Laffer laugher

A hearty, hilarious thank you to Brad DeLong for flagging this:

Yes, it's the Wall Street Journal editorial page reporting more American Enterprise Institute-quality research from Kevin Hassett. This is the most mendacious ever.

Mark Thoma is on the case:

http://economistsview.typepad.com/economistsview/2007/07/yet-again-tax-c.htmlMark Thoma: Yet Again, Tax Cuts Do Not Pay for Themselves: The Wall Street Journal says Kevin Hassett has discovered the Laffer curve, but I think these data might say something else. Here's the picture from the editorial where they are making their usual plea for more tax cuts:  

The blue line is supposed to be the Laffer curve, but this is far from compelling. Since it looks like all that's been done here is to draw a line through an outlier, Norway (an outlier that in other contexts we are told to ignore because it is an outlier, e.g. see below), and since this is clearly not the best fitting line to these data, here's another possibility: 

 

...[R]evenues rise with tax rates, and the fit also looks better than in the first graph. Toss out Norway, and the fit looks even better (and to quote The Economist blog on this point, "Throwing out Norway...")

Sorry to quote the whole thing, but holy shit! Does the Wall Street Journal really believe that none of its readers (or its frickin' critics!!!) understands basic statistics? The obverse would be to perhaps dump that big cluster of countries along the bottom, repeat the analysis, and find--surprise!--an even steeper rise in revenue with tax rates than we find with the correct analysis. But that would be horribly dishonest.

First, note the hilarious irony that a right wing outfit like the Wall Street Journal is implicitly pointing to Norway as the optimal model of economic success.

Also, take a look at what their version of the graph predicts: that if the United States dropped its corporate tax rates by just seven percent, we could increase our revenue by a factor of five. Wow! Who knew we were hovering so close to such astronomical economic success. We should probably cut those tax rates, put the money towards scientific investment and global stability projects and then award the Journal a Nobel Prize in everything.

Yes, it's the Wall Street Journal editorial page reporting more American Enterprise Institute-quality research from Kevin Hassett. This is the most mendacious ever.

Mark Thoma is on the case:

http://economistsview.typepad.com/economistsview/2007/07/yet-again-tax-c.htmlMark Thoma: Yet Again, Tax Cuts Do Not Pay for Themselves: The Wall Street Journal says Kevin Hassett has discovered the Laffer curve, but I think these data might say something else. Here's the picture from the editorial where they are making their usual plea for more tax cuts:  

The blue line is supposed to be the Laffer curve, but this is far from compelling. Since it looks like all that's been done here is to draw a line through an outlier, Norway (an outlier that in other contexts we are told to ignore because it is an outlier, e.g. see below), and since this is clearly not the best fitting line to these data, here's another possibility: 

 

...[R]evenues rise with tax rates, and the fit also looks better than in the first graph. Toss out Norway, and the fit looks even better (and to quote The Economist blog on this point, "Throwing out Norway...")