Laughable Larry Kudlow, as high priest of the Laffer Curve, has long been servant of “King Dollar,” as Larry has often reverently referred to US currency. The Laffer Curve is the central creed of trickle-down economics. It’s a bell-curve that demonstrates how lowering tax rates actually increases tax revenue to a certain point by stimulating the economy and then, beyond that point, lowering taxes lowers tax revenue. (If the latter were not true, the highest tax revenue would come in at a tax rate of zero, which is ludicrous. So, logically, you know at some point tax-rate reductions start to result in diminishing returns for revenue.)
Where there is room for disagreement is in determining where the high point for the revenue curve lies on that continuum between a 100% income tax and 0%. Larry places it a lot closer to a 0% tax rate than I would or than Larry’s former boss, David Stockman (head of Reagan’s budgeting office) places it. That’s because Larry lusts over tax rates that fill his own pockets, not rates that optimize the balance between government revenue and economic stimulus. (Just part of the voodoo in Voodoo Economics.)
Larry and his sidekick Stephen Moore are now on a journey to cajole the Fed into doing everything Larry has ever said the Fed should not do — dethrone King Dollar. Laffable Larry’s change of heart has come about because it is now unavoidable fact that the tax plan he concocted with Stephen Moore, based on Larry’s beliefs about the Laffer Curve, is not only failing to pay for its own tax breaks as Larry & Moore assured the world it would, but also not doing a whole heck of a lot to stimulate the economy any more.
Larry & Mo’s tax plan boosted the stock market … for awhile … but GDP got only one boost in the second quarter of last year and has been falling ever since.
Read the rest here: The Great Recession