[serious] Why is the UK so amazing?

[Dinner]

I expect KH to argue that in the long run maximizing capital's ROI results in greater over all employment. That might be true or it might not depending on if we're talking total employment for the world or just the US domestically; I.E. getting a great ROI by investing in China certainly helps increase employment in China but it doesn't do much to increase domestic employment here in the US.

[KrazyHorse]

What does "each marginal dollar collected in income taxes" mean?

If I increase marginal rates enough to collect an additional dollar, what will happen to overall output

[Dinner]

That sounds incorrect as it would imply tax cuts pay for themselves (as in decreasing taxes results in enough new economic activity to generate an increase in taxes collected) and we know from experience that is almost never true. That's just the free lunch fantasy of supply side economics.

[giblets]

If I increase marginal rates enough to collect an additional dollar, what will happen to overall output

So if you had a bottom rate of 10% and a top rate of 40%, and you increased the bottom rate to 11%, would the top rate go to 44%?

[KrazyHorse]

That sounds incorrect as it would imply tax cuts pay for themselves (as in decreasing taxes results in enough new economic activity to generate an increase in taxes collected) and we know from experience that is almost never true. That's just the free lunch fantasy of supply side economics.

No it wouldn't imply that tax cuts pay for themselves, nor do I believe that they do (in the US under the current tax structure). If they did pay for themselves then it would be impossible to raise any additional revenue (the deadweight loss from each marginal dollar raised would be infinite). The reasonable estimates I quoted for elasticities, along with an assumption of taxes paid on the additional production imply that tax cuts are ~30% self-financing in the US currently (and that conversely tax increases only raise ~70% of what they would raise under static assumptions).

[giblets]

What are reasonable estimates for deadweight loss caused by deficit spending?

[KrazyHorse]

So if you had a bottom rate of 10% and a top rate of 40%, and you increased the bottom rate to 11%, would the top rate go to 44%?

The numbers I quoted are some kind of hodgepodge average across the structure of marginal rates. Increasing the lowest rates will be less distortionary than increasing the top rates even under a constant labor supply elasticity assumption (because much of the taxes raised are inframarginal and because deadweight losses scale quadratically with the size of the distortion). Even worse, there is evidence that the top of the income distribution actually has a significantly higher labor supply elasticity than the bottom.

From an efficiency point of view, increasing top marginal rates is possibly the worst way to increase income taxes.

[KrazyHorse]

What are reasonable estimates for deadweight loss caused by deficit spending?

I have no idea what this question means.

[giblets]

Is there less or more deadweight loss if the government relies more on borrowing and less on taxes to finance spending?

[Dinner]

I suppose that would depend on the interest rate and possibly currency exchange rates (if the loan/bonds are denominated in a foreign currency). Right now interest rates on T-Bills is so low it's almost free money for the government.

[KrazyHorse]

No idea in the short run (it depends on aggregate demand and the monetary policy regime). In the long run, you probably gain something because the interest rate of government bonds is below private discount rates. I don't know of any empirical work which estimates this on macro scales, and unlike the income elasticity question this has no micro analogue.

[Jon Miller]

What data would that be? A childish analysis consisting of "taxes were high in the 50s and things were good then"?

http://cboblog.cbo.gov/?p=1427

JM

[Cort Haus]

The UK is so amazing because

#1 - they have invented football and tennis
#2 - they have the best football league on the planet
#3 - BBC

Otherwise I cannot think of anything else that is actually better in UK than elsewhere... the rest is average or below average

The weather is magnificently average. Rarely too hot or too cold. A little damp at times, perhaps, but not only does this contribute to a nice green countryside, but it was the availability of water-power that contributed to the industrial revolution in the first place.

There's also a rich history, with plenty of fine architecture, and a strong cultural background in literature, music and comedy. Few cities have as much live music as London, or comedy like Edinburgh.

Oh, and cricket in the summer.

[OneFootInTheGrave]

rich history

the weather

and yes, music/theatre scene is one of the best, so if you live for it, it's good... but otherwise, probably better to fly in for the evening and fly out next day

[Provost Harrison]

Thankyou Cort Haus...despite our sometimes lousy weather, it is never extreme and has contributed to our success as a nation. Compared to some of the temperatures I have experienced in my time working all over the world, give me the British climate any way. I will never understand why, except for a beach holiday, why such high temperatures are remotely desirable. They are not, they are horrible.

There is nothing like a cool, overcast day (plenty of those here in Manchester)...and quite frankly you can keep your sweltering heat.

Perhaps I am in a relatively privileged position amd have a decent income, but no one is or should be starving and I quite like my own country and its culture and have no urge to emigrate. I can appreciate the culture of other countries but there is no place like home.