Outdated Computer Models Let Congress DownAdded: Sunday, April 14th, 2013
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The US Congress has claimed that it largely fails to predict the economic impact of its policies because it relies on outdated computer models! It’s been decades now that the official forecasters at the Congressional Budget Office and Joint Committee on Taxation kept assuming that changes in tax rates will insignificantly influence the way businesses and households behave, as well as the competitiveness of the country’s economy.
Thus far, no-one could clearly understand how it reached this conclusion, because it was things taught in 6th form economics worldwide. Nevertheless, in the United States computers were told that people work almost as much at a 60% income tax rate as they do with a 30% rate. In case capital gains taxes are increased to 30% from 15%, this wouldn’t bother the investors.
Financial analysts point out that this led to crazy results – for example, a decade ago the PCs spat out a prediction that capital gains revenues would be $68 billion in 2006 and $73 billion in 2007, and in May 2003 Congress cut the capital gains tax rate to 15% from 20% yet the PCs insisted that the rate cut would drop revenues to $65 billion in 2006 and $69 billion in 2007.
As you can guess, none of these predictions came true: actual capital gains revenue increased despite the lower tax rate to $109 billion in 2006 and further to $126 billion in 2007. The matter is that reduction of the capital gains tax boosted economic growth and appeared a greater incentive for investors to cash in their gains at the lower rate.
Today it has been decided to switch to something more dynamic. The fact that it was all wrong has been around for ages, and it was only a matter of understanding whether this response to the economy was worth factoring in.
8 years ago, Harvard economists Greg Mankiw and Matthew Weinzierl investigated the revenue feedback of tax cuts and came to a conclusion that the response of the economy to tax changes was too significant to be ignored. The researchers pointed out that tax cuts were in part self-financing, which needed to be part of the formulas in Senate PCs.
The idea is that if they can play around with the figures on the PC they are less likely to make a mistake – for instance, Republicans claimed that tax credits for having kids which cost the most in lost revenue did the least for economic growth. Now the computers would tell them otherwise. Anyway, both the Democrats and the Republicans have already voted to change the computer model formulas to be more precise in future.
April 14th,2013Posted by:
Sunday, April 14th, 2013
|Good read, thanks SaM|
|Congress has been letting down the taxpayer far longer.|
|posted by (2013-04-14 12:18:45)|
|Isn t it the job of congress to let down the taxpayer has it ever failed to do so and it gets worse year by year ? I think so . . Congress is now rated worse then donald trump i have read . .|
|posted by (2013-04-14 16:16:05)|
|Wow. And your example is - Republicans claimed that tax credits for having kids which cost the most in lost revenue did the least for economic growth.|
How about every time the republicans want to cut taxes the democrats cry, "How are we going to pay for it?" and then they are demogogued with "They want tax cuts for the rich".
Conservatives have been trying to tell deomocrats for years that tax cuts create more growth and in the long run, more revenue. Truth is, democrats don't want growth in the private sector. That would make their role as the saviors less relevant. No they want things exactly the way Obama is doing it. Increase taxes and spending, stifle economic growth and make as many people dependent on government as possible. The more victims, the broader their voting base.
All the while blaming republicans as the party of no. Their only goal - block Obama and tank the economy. I mean everybody knows the only reason they oppose Obama is because he is black. The saddest thing is that so many people believe it. America is on the road to ruin and the democrats are driving the car. Don't doubt me. It's all about power to the democrats and this is their chance to achieve one party rule.
|Unsub,I initially jumped in here to toss in my two cents worth, but after having read your post, I applaud you. Your evaluation regarding the Democrats' agenda is succinct and dead-on point. You, Sir, have just become my newest best friend....|
|Nope! The US Congress wouldn't do that(??)..hee-haw!!|
|Recon and Unsub- The missing part of this statement is that the Republicans don't fight the increased taxation, they just bicker and pretend to put up a fight. Why? Romney and Obama both got more of their campaign funds from Goldman Sachs than any other source. Both sides work for Goldman Sachs. Their debates and bickering is all theater.|
This should tell you that Obama doesn't want to tax you- he's just doing what his bosses tell him to. It should also tell you that Romney works for the same bankster elite and would be doing the same things.
They're front men. The left and right in government oppose each other no more than sock puppets on your left and right hands.
Each election you pick a new front man for the machine to hide behind as they enslave us and you seem to not notice that it's the same wolf in a different sheep's clothing.
|"They're front men. The left and right in government oppose each other no more than sock puppets on your left and right hands."|
roflmao omg That was so funny and it's so true, too.
|posted by (2013-04-16 03:41:04)|
|I hear the line(s), "They are all the same" or "They all do it" all the time YoMammaSoFat. I do agree that the republicans don't hold their ground and usually cave to the democrats but I don't think it's for the reasons you state. Like when they were debating over the fiscal cliff (not to be confused with the sequester), Obama insisted on a "balanced approach". The republicans caved and gave Obama the tax increases he wanted, maybe not as much as he wanted but still. But when it came time for the spending cuts (you know, the "balanced approach" Obama insisted on) it didn't happen.|
Now let's talk about the sequester. Obama has been trying to claim it was the republicans idea. The media and the democratic party parroted Obama's claims. Fact is, it was Obama's idea. The only problem was Obama counted on them caving, which to everyone's surprise, they held strong. And to call them cuts is misleading. The sequester was actually a reduction in the rate of increase. So when they say it was 85 billion in cuts, they don't tell you that the programs involved actually received more funding than the previous year. So in the democrats world, if a program was going to get a 5% increase, instead gets a 3% increase, that's a cut.
And ObamaCare. Not a single republican vote. I could go on, but I think you get the picture. The way I see it the difference between the democrats and republicans is simple. If you think the government can do a better job at providing people with a particular good or service then you are a democrat. If you think private sector companies can do a better job at providing people with a particular good or service then you are a republican. My only question would be for you to name one successful government program. I won't be holding my breath for an answer.
|posted by (2013-04-16 21:33:27)|
|Unsub; Not sure which of your posts I like the most, great points all around!|
YoMammaSoFat, exactly how do you control a sitting US President? He has the ear of the press, if not the world. Secret service protection for life, this is the last job he will ever hold. Seems to me he could do anything he wanted within the bounds of presidential power, even more so now as this is his final term.
Obama is, was and always will be a communist, plain and simple. He and the democratic are moving us more and more towards the communist model. Sadly that seems to be what America wants, God are we stupid!
|posted by (2013-04-18 00:38:54)|
|Business's die for have a business with government and would never stop upgrade anything if contract it money and prestige for more expensive future cost. if it haven't true congress it out of touch about tech! and should die with Gov TV channels and paper ever only.|
|Want to have an intelligent discussion about whether any country should raise or lower taxes to get the economy going? Learn something about: Friedrich Hayek (Nobel Prize Winner - Economics), John Maynard Keynes & Keynesian economics, and Milton Friedman (Nobel Prize Winner - Economics). The computers aren't the problem. It the old "GIGO" (Garbage In Garbage Out) situation.||
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