Same old plot, same old cast of characters

Once again, prompted by an op-ed by Warren Buffett, Kevin Drum wades into the septic swamp of increasing taxes on the rich. He includes a plot comparing the capital gains tax rate to real (private sector) investment in the economy, and to my eye they look completely uncorrelated, with post-WWII investment growing in almost linear fashion (he plots the Log) while the CapGains rate has jumped all over the place.  However, Kevin doesn't give sourcing on the chart, so it's hard to know what the assumptions behind it are. Does it adjust for inflation? What about population growth? Etc.

In any event, within minutes the Republican trolls were out in full force in his comments section, performing the written equivalent of drowning Kevin out by singing LA LA LA with their fingers in their ears. Proof once again that the GOP has devolved into  a religious cult trapped in cognitive dissonance. It's a mental house of cards so unstable that anytime the core falsehoods are challenged the "When in doubt, SHOUT" reaction is sure to follow.

As I never tire of telling people, over the past 35 years the GOP has been taken over by crackpot "supply side" economics — crackpot in the sense that there is no empirical evidence to support their theory, and a great deal to disprove it — a process nicely chronicled by John Chait in his book The Big Con. The infamous Laffer Curve, which (falsely) suggests that lowering tax rates causes government revenues to rise, is the best known aspect of supply side economics. So well known, in fact, that the average person might think "supply side" and "Laffer Curve" are equivalent terms. They're not, and in fact if it was that simple the GOP would likely have escaped its deluded cargo-cult state. Cognitive Dissonance almost always rests on having a complex interlocking series of arguments that allow the cult to rationalize their way around confronting their false beliefs. In the case of the supply siders, that means a multigenerational argument — largely led by the Editorial staff a the Wall Street Journal — that marginal tax rates, particularly low marginal rates on upper incomes, are a key variable in economic growth. (Indeed, in recent years some supply siders have become so extreme they border on positing marginal tax rates as the only variable in growth rates.)

That seems like an easily tested hypothesis, and sure enough, Jacques Distler has the goods, and I've taken the liberty of copying the chart below. As with Kevin's chart of investment vs. the capital gains rate, there's no there there. If anything, there's a slight correlation with increased rates on upper incomes promoting growth — Gee, you think maybe people work harder in order to bring home the same net income? — a correlation which is only going to increase when the figures from 2010 and 2011 are added.

It would be nice to think straightforward analyses like this could start an intelligent dialog and perhaps lead the GOP back to reality. But as the response to Kevin's post shows, the rabid-right is so far the anti-tax rabbit hole that it will take a generation for them to come to their senses, if then.

Update: Corrected the sentence about the Laffer Curve to reflect that it's government revenues that are supposed to rise, not government spending. Thanks for the catch Periodista.

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Once again, prompted by an op-ad by Warren Buffett, Kevin Drum wades into the septic swamp of increasing taxes on the rich. He includes a plot comparing the capital gains tax rate to real (private sector) investment in the economy,...

[Periodista]

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Good post, but shouldn't that be: 'lowering tax rates causes government *revenue* to rise'....?

I believe Laffer argued on that famous napkin tthat lower rates would juice the economy so much that incomes would rise enough to make up for lower rates.

Yes?