Austan Goolsbee: Possible head of White House Economic Advisors

[graphrix_IHB]

<a href="http://faculty.chicagogsb.edu/austan.goolsbee/website/research/vitae.htm">Austan Goolsbee is a prof. at the U. of Chicago</a>. It is expected that he will head the <a href="http://online.wsj.com/article/SB122593241428003447.html">Obama's economic advisors</a>. I don't know much about him, and I am currently reading up on his papers. Someone, like Goolsbee, who comes from the U. of Chicago, and the school of Milton Friedman, I thought it would be interesting to discuss his works amongst IHBers. I know this might cross the line on what is economic and what is politics, but I am really curious to hear from IHBers, like Skek, WINEX, IR, EvaL, NSR, Profette, and anyone else, on a purely economic stand point how they feel and think about Goolsbee's work. Please, even if you think your opinion doesn't matter, or that you don't understand his work, I encourage you to contribute. It is the only way to learn, and there are no dumb questions or opinions, and I encourage anyone to ask something, anything. This is someone who could be advising about your livelihood, and you should ask questions, because I have many. Also, I will have a disclosure at the end of this post disclosing some rules of the thread, and I WILL FOLLOW THEM.



I glanced at his <a href="http://faculty.chicagogsb.edu/austan.goolsbee/research/laf.pdf">paper that debunks the Laffer Curve</a>, in which I admit I only read the abstract and summary, but we should all know that Laffer is on record via CNBC and Bloomberg as having a special delivery of Phil Gramm's rose colored glasses. Laffer, has been so gawd awfully wrong, that if I ever met him in person I would head butt him on general principle alone. He is in fact worse than Panda touting gold, at least if you bought gold like Panda said, then you wouldn't have seen the losses if you followed Laffer.



<em>Disclosure: This is in the economics thread because it is meant to focus on economics, not politics. While politics are involved, and politics will be part of the discussion, the focus should only be on economics. Do your best to keep it that way, and you <strong>MUST cite your sources</strong>. Name calling will not be tolerated at all. If you insinuate that someone is a KKK member or call someone an idiot or stupid, then <strong>I WILL EDIT YOUR POST</strong>. Do not test me on this, because I will make look ridiculous. </em>



I sincerely look forward to what people think, whether we agree or not. That is the point: <strong>DISCUSSION.</strong>

 

[IrvineRenter_IHB]

You are right that it is very difficult to separate politics from this discussion. My comment is about the implication of the debate over the Laffer Curve on politics.



I would anticipate the Laffer Curve to become one of the most contentious political discussions of Obama's and the Democrats time in office. As the paper pointed out, when Reagan won and implemented his tax policies, there was widespread acceptance of the truth of the Laffer Curve among the general population. This contributed to years of Republican domination. If this idea, the idea that cutting the highest marginal tax rates boosts productivity and tax revenues, is rejected by the populace, the Republicans will lose their most potent economic argument. Hopefully, we can have some debate and discussion on the merits of the paper linked above, but keep in mind, the idea of the Laffer Curve in American politics is very important. Academics, with support from both Liberal and Conservative think tanks, will debate this topic in the academic literature in hopes of impacting the electorate. If the electorate continues to believe in the Laffer Curve, the Republicans have an issue they can use to come back to power. If the electorate rejects this idea, the Republicans are in serious trouble.



IMO, there must be some truth to the Laffer Curve. If I were living in Sweden with its 85% marginal income tax rate, I would not feel very motivated to do much of anything. As tax rates move higher, the truth of the Laffer Curve likely increases. However, as tax rates move lower, the truth of the Laffer Curve likely decreases. It is a classic case of marginal utility. The lower tax rates are, the less benefit is achieved by lowering them further and visa versa.



IMO, the reason the Bush tax cuts did not have more impact is due to the reason I outlined above. When marginal tax rates were already relatively low, lowering them further did not have the stimulatory effect the Laffer Curve would suggest. There are undoubtedly other factors at play, but I believe this is part of why the Bush tax cuts did not do more.



IMO, the evidence of the truth or fallacy of the Laffer Curve will be demonstrated by Obama's tax policies. Marginal tax rates on high wage earners is almost certainly going to rise. If the economy sputters -- even if this is not the reason -- it will be seen by the electorate as confirmation of the truth of the Laffer Curve (Perhaps Nude is right, and this will result in the Democrats losing power.) If the economy recovers after marginal tax rates move higher, this will be interpreted as a repudiation of the Laffer Curve. The Laffer Curve did not seem to prevent the economy under Bill Clinton from performing well, but perhaps some of that prosperity was due to FED policy and our ever-decreasing interest rates. There are so many variables in play, that it is very hard to determine what impact tax policy has, if it has any at all.