| HN Mirror

I'll contest the applicability of the Laffer curve (really, Rolle's lemma for anyone who's taken real analysis) to any public finance model approaching what we actually operate in. Public finance is plainly way, way more involved than the effects of one marginal tax rate in isolation.

That's before we get into the (lack of?) empirical data. I'm finding it hard to come up with any citations that offer an existence proof of a Laffer curve for real, actual public finance systems. The Cato Institute and Brookings have things to say, but they're encumbered by policy goals. Ebrill, also encumbered by policy goals near as I can tell, urges caution. Espanhol's master's thesis concludes that a Laffer curve doesn't exist in its investigation of corporate tax rates across the Eurozone.

So, frankly, I'm keener just to throw out the academics here.

That's also before we get into what debt is and how it works. It isn't a call option: the persons, fictitious and natural, to whom the US government is indebted cannot exercise those debts on a whim in an effort to get paid. They have a maturity schedule. What matters to these creditors (and all creditors more broadly) is that there's faith that their debt instruments will eventually fully mature. For natural persons, that's likely decades from now. For fictitious persons like governments, that could very well be on the order of centuries.

It's for this reason why I also reject the appeal to Jerome Powell's authority: he doesn't express a concrete reason why he expects the faith that those persons, fictious and natural, have in the federal government to erode to the point where default is some notion of imminent. Does he expect the executive branch to stop payments suddenly? Does he expect that the tax base will collapse in the very near future? (Malthusians in particular are fond of crying the latter, predicting widespread famine.)

Furthermore, that's all before we get into taxation and how it works. It's a sticky subject academically, even after you peel away the conflicting policy goals. Is taxation revenue? Is it a constraint on the money supply? Is it economic dead weight? The answer to all of these is, "It really depends." One model says one thing, and another says something else, and there isn't a whole lot of real consensus on which one fits best where. (Economics, it turns out, is one of those social sciences, which means that most experimentation is thorny unless you abandon ethics. When all you have is models...)

The thing that matters at the end of the day is that someone (maybe you!) will cheerfully accept my greenbacks for what I reasonably feel like they're worth, and as long as that remains the case, I'll happily render unto Caesar until we finally find a way to kill him for good.