The Thing About Thucky

Posted by Bob Lord

Okay, actually there are several things about Thucky, but I liked the alliteration so I went with it. 

The thing about Thucky for this post is that he purports to be really well read, and perhaps he is, but the synapses just don't fire for him the way they fire for the right-wing economists he worships. In my school days, he would have been referred to as a "dummy try hard." He works really hard. He reads about Rogerson and Prescott. He believes they're really smart. He reads everything they churn out. He knows their conclusions, but doesn't truly grasp how they got there. Nor does he have the mental strength or the intellectual curiosity to challenge anything his heroes throw out there for him. 

Let me digress for a second. I use the male pronoun to refer to Thucky, and have no real basis for doing so. Perhaps it's because most of us tend to assume anonymous people are the same gender as we are, or perhaps it's because the real Thucydides actually was male. I don't know, but I recognize the possibility that when I say Thuckmeister I perhaps should be saying Thuckstress.

Anyhow, I've been having this ongoing debate with ole Thuckarooskie about the effect of tax policy on tax revenue, and I've realized that Thucky doesn't really grasp fundamental concepts. 

He's on safe ground when he just parrots what Rogerson and Prescott and others have concluded. But when he engages in his own analysis, he gets into trouble. 

This gets a bit geeky, but try to hang in here for this example.

 

Policy geeks often refer to the ratio, expressed as a percentage, of tax revenue to GDP. Conservatives actually want this ratio to decline, because they believe a ratio means that government is placing an undue burden on the economy. Not Thucky. He believes that if we lower tax rates, the ratio will go up.

He's terribly confused. His thinking is that if we lower tax rates, the economy will expand, which is classic supply side theory. But if the supply siders are right, the increase in the GDP would drive the ratio of tax revenue to GDP down, not up. It's possible we could recover the revenue lost from the lowering of rates through an increase in the tax base, because GDP increases. Indeed, that's the theory upon which Arthur Laffer and his ilk rely. I'm not disputing that the lowering of rates, everything else being equal, will stimulate the economy and increase GDP. But even if that's right, the net move in the ratio would be lower.

It was sort of stunning for me to realize how horribly confused out of his element Thucky is. Here's this guy throwing around fancy terms like the Beveridge Curve and the velocity of money, but he doesn't grasp the basic math that when you drive the denominator of a ratio higher, the ratio itself decreases.  

I've seen this shortcoming in other exchanges with Thucky, but the other occasions involved more technical concepts, so I didn't think much of it. This time, however, it was glaring.  

You have to feel for him. He wants so, so hard to be smart. It's reminiscent of when the Scarecrow from Oz gets a diploma as a substitute for a brain. Thucky reads Rogerson and Prescott and throws around terminology, just like the Scarecrow proudly displays his diploma. But it's not quite the same.  

10 responses to “The Thing About Thucky

  1. What planet are you living on? State and local governments have been engaged in a destructive race to the bottom where they bid against one another by lowering tax rates of the wealthy and corporations in order to attract business to their state. It’s foolhardy, because the other states and localities follow suit, the net result being that the state and local tax base gets decimated nationwide.

    Federal tax rates are low by historical standards. The top marginal corporate rate has been virtually unchanged since 1987, but the effective rate has dropped dramatically.

    Again, you’re blindly repeating conservative talking points. Your comment confirms the observation I made in my post.

  2. A sneer, that’s all I get is a sneer? No evidence?

    For the first time since at least 1950, spending by state and local governments is flat for six years. In the last sixty years, this hasn’t even lasted one year. Infrastructure is deteriorating, jobs aren’t being created in the government sector, teachers aren’t being hired, class sizes are swelling.

    Yet, tax rates are higher than ever. The US has the highest corporate tax rate in the world. Federal income taxes are higher than they have been since 1986, yet tax revenues are stagnant and 4 percentile points less of gdp than they have been in the recent past.

    The explosive growth of women earning more than $100,000 has come to an end. We nailed those rich ladies with those high tax rates, didn’t we? They just aren’t paying them.

  3. The “rational expectations” of your “framework” are inevitably that the rich get richer and the poor starve. The neat thing for you is that you get to say they deserved it due to their “immoral lifestyles”.

  4. “Anyhow, I’ve been having this ongoing debate with ole Thuckarooskie about the effect of tax policy on tax revenue, and I’ve realized that Thucky doesn’t really grasp fundamental concepts”

    I like Thucka-P.Diddy

  5. My thing is that if Laffer were right about lower taxes leading to more tax revenue that conservatives should be clamoring for tax increases, because wouldn’t that hasten the arrival of the glorious bathtub drowning?

  6. After 30+ years of faith based supply-side “trickle down” economics, you would think the unemployment rate would be down to zero, everyone would have a well-paid job, and the economy would be booming. Where’s the evidence? That’s the thing about fantasies … they’re not real.

  7. You forgot about Reinhart and Rogoff. Don’t you want to list them?

  8. Hard to argue with that. It’s a great line, one which I fully intend to steal. Thanks.

  9. Quit it. Your theories, transfer payments by higher taxes for fairness; quantitative easing to facilitate growth dont cause and dont predict. My theories, lower tax rates + reduced regulation+ reduced welfare population enclosed in a framework of rational expectstions, comprehensively explain this great recession and how to get out of it.

    Also, its not just Rogerson and Prescott I’m citing. Its Romer, McGratten, Freidman, Taylor, Diamond, Goolsbee, Feldstein, Ohanian and Slemrod and Cole just to name a few.

    Your theories struggle at best. The economy struggles and the poor are worse off.

  10. It’s like my grandpa said, don’t bother trying to teach a pig to sing. It won’t get you anywhere, and it will annoy the hell out of the pig.