GALLERY GUIDO: Osborne, the Laffer Curve and the Left

There’s a Computable General Equilibrium Model at the Treasury. If it were made of string and resin it wouldn’t be any less reliable, but its predictions about the cut in corporation tax are likable, so let’s quote them.

The Treasury select committee told us the computer is forecasting corporation tax going from 28 pence to 20 pence will increase GDP between 0.6 and 0.8 per cent, and will increase business investment from 2.5 per cent of some damn thing or other to 4.5 per cent.

It’s “a quiet revolution” George Osborne says, of this example of the Laffer Curve in action.

This curve is still mocked by the left. But it has an interesting pedigree.

An early exposition from the 1930s put it like this:

“Nor should the argument seem strange that taxation may be so high as to defeat its object, and that, given sufficient time to gather the fruits, a reduction of taxation will run a better chance than an increase of balancing the budget.”

That is – the budget can be balanced by reducing tax not increasing it.

“For to take the opposite view today is to resemble a manufacturer who, running at a loss, decides to raise his price, and when his declining sales increase the loss, wrapping himself in the rectitude of plain arithmetic, decides that prudence requires him to raise the price still more—and who, when at last his account is balanced with nought on both sides, is still found righteously declaring that it would have been the act of a gambler to reduce the price when you were already making a loss.”

“The act of a gambler” to reduce taxation. “A dangerous experiment” as it might be said. An ideological leap into the dark. These criticisms are still made by the left, and even by Red and Redder Eds.

The author of the proposition was one of the few economists capable of writing a phrase like “the rectitude of plain arithmetic”. But then he wasn’t an economist from birth.

It was John Maynard Keynes.




Tip offs: 0709 284 0531
team@Order-order.com

Quote of the Day

Boris Johnson was shown a trophy monkey head as he toured a room of illegally-poached animals seized by Scotland Yard. He said:

“What’s this poor chap here? Faint air of a … Labour backbencher.”

Sponsors

Guidogram: Sign up

Subscribe to the most succinct 7 days a week daily email read by thousands of Westminster insiders.
Watson Now Opposes Airing Lurid Historic Claims Against MPs Watson Now Opposes Airing Lurid Historic Claims Against MPs
Green: I Wasn’t Inappropriate to Kate Maltby Green: I Wasn’t Inappropriate to Kate Maltby
Geoff Norcott Drives Corbynistas Crazy Geoff Norcott Drives Corbynistas Crazy
BuzzFeed Runners and Riders BuzzFeed Runners and Riders
BBC Still Ignoring Agent COB Story BBC Still Ignoring Agent COB Story
Moscow’s Man in Westminster Moscow’s Man in Westminster
Waterson New Guardian Media Editor Waterson New Guardian Media Editor
Tories Demand Agent COB Faces Foreign Affairs Select Committee Tories Demand Agent COB Faces Foreign Affairs Select Committee
Vaz Reported to National Crime Agency Over His Finances Vaz Reported to National Crime Agency Over His Finances
Bolton Sacked Bolton Sacked
Agent COB Was ‘Paid Informant’ Alleges Czech Spy Agent COB Was ‘Paid Informant’ Alleges Czech Spy
Sunday Show Highlights Sunday Show Highlights
No Facebook Engagement Drop Off Seen Here No Facebook Engagement Drop Off Seen Here
Adonis Tipped to Set Up Centrist Party and Be “British Macron” Adonis Tipped to Set Up Centrist Party and Be “British Macron”
Corbyn’s New Anti-Racism Campaign Star Sent N-Word, “Jew” and Hitler Tweets Corbyn’s New Anti-Racism Campaign Star Sent N-Word, “Jew” and Hitler Tweets
Corbynistas Openly Using McDonnell’s IRA Nickname Corbynistas Openly Using McDonnell’s IRA Nickname
Standard Deliveroo Love-In Standard Deliveroo Love-In
Gotcha! Commie Corbyn Gotcha! Commie Corbyn
Oxfam Failed to Ban Staff Using Prostitutes Because of “Civil Liberties” Oxfam Failed to Ban Staff Using Prostitutes Because of “Civil Liberties”
Labour MP to Voter: “P*ss Off” Labour MP to Voter: “P*ss Off”