re: #36 lostlakehiker

Speaking of losing elections, and of consequences, and of “crazy”, here’s an article in the New York Times, a notorious right wing rag /// explaining why raising taxes on high earners can backfire.

Yes, those with high incomes can afford to pay more in taxes. But, and this is the catch, their income is not written on the wall, beyond reach of change by human agency. How much they will earn depends on part on whether they’re permitted to keep any meaningful fraction of it.

Why work extra, their thinking will go, if they will never see a dime on the dollar out of the extra earnings?

classical marginal utility stuff..
The government can only set tax rates so high before the consequences to the overall economy of taxation create counterproductive drag.

When Richie Rich forgoes the extra income that comes from extra work, the government collects not 45 % instead of 40 %, but 0 % instead of 40%. What’s more, all earnings are the result of an exchange that benefited both parties. Richie Rich’s non earnings are one side of an exchange which would have meant earnings or some other economic benefit to the other party to the exchange. Again, taxes are lost. Also, the economy gets weaker by that much.

Liberals are not clinically insane when they miscalculate the consequences of their planned tax policies, or medical care legislation, or what have you. But the consequences are real and unfortunate, and they and their votes are the cause of the damage.

It is indeed a sad thing for the world that Greg Mankiw will be speaking less.

But humor those of us who like historical context: how does this square with real-world behavior during the Clinton years? Did economist-for-hire speaking engagements go unfilled then?

And for you deficit hawks out there: how much deficit are you willing to suffer so Greg can get back on the road?