Treefingers1206 (talk) 22:20, 31 August 2010 (UTC)

Still laughably biased?

The entire fiscal policy of this article is still riddled with personal bias and looks more like as Reagan roast than an educational overview. I see no real talk has gone on this talk page recently. Is this section still under review as it needs a hardcore cleanup. The criticism portions spill far outside the "Criticism" section and there is a plethora of grammatical errors, leading me to believe a supply-side economics critic edited it while very, very angry. Furthermore, anyone coming here to look for encyclopedic knowledge of supply-side economics will find very little and will leave with misinformation about both the economic theory and the Reagan regime, which only partially applied supply-side economics during its reign. Much of what is here instead needs to be moved to the trickle-down economics article. —Preceding unsigned comment added by 75.148.5.169 (talk) 18:31, 14 October 2010 (UTC)

There is no evidence that this economic ideology has worked to improved government tax revenue. Even Friedman admits it would not do so. Perhaps it is republicans which are biased against reality, most Europeans recognize it correctly as a flawed ideology, so on average the unbiased description will contain legitimate criticism, just as you would criticize marxist economics. Ahahaha373 (talk) 18:37, 18 May 2012 (UTC)

Removed paragraph from lead

I have removed this paragraph from the lead:

There have been strong debates over the theory in America in past 30 years. In 2003, the Wall Street Journal declared the debate over the ability of supply-side economics to reduce taxes without cost has ended "with a whimper," after extensive modeling performed by the Congressional Budget Office (CBO) failed to support that possibility.

I think it is unduly negative considering that supply-side economists expect very few tax cuts to actually pay for themselves fully. This is already covered in the Criticism section anyway. –CWenger (talk) 22:25, 28 January 2011 (UTC)

Agreed that most economists do not expect tax cuts to pay for themselves. However, I added this paragraph because much of the discussion of taxes in the media and among everyday folks has the assumption that tax cuts DO pay for themselves. As wikipedia is widely used as an everyday resource it is very important that this fact be included in the summary. I have undone your deletion.Jytdog (talk) 12:26, 29 January 2011 (UTC)

I am fine with the paragraph as it has been rewritten. Thanks. –CWenger (talk) 16:31, 29 January 2011 (UTC)

Great! It is good to resolve something in a nice manner!

I agree! Wikipedia can be very frustrating sometimes... –CWenger (talk) 16:04, 30 January 2011 (UTC)

The Econoclasts by Brian Domitrovic

This article on supply side economics is inaccurate, unbalanced and unsatisfactory. It does not reflect well on Widipedia. It should be re-written by a scholar who knows the subject. Brian Domitrovic, the Harvard University economist who wrote The Econoclasts would be an excellent choice. — Preceding unsigned comment added by Martinweinstein (talk • contribs) 09:32, 28 February 2011 (UTC)

Not Harvard, but Sam Houston State University, which is so bad that it's unranked and has a 71% admissions acceptance rate. Jwray (talk) 02:04, 20 March 2011 (UTC)

Triple merger with Reaganomics and Trickle-down economics

I think it's a good idea because they're all the same subject. Second? Jwray (talk) 23:02, 19 March 2011 (UTC)

Possibly trickle-down economics. I'd argue against Reaganomics, though, because if you look at the page you will see this policy involved more than simply tax cuts, which is what supply-side economics primarily is. –CWenger (talk) 23:19, 19 March 2011 (UTC)

Supply Side Economics - Taxes, Deficits, and Debt

It is my understanding that the whole thrust of supply side economics is a cost of capital exercise. Meaning that the private sector realizes its cost of capital on an after tax basis. Capital financing in the private sector takes two forms - debt (bonds) and equity (stocks). Capital and taxes being two costs in the production of any good, lowering the after tax cost of capital leads to an increase in production for a given amount of demand - ie, firms compete for that demand.

The capital gains tax cuts of the Reagan era focused solely on the equity side of finance. Supply side economics applications in government policy is missing a key ingredient - a term structure device. A lot of private sector capital financing relies on the credit markets. Debt instruments are fixed term (One month to 30 years) by their very nature. And so, if the federal government wanted to lower the after tax cost of capital across a term structure, it would sell a term structure instrument.

This is why supply side economics has no foundations in macro-economic theory. There is no financial instrument that embodies that policy.

Instead what we have are inflation indexed bonds (introduced by Bob Rubin in 1997) that permit financial firms to speculate on the direction of commodities and drive inflation higher at their leisure. 24.3.100.36 (talk) 05:05, 30 March 2011 (UTC)

Opposition in the opener

Why is a CNBC reporter being so extensively quoted in the opener? To me, the opener reads like a planned refutation of the whole idea, as if it were universally accepted as being discredited. I'm not sure that's the case...InFairness (talk) 04:15, 13 August 2011 (UTC)

I consider myself a supply-sider and I don't find the quotes too negative. It seems like a pretty decent overview by mainstream economic thought. It would be preferable to find somebody more notable saying essentially the same thing, but it is acceptable as it stands in my opinion. However, for a bit of balance, since it is true that there is virtually nothing positive is said in the lead, maybe we could find somebody attributing the economic booms of the 1920s, 60s, and 80s to supply-side tax cuts of Coolidge, Kennedy, and Reagan, respectively. –CWenger (^ • @) 04:41, 13 August 2011 (UTC)

It didn't start out that way! Somebody didn't like the citation of the WSJ article indicating that "the debate was over" that cutting taxes could increase revenue and added a bunch of text to play down/discredit the quote. So there is overgrowth... you can see it in the history 5 August 2011 by 76.218.32.141. The citation of the WSJ article is useful in the lede as there is so much loose talk about raising revenue by cutting taxes, and as the lede indicates the real goal of supply side is not to increase govt revenue but rather to unleash economic growth. Jytdog (talk) 17:40, 13 August 2011 (UTC)

Bad Link Epidemic

http://www.highbeam.com/doc/1G1-20004037.html does not lead to the article mentioned, much like reference #10. Is it a dead link, or merely an advertisement for this highbeam service?

169.231.35.75 (talk) —Preceding undated comment added 04:08, 26 April 2012 (UTC).

Employment growth by top tax rate image

I've started a centralised discussion here regarding File:Employment growth by top tax rate.jpg, which is used in this article. Gabbe (talk) 09:59, 6 November 2012 (UTC)

Marx and Smith paragraph

This paragraph is stupid. The connotation is that supply side theory relates to the left (Marx) and the right (Smith), but since this isn't explicitly stated it comes of as a random collection of facts. — Preceding unsigned comment added by 192.12.184.6 (talk) 17:28, 27 November 2012 (UTC)

Lower federal revenue as percentage of GDP

@VikingExplorer: recently added the following:

However, lower federal revenue as a percentage of GDP would be expected according to supply side economics. The Laffer curve relates real revenue (not %GDP) to tax rates. Lower tax rates would naturally reduce the percentage that tax revenues are of GDP, but the point of the Laffer curve is that real revenues will be, after a transient drop, greater at the lower rates. For example, imagine the entire economy is 1 company with $1000 in revenue and $100 in profit. With a tax rate of 50%, the government would receive $50 in revenue. With the rate lowered to 33%, the revenue might increase to $2000, resulting in $200 in profit, and $66 for the government. Accordingly, real federal revenue was trending upwards during the entire decade of the 1980s.

The latest source was GPO, US Government Printing Office, Federal revenue, Table 2.1 - Receipts by Source: 1934–2016 (Excel file). The previous source to a similar problematic sentence was http://www.usgovernmentrevenue.com which appears to be a WP:SPS. Most importantly, Neither source explicitly makes this point, so the added material is WP:SYNTH at best. The highly simplified example is most certainly not found in an excel file from the GPO, and the difficult-to-navigate blog doesn't make the point either (it mainly also provides raw data, at least on the page which was linked). It is not up to Wikipedia to present such material without solid sources, because Wikipedia is not a platform for original research. Simply supplying raw data and expecting readers to come to such specific and esoteric conclusions is a violation of WP:NPOV, so I have removed the paragraph once again. Grayfell (talk) 23:40, 26 September 2014 (UTC)

@Abierma3:

How is this an NPOV issue or undue weight? →Reagan also reduced taxes from a top marginal rate of 50% to 28%,[15] lower on the Laffer Curve, which increased nominal federal government revenue during his term, but revenue fell as a percentage of GDP.[16] While lower tax rates imply lower federal revenue when measured as a percentage of GDP, the Laffer curve relates real revenue (not %GDP) to tax rates. The Laffer curve says that when tax rates are too high, tax revenue in dollars will be, after a transient drop, greater at the lower rates.[17]

Please take a look at one of the most neutral sources in the article. http://web.uconn.edu/cunningham/econ309/lafferpdf.pdf Lipsquid (talk) 18:35, 21 June 2015 (UTC)

@Lipsquid:, thank you for taking the time to discuss this issue. I removed the text, "but revenue fell as a percentage of GDP," because it is undue weight (and undue weight is an NPOV concern). Here is the reason why: It was in the Laffer curve section, and the next sentence states, "...the Laffer curve relates real revenue (not %GDP) to tax rates." Thus, the removed statement does not belong in this section. I agree that a discussion of % GDP is certainly relevant to supply-side economics though. If you look down to the Effect on tax revenues section, it says, "Some hold this was borne out during the 1980s when, advocates of supply-side economics claim, tax cuts ultimately led to an overall increase in governmental revenue due to stronger economic growth. However, some economists dispute this assertion, pointing to the fact that revenue as a percentage of GDP declined during Reagan's term in office." The article already included the statement, so that is why I removed it. To include it twice, especially in the Laffer curve section, is NPOV. Abierma3 (talk) 04:48, 22 June 2015 (UTC)

@Abierma3: While I agree that it would occur twice in the article, many, many, many comments occur twice in this article and in most articles. I would suggest adding back "but revenue fell as a percentage of GDP" as it gives a full summary of what happened under the Reagan cuts and removing the next sentence, "the Laffer curve relates real revenue (not %GDP) to tax rates.", which is a description of Laffer curve mechanics and should probably be in the Laffer Curve section. The fact that revenues increased, but fell as a percentage of GDP is a matter of supply-side economics in general and not an attribute of only the Laffer Curve. In general and in my opinion, the article has too much emphasis already on the Laffer Curve which is only the distribution of tax revenues across various tax rates. Give the Laffer Curve its own section, but lets keep the article about supply-side economic theory. Lipsquid (talk) 16:35, 22 June 2015 (UTC)

The two sentences we are discussing (the first sentence contained the removed statement) are in the Laffer curve section. That is exactly why I removed it; tax revenue as a percentage of GDP does not pertain to the Laffer curve, so including the fact that tax revenue as % of GDP fell during Reagan's years as president would be better placed in the Effect on tax revenues section (which it already is). I think we are in agreement that % of GDP does belong in the article, but not in the Laffer curve section, so it seems this is just a misunderstanding. Abierma3 (talk) 17:55, 22 June 2015 (UTC)

I think we are closer to an agreement. I suggest we remove the last statement "lower on the Laffer Curve, which also increased federal government revenue during his term.[16]" or we discuss the affects of the Kennedy cuts and the Reagan cuts and include revenue impact and the impact of revenue as a percentage of GDP. Cherry picking only the Reagan increase in revenue, while not discussing the Kennedy revenue and ignoring the impact of inflation and that the revenues were at a lower % of GDP favors a biased POV. WP is here to provide all information and let users form their own opinion. To leave out information because it does not support a particular point of view is by definition biased. Lipsquid (talk) 16:53, 25 June 2015 (UTC)

I just did a small copyedit for grammar and clarity, below is the paragraph under debate:

The Reagan administration and the Kennedy administration both justified such changes in socioeconomic terms by invoking the old saying that "a rising tide lifts all boats".[13] Kennedy reduced taxes from a top marginal rate of 91% to 65%,[14] which—consistent with the Laffer curve model—increased government revenue. Also consistent with the Laffer curve model, Reagan reduced taxes from a top marginal rate of 50% to 28%,[15] which increased government revenue during his term.[16]

As you can see, the Kennedy tax cuts are mentioned in the preceding sentence with equal weight as the sentence about the Reagan tax cuts. I don't see how this is cherry picking if both are mentioned equally. Also, don't forget that this section is about the Laffer curve, which is strictly about the relationship between tax rates and government revenue, so any discussion of tax revenue as a percentage of GDP needs to be in the "Effect on tax revenues" rather than the "Laffer curve" section. And since the decrease in tax revenue as a percentage of GDP is already mentioned in the "Effect on tax revenues" section, this information is not being ignored like you say, so I don't see a NPOV concern at all. Remember bias works both ways, something can be biased if information is not included in sections where it belongs, but something can also be biased if information is included in sections where it does not belong. Lastly, a discussion of inflation or other macroeconomic variables would belong in the "Fiscal policy theory" section. There is already a mention of "asset inflation" and "bubble" here, but feel free to add to this if you think it is inadequate. Abierma3 (talk) 17:52, 25 June 2015 (UTC)

When I said cherry picking, I was talking about ignoring inflation and that taxation as % of GDP is a truer reflection of efficiency of tax policy. I am not sure how anyone can argue this with a straight face, but I can't think for other people. To leave out information because it does not support a particular point of view is by definition biased. Lipsquid (talk) 21:53, 25 June 2015 (UTC)

Inflation and taxation as a percentage of GDP are irrelevant to a discussion of the Laffer curve. We don't want to convolute an economic concept when there are better places in the article to include the information. Abierma3 (talk) 15:40, 26 June 2015 (UTC)

Unless we can come to an agreement, I am going to remove the non-neutral POV items and rewrite this section as it does not reflect the reference and includes original research on the definition of Laffer Curve.

From the reference: "the Laffer Curve does not say whether a tax cut will raise or lower revenues, nor does it predict that any and all tax rate reductions would necessarily bring in more total revenues. Instead it says that tax rate reductions will always result in a smaller loss in revenues than one would have expected when relying only on the static estimates of the previous tax base. This also means that the higher the starting tax rate, the more dramatic the supply-side stimulus will be from cutting the tax rate. It is possible that this economic effect will swamp the arithmetic effect, causing an actual increase in tax revenue." Lipsquid (talk) 02:00, 7 July 2015 (UTC)

What do we disagree on? It seems pretty clear-cut. Tax revenue as a % of GDP does not belong in the Laffer Curve section, and it is already properly included in other sections. We have already discussed this thoroughly. Please be more specific on what you have a problem with. What exact statement does not reflect the reference? I will source it if there is any discrepancy (i.e. what you call original research). Abierma3 (talk) 02:05, 7 July 2015 (UTC)

This is what the reference says "the Laffer Curve does not say whether a tax cut will raise or lower revenues, nor does it predict that any and all tax rate reductions would necessarily bring in more total revenues. Instead it says that tax rate reductions will always result in a smaller loss in revenues than one would have expected when relying only on the static estimates of the previous tax base."

This is what the Wikipedia article says "Kennedy reduced taxes from a top marginal rate of 91% to 65%,[14] which—consistent with the Laffer curve model—increased government revenue. Also consistent with the Laffer curve model, Reagan reduced taxes from a top marginal rate of 50% to 28%,[15] causing an increase in government revenue during his term"

These statements are incompatible and the Wikipedia statement seems to contain original research. I doubt there is any resource that would be strong enough to dismiss Laffer's own definition of the meaning of the Laffer Curve. Lipsquid (talk) 02:42, 7 July 2015 (UTC)

The source says, "This also means that the higher the starting tax rate, the more dramatic the supply-side stimulus will be from cutting the tax rate. It is possible that this economic effect will swamp the arithmetic effect, causing an actual increase in tax revenue." 91% and 50% are abnormally high tax rates, so this is in fact consistent with the Laffer curve and what the source says. Explain how this "[dismisses] Laffer's own definition of the meaning of the Laffer curve." Abierma3 (talk) 02:51, 7 July 2015 (UTC)

I have explained my points, the wording does not match the referenced article, not does it reflect Mr. Laffer's own definition of the Laffer Curve. Feel free to make edits for more proper wording or to balance any point of view, I encourage other editors to review and if you would like we can mark the article, make a Request for Comment or any other dispute resolution method you like so that more people can take a look. I appreciate your feedback but Wikipedia is not a place for original research and I am certainly not claiming this is your original research, just that it is original research. Lipsquid (talk) 04:11, 7 July 2015 (UTC)

Wikipedia is supposed to paraphrase a source, the wording is never supposed to "match a referenced article." You still haven't explained how this "[dismisses] Laffer's own definition of the meaning of the Laffer curve." Please do so, and also please point out exactly what is original research so I can source it. Something is not original research just because it is not sourced, as Wikipedia really only requires citations for material that is likely to be called into question. You have called the material into question so I will source it when I get a chance. Nothing in the disputed text is inconsistent with the Laffer curve model so this shouldn't be too difficult of a task. Abierma3 (talk) 04:32, 7 July 2015 (UTC)

I fixed what I felt was incorrectly referenced, the wording should certainly portray the same intent as the writer's with no additional original research, which this section was heavy on. I listed my reasons, I like your additional edits, it reads as much more neutral in view now so I feel no more need to discuss it. Again, if you would like additional editors to review, I would welcome tagging the page or making an RFC. The article is still, in my worthless opinion, too Laffer Curve heavy, but getting better. I will probably clean-up the criticisms section with more references. Hopefully other editors will wander by and make additional edits and it will continue to be a great article with many points of view. Thank you again for your recent edits. Lipsquid (talk) 05:51, 7 July 2015 (UTC)

I'm satisfied with recent changes. My apologies, I thought you were calling for a dramatic rewrite of the section. Abierma3 (talk) 17:36, 7 July 2015 (UTC)

I removed the paraphrasing. I have no problem with the Laffer Curve possibly increasing raw revenue and i liked your previous edits that were very nice middle ground. Can we consolidate a bit on the Laffer Curve possibly raising revenue and not keep saying the same thing repeatedly? It is very clear from the article, and is common sense, that lowering taxes could possibly raise net income, lower net income or keep net income flat, do we need to repeat those outcomes or give undue weight to only one of the three outcomes? Lipsquid (talk) 18:59, 7 July 2015 (UTC)

If you "have no problem with the Laffer Curve possibly increasing raw revenue," then why remove it? This is sourced material from the Laffer Center, so it fits well in the Laffer Curve section. The section already says that tax rates "too low will not maximize tax revenues." Net income has nothing to do with the Laffer curve. A tax cut possibly increasing overall tax revenue is an important notion to supply-side economics. This sourced information should not be removed. Also, claiming things are "common sense" is not a reason for removal. Abierma3 (talk) 19:11, 7 July 2015 (UTC)

Lipsquid, you recently reverted my edits, calling me a disruptive editor and urging me to use the talk page. I would like to remind you that I have been willing to discuss the issue the entire time and that my above post has been awaiting a response for over a day now (before you made these edits). I also think it is necessary to defend myself: I am not the disruptive editor here, it is you who is removing sourced info without proper justification or consensus. You don't seem willing to discuss this removal of sourced info either, which makes me suspicious that you are POV pushing. Abierma3 (talk) 08:10, 9 July 2015 (UTC)

When I asserted common sense, it was the same angle that VikingExplorer is currently also asserting. If you lower tax rates and gross GDP goes up, then you must take in lower taxes as a percentage of GDP, period, it is common sense and mathematics. If you don't understand this, you may want to consider doing more review before editing commentary about the Laffer Curve. In general, you should not revert the edits of others without discussion unless you are sure they are a vandal or a passerby. Use the talk page, make an RfC, tag the page, there are many dispute resolution methods available if you feel you are being treated unfairly or you come to a impasse on points of view. Don't be disruptive and don't just revert. Lipsquid (talk) 01:42, 10 July 2015 (UTC)

Assertion about decrease in revenue as a % of GDP is false

I ask Lipsquid to self-revert his decision to re-add false information. This information was originally added by VikingExplorer. For some reason he wanted to discuss it on his talk page instead of this talk page, so I have included his post and my response below. I would also like to point out that VikingExplorer added nearly the exact content in September 2014, which was called out for being unsourced, false, and unacceptable original research by Grayfell (see the top post in the above section), and also failed to provide a reliable source for the addition either in September 2014 or now.

VikingExplorer post:

There seem to be people who erroneously think that an argument against the Laffer curve is that it doesn't raise tax revenues as a % of GDP. This is an invalid argument. For example, imagine if we had a tax rate of 10%, and this raised $10 in tax revenue. The GDP must be $10/.1 = $100. If we then lowered the tax rate to 9%, and IF in this imaginary scenario, the tax revenues increased to $11, then the GDP must have increased to $11/.09 = $122. The tax revenues as a percentage of GDP would be $10/$100 = 10% and $11/$122 = 9%. See how it matches the tax rate? So, claiming that the Laffer curve is invalid because it doesn't increase taxes as % of GPD is non-sense. It shows an extreme lack of understanding and critical thinking skills. In any real situation, the economy may or may not be overtaxed, and a tax cut may or may not actually increase revenues. There is a lot to criticize about actual tax policy, but we should not engage in non-sequitur arguments.

My response:

First off, Wikipedia only uses reliable sources. You must provide a source for this, or it doesn't belong in this encyclopedic article. Justifying the addition based on your overly-simplified (and false) example is original research. Secondly, your example is wrong because it assumes GDP is equal to taxable income, which is not true. Your entire argument is also easily proven false. In the case of tax cuts causing an increase in overall tax revenue, there is an economic effect (i.e. raise in taxable income and likely raise in GDP) that overcomes the tax revenue lost from the tax cuts, leading to an overall increase in tax revenue (i.e. raise in tax revenue). Thus, since both tax revenue and GDP might be raised, Laffer theory cannot predict anything about tax revenue as a % of GDP (again, GDP does not equal taxable income). Please remove your false information.

Abierma3 (talk) 07:47, 9 July 2015 (UTC)

First of all, you are misrepresenting what happened. I originally added text, which Grayfell very nicely helped me properly source. We achieved consensus, and the resulting text correctly describes the meaning of the Laffer curve.

I mostly agree with you when you say "Thus, since both tax revenue and GDP might be raised". An increase in tax revenue when the tax rate has been lowered can ONLY be explained by an increase in GDP (i.e. increased economic activity). As such, the tax revenues as a % of GDP should go down (or stay the same). In any case, the fact the tax revenue as % of GDP does not go up is NOT an valid criticism of the idea, since as you correctly say "Laffer theory cannot predict anything about tax revenue as a % of GDP". I agree with your statement here in quotes. All of my changes to this section from the beginning have been attempting to make this point and to remove any reference to % of GDP from the description of the theory.

Can you help me come up with a neutral POV description of the theory which does include any mention of % of GDP? VikingExplorer (talk) 18:04, 9 July 2015 (UTC)

Tax revenue as a percentage of GDP could go down, stay the same, or go up. As I pointed out, taxable income is not equivalent to GDP. Taxable income (and thus tax revenue) could increase while other economic factors cause GDP to remain stagnant, which would mean an increase in tax revenue as percentage of GDP. Since any of these three options are possible, that is why I say Laffer theory cannot predict it. This is also why I have reiterated multiple times on this talk page that tax revenue as a percentage of GDP does not belong in the Laffer curve section. I don't know how you could get any more NPOV than what the original sentence said (i.e. "but [Laffer theory] does not account for any relationship to taxation as a percentage of GDP nor factor in the effects of inflation on government tax revenue). Maybe we could change this from "does not account for any relationship" to "does not predict any relationship." Frankly, my opinion is that this last paragraph is useless, confusing, and irrelevant to the Laffer curve and might be better if it was entirely deleted. I ask you to self-revert to the original or make these recommended changes, because the current version is unsourced and false. Abierma3 (talk) 18:23, 9 July 2015 (UTC)

As for your distinction between taxable income and GDP, the laffer curve is obviously a simplified model meant to help understand a concept. Imagine that the entire economy consists of 2 people, a supplier and a consumer. In this case, the GDP would equal the taxable income. Obviously, taxable income != GDP, but I didn't mean that literally. GNP (Gross National Product) = employee compensation + proprietors' income + rents + corporate profits + interest income GDP = GNP + indirect business taxes + depreciation + net income of foreigners. I think it's generally understood that taxable income is a big portion of GDP. The point is that no one should expect tax revenue/GDP to go up in response to a tax rate drop.

"This is also why I have reiterated multiple times on this talk page that tax revenue as a percentage of GDP does not belong in the Laffer curve section." I agree 100%. I never wanted any mention of % of GDP. The previous sentence regarding inflation was not original and is not NPOV since there are a million things that are not relevant to the theory. If I said "the sun will rise tomorrow, but this doesn't account for A, B, C, D, E, F". The implication is that the sun may not rise. It's just adding confusion.

In fact, many people are confused by the criticism that the Laffer curve is not correct since tax revenues do not go up as a % of GDP. This is invalid since if the idea is correct, it would be because of increased economic activity, which would be reflected by a larger GDP. Therefore, even if tax revenues remained constant, the % of GDP would go down. A ratio naturally goes down when the denominator is increased. VikingExplorer (talk) 18:59, 9 July 2015 (UTC)

I agree with you. Please revert back to the version that says "...but does not account for any relationship to taxation as a percentage of GDP nor factor in the effects of inflation on government tax revenue" as this reflects what we agree upon and is NPOV. I wouldn't disagree if you chose to delete the entire last paragraph of the section because we both agree tax revenue as percentage of GDP is irrelevant to a discussion of the Laffer curve. I have been accused of being a "disruptive editor," so I would prefer if you made these changes. Abierma3 (talk) 19:25, 9 July 2015 (UTC)

As I explained, the original sentence is not NPOV, since the implication is quite different. I'll try to come up with something that reflects what we agree on. VikingExplorer (talk) 21:23, 9 July 2015 (UTC)

From Mr laffer himself: "the Laffer Curve does not say whether a tax cut will raise or lower revenues, nor does it predict that any and all tax rate reductions would necessarily bring in more total revenues. Instead it says that tax rate reductions will always result in a smaller loss in revenues than one would have expected when relying only on the static estimates of the previous tax base." The second sentence is key "will always result in a smaller loss than one would have expected". In general, I think we all agree, except on whether inflation and taxation as a percentage of GDP are appropriate in an article about an economic theory. I think it is pretty rough to exclude fully excepted principles of economic theory in the discussion and when talking about taxation, the amount as percentage of GDP is the yardstick most commonly used. Ignoring it is like calculating profits without including expenditures, it makes no sense and has no valid measurement because inflation has a definitive and widely accepted effect on all economic theories. Supply Side Economics is no different. This is not an article about the Laffer Curve, though the Laffer Curve is important to Supply Side Economics. How the Laffer Curve effects taxation in supply side theory is an integral part of the discussion because we all know it has an effect and we all agree as to what that effect is, let's use this as an opportunity to have people actually understand what the Laffer Curve means as it is a useful theory. Lipsquid (talk) 02:36, 10 July 2015 (UTC)

"the amount as percentage of GDP is the yardstick most commonly used" It does not make sense in connection with the Laffer curve, since it's specifically about maximizing tax dollars by increasing the GDP. Abierma3 was correct that this can't be sourced. However, it would be expected that tax revenue as a % of GDP would be expected to go down IF the situation starts out overtaxed and a lower tax rate is enacted and economic activity increases.VikingExplorer (talk) 13:28, 10 July 2015 (UTC)

Sure it makes sense in connection with the Laffer Curve and it is still easy to calculate. It just goes down. Why hide it? Take this as an opportunity to educate, lots of people come to Wikipedia to learn, use sources to explain why it goes down. There are tons of these sources out there. http://www.factandmyth.com/wp-content/uploads/2011/08/clinton-taxes.jpg 14:49, 10 July 2015 (UTC) — Preceding unsigned comment added by Lipsquid (talk • contribs)

Lipsquid, TaxRev/GDP is likely to go down if the economy is above the Laffer peak, but that's not the point of the Laffer curve. The curve of TaxRev/GDP will not have the characteristic hump shape. Imagine if the tax rate were 99%, and no one did any work except two people, and one sold the other a cappuccino for $100. The government would get $99, and the GDP would be $100. TaxRev/GDP = 99%, a large number rather than the small number implied by a Laffer hump curve. The Laffer curve only makes sense in terms of real dollars, and that the economic effect is the opposite of the tax rate change. When one looks at TR/GDP, it goes as expected, the same direction as the tax rate change. VikingExplorer (talk) 16:20, 10 July 2015 (UTC)

I don't disagree with you at all. This is not an article about the Laffer Curve. It is an article about Supply Side Economics and if you want to include the Laffer Curve in Supply Side Economics, then include its economic effects on Supply Side Economics. One of the critical measures of any economic system is taxation as a percentage of GDP and ignoring % of GDP makes the discussion meaningless, just like any discussion of my own personal taxes is meaningless without knowing my tax rate as a percentage of income/earnings. Lipsquid (talk) 16:55, 10 July 2015 (UTC)

Lipsquid, if you agree with me, we should be good, right? However, when you say "One of the critical measures of any economic system is taxation as a percentage of GDP", this is false. Your argument is stretching which makes you seem like you have an axe to grind. The bottom line is that the heart of the Laffer curve is the hump shape. As soon as you switch to TRev/GDP, that shape disappears, so that Laffer has no meaning or explanatory power. If that is your goal, then you are NOT NPOV. As Abierma3 pointed out, Laffer theory makes no specific prediction about TRev/GDP. It's about T$ = f(Tax-Rate). Lowering rates could cause GDP to rise such that the tax/GDP remained a constant. As for SSE, this "Laffer Curve" section is only to explain Laffer's influence on SSE, not to explain SSE. I'll add "due to increased economic activity" to connect the dots. VikingExplorer (talk) 18:40, 10 July 2015 (UTC)

I really do think we are mostly in agreement, I am a fan of Supply Side Economics and think the Laffer Curve is just a fancy way of saying that we should look to find the Goldilocks zone of taxation, not too high not too low. Other than that, it makes few predictions and is treated more like a cult, pseudoscience since many people fall in love with it but refuse to accept all of the associated mathematical implications. Its implications are its implications. I defended your last edits so I don't think it is fair to say I have an axe to grind. If I do have an axe, it is to have a great, fully informed article. I can source from many reliable sources that lowering taxes always lowers taxation as a percentage of GDP. Mathematics dictates that it must be so. I hate the last sentence in the section, it is misleading. Lipsquid (talk) 19:36, 10 July 2015 (UTC)

Yes, you can source that "lowering taxes always lowers taxation as a percentage of GDP", but that's because it's not profound in the least, and therefore carries no information. It's certainly got nothing to do with the Laffer curve. I'm only interested in keeping the Laffer curve description free from confusion, since it's a simple concept. The last sentence is a great summary of the Laffer curve, so I can't think of any reason that you could find it misleading, unless your agenda is to somehow discredit the Laffer curve. Your description of the Laffer curve in terms of cult and pseudoscience supports the notion that you are not neutral. VikingExplorer (talk) 21:18, 10 July 2015 (UTC)

I only used cult and pseudoscience as a description of people who like to ignore critical data points. The Laffer Curve is 100% valid, there is nothing wrong with its use and I am not a critic. All that said, it still takes in lower taxes as a percentage of GDP and that has an effect on supply side economics. It is no wonder it confuses people, you have to know the secret jargon and understand what is implied, but never said, because it doesn't make a nice simple story. Everyone who understands knows that it takes in lower taxes as a percentage of GDP. Who cares that some say it doesn't matter? It is facts or data points that are true regardless, people can decide which facts matter when given all of the information. Things like this are the most annoying part of Wikipedia. Lipsquid (talk) 02:57, 11 July 2015 (UTC)

"Everyone who understands knows that it takes in lower taxes as a percentage of GDP". I agree that if one lowers tax rates, it should generally result in lower tax revenues as a % of GDP. As Abierma3 has pointed out, it's not a specific consequence of the laffer situation. It's a general fact that is caused by the numerator definitely going down, and in some cases, the denominator going up. Not every tax rate drop will have that effect. If you can cite this from primary sources, and if Abierma3 agrees, maybe we can add something like "As expected from any tax rate drop, tax revenues as a % of GDP will also drop." VikingExplorer (talk) 13:09, 11 July 2015 (UTC)

RfC: Can I have some guidance?

Several paragraphs in this section have simply been copy-pasted verbatim from: http://www.quickoverview.com/issues/supply-side-economics.html. I'd like to highlight 5 examples:

(1) Verbatim: The supply-siders were influenced strongly by the idea of the Laffer curve,

(2) Verbatim: This led the supply-siders to advocate large reductions

(3) Verbatim: Furthermore, in response to inflation,

(4) Verbatim: However, some economists see similarities between supply-side proposals and Keynesian economics

(5) Marx and Smith section, Verbatim: Both supply-siders and their opponents have been keen to claim the mantles

I would suggest that we delete all but #1. Paragraph #2 is not related to the Laffer curve connections to Supply Side. The other paragraphs are questionably sourced. I would speculate that the existing citations are made up.VikingExplorer (talk) 18:08, 10 July 2015 (UTC)