The Productivity Curve

The debate about whether we are undertaxed or overtaxed as been raging for decades, and I doubt that I am going to solve it here, but I am going to pour some more fuel on the fire.

The mathematics of economics and tax policy is not an exact science. Any model is bound to be overly simplistic and not take all factors into account. That being said, there are important principles which can be distilled from a mathematical analysis of tax policy.

The Laffer Curve is a concept promoted by economist Arthur Laffer, which shows the relationship between tax rates and tax revenues. It is not intended to be an exact function relating tax revenues to a single variable, but rather, it shows that increasing tax rates does not always increase tax revenues.

We know that the value of the Laffer Curve is zero at 0% taxation, and we also know that it is zero at 100% taxation. There is not an exact value of the Laffer Curve for all points in between. The tax revenues generated are a function of countless interrelated variables, and tax rate is just one of those determining factors.

While we do not know the exact value of the Laffer Curve, we do know a lot about its shape and properties. It is an arch, skewed towards the lower tax rates. The partial derivative of the Laffer Curve with respect to tax rate is fairly well behaved. In English, this means that if you hold all other factors constant, there is a predictable change in tax revenues resulting from a small change in tax rate. In the example above, a 33% tax rate generates the greatest tax revenues. If the current tax rate is 33%, any change would result in a decrease in tax revenues. If the current tax rate was less than 33%, a small tax increase would increase tax revenues. If the current tax rate was more than 33%, a small tax cut would increase tax revenues.

Remember that the Laffer Curve is not precisely known. In reality, instead of being a single line, it is a band with some thickness, to account for the other factors which affect tax revenues. Instead of having a distinct peak, there is a range which contains the peak, but the precise location of the peak can not be determined because of all of the other factors which affect tax revenues.

There is reason to believe that our current tax rates are close to the peak of the Laffer Curve. This means that Republicans have been successful at achieving their goal of implementing a supply-side economic policy. Democrats argue for a tax rate higher than the rate which maximizes tax revenues. They take this position for reasons that I will go into later.

Republicans have argued for years that tax revenues can be increased by cutting tax rates. This argument was made by President Kennedy when he reduced the top marginal tax rate from 90%, and it was made by President Reagan and President Bush. It has proven to be true in every case. However, I claim that maximizing tax revenues is the wrong goal. Only if you want bigger government and more government and you believe that it is better for the government to spend your money rather than you spending your money should you try to maximize tax revenues. If you recognize that government is too big, too intrusive, and too unproductive, your goal should be to reduce tax revenues and increase private sector productivity.

I suggest that instead of attempting to maximize tax revenues, we should instead maximize productivity. A second curve can be derived directly from the Laffer Curve. I’ll call this the productivity curve. It predicts the relationship between tax rates and productivity of the nation’s economy. It is mathematically certain that the productivity curve peaks at a lower tax rate than the Laffer Curve. For the Laffer Curve to peak, the productivity curve must be sloping steeply downward, indicating that it is past its peak. The standard of living of the country is determined not by tax revenues, but by the production of the economy. Prosperity does not come from the government; it comes from the private sector. If we maximize productivity instead of tax revenues, we will increase our national standard of living.

Recognize that the chart above represents the results in a single year. The long-term results look even better for the maximized productivity tax rate. Economic growth is directly related to productivity, maximizing productivity in the current year also increases economic growth for future years because it results in greater reinvestment in the economy. The longer the term you consider, the better the maximized productivity tax rates look. In fact, if you look long term, more tax revenues will be generated by maximizing productivity than by maximizing current tax revenues.

Considering that it is mathematically certain that our nation would be more prosperous if we maximized productivity rather than tax revenues, why have we spent decades chasing after the wrong goal? Primarily it is because we have let the politicians frame the debate. Republicans have argued for a tax policy designed to maximize tax revenues, while claiming to be the party for smaller government. Democrats have taken an even more incomprehensible position, seeking tax rates higher than the rates which maximize revenues. This increases the power of the government, which means that it increases their own power. The further to the right you go on this graph, the larger the share of the economy that the government controls. Liberals believe that government control of the economy is a good thing. This is clearly a self-serving belief for the politicians, but they convince their constituents to buy into that belief by demonizing corporations and business and portraying government as the solution to every problem. By being further to the right on this graph, they give themselves more leverage to buy votes with government money and services, justified in the name of equality.

Neither approach serves the best interests of our nation. Democrats will say that cutting taxes will benefit the rich and increase the gap between the “haves” and the “have-nots”. The reality is that an increase in the prosperity of the country creates more opportunity for anyone to achieve success and share in the prosperity. Democrats don’t like this because it means that they are not the ones providing the wealth redistribution. Government can only transfer wealth. It can not create it. The private sector creates wealth. Government tries to impose equality by changing the way that the “pie” is divided up. The private sector bakes a bigger pie so that everyone can have more without taking it away from someone else. If you prefer the government’s approach, by all means maximize tax revenues. On the other hand, if you prefer unlimited opportunity to equality of outcome, it is time to make major changes to the way we set our tax policy.

The Bible Code

Amidst all of the attention given to the fictional "code" in Dan Brown's fabrication, The Da Vinci Code, another code has gone almost unnoticed.

The Bible, a collection of 66 books writen by dozens of different authors over more than a thousand year's time, contains one cohesive code which runs from beginning to end. The secrets revealed by this amazing code are unknown to most of the world, and carry with them the power to transform lives. To decypher this code, one must analyze a series of ancient symbols arranged according to certain phonetic and grammatical patterns.

Here on this blog I will reveal the secret to break the code and unlock the supernatural power it holds.

First, place a Bible on a table face up, spine to the left. Open the cover to reveal the first page. Carefully examine the text on that page, starting at the upper left and proceeding first from left to right, and from top to bottom. When you reach the end of the first page, turn the page and proceed to the second page. Repeat this process until the secret is revealed.

Dire Warning

Dihydrogen Monoxide (DHMO) is a colorless and odorless chemical compound, also referred to by some as Dihydrogen Oxide, Hydrogen Hydroxide, Hydronium Hydroxide, or simply Hydric acid. Its basis is the unstable radical Hydroxide, the components of which are found in a number of caustic, explosive and poisonous compounds such as Sulfuric Acid, Nitroglycerine and Ethyl Alcohol.

Although the U.S. Government and the Centers for Disease Control (CDC) do not classify Dihydrogen Monoxide as a toxic or carcinogenic substance (as it does with better known chemicals such as hydrochloric acid and benzene), DHMO is a constituent of many known toxic substances, diseases and disease-causing agents, environmental hazards and can even be lethal to humans in quantities as small as a thimbleful.

Research conducted by award-winning U.S. scientist Nathan Zohner concluded that roughly 86 percent of the population supports a ban on dihydrogen monoxide. Although his results are preliminary, Zohner believes people need to pay closer attention to the information presented to them regarding Dihydrogen Monoxide. He adds that if more people knew the truth about DHMO then studies like the one he conducted would not be necessary.

A similar study conducted by U.S. researchers Patrick K. McCluskey and Matthew Kulick also found that nearly 90 percent of the citizens participating in their study were willing to sign a petition to support an outright ban on the use of Dihydrogen Monoxide in the United States.

Each year, Dihydrogen Monoxide is a known causative component in many thousands of deaths and is a major contributor to millions upon millions of dollars in damage to property and the environment. Some of the known perils of Dihydrogen Monoxide are:

Death due to accidental inhalation of DHMO, even in small quantities. Prolonged exposure to solid DHMO causes severe tissue damage. Excessive ingestion produces a number of unpleasant though not typically life-threatening side-effects. DHMO is a major component of acid rain. Gaseous DHMO can cause severe burns. Contributes to soil erosion. Leads to corrosion and oxidation of many metals. Contamination of electrical systems often causes short-circuits. Exposure decreases effectiveness of automobile brakes. Found in biopsies of pre-cancerous tumors and lesions. Often associated with killer cyclones in the U.S. Midwest and elsewhere. Thermal variations in DHMO are a suspected contributor to the El Nino weather effect. Related to the tsunami which killed 200,000 people in 2004.

Despite the known dangers of DHMO, it continues to be used daily by industry, government, and even in private homes across the U.S. and worldwide. Some of the well-known uses of Dihydrogen Monoxide are:

• as an industrial solvent and coolant,
• in nuclear power plants,
• by the U.S. Navy in the propulsion systems of some older vessels,
• by elite athletes to improve performance,
• in the production of Styrofoam,
• in biological and chemical weapons manufacture,
• as a spray-on fire suppressant and retardant,
• in abortion clinics,
• as a major ingredient in many home-brewed bombs,
• as a byproduct of hydrocarbon combustion in furnaces and air conditioning compressor operation,
• in cult rituals,
• by the Church of Scientology on their members and their members' families,
• by both the KKK and the NAACP during rallies and marches,
• by pedophiles and pornographers (for uses we'd rather not say here),
• by the clientele at a number of homosexual bath houses in New York City and San Francisco,
• historically, in Hitler's death camps in Nazi Germany, and in prisons in Turkey, Serbia, Croatia, Libya, Iraq and Iran,
• in World War II prison camps in Japan, and in prisons in China, for various forms of torture,
• by the Serbian military as authorized by Slobodan Milosevic in their ethnic cleansing campaign,
• by many terrorist organizations,
• in community swimming pools to maintain chemical balance,
• in animal research laboratories, and
• in pesticide production and distribution.

What you may find surprising are some of the products and places where DHMO is used, but which for one reason or another, are not normally made part of public presentations on the dangers to the lives of our family members and friends. Among these startling uses are:

as an additive to food products, including jarred baby food and baby formula, and even in many soups, carbonated beverages and supposedly "all-natural" fruit juices in cough medicines and other liquid pharmaceuticals, in spray-on oven cleaners, in shampoos, shaving creams, deodorants and numerous other bathroom products, in bathtub bubble products marketed to children, as a preservative in grocery store fresh produce sections, in the production of beer by all the major beer distributors, in the coffee available at major coffee houses in the US and abroad, in Formula One race cars, although its use is regulated by the Formula One Racing Commission, and as a target of ongoing NASA planetary and stellar research.

One of the most surprising facts recently revealed about Dihydrogen Monoxide contamination is in its use as a food and produce "decontaminant." Studies have shown that even after careful washing, food and produce that has been contaminated by DHMO remains tainted by DHMO.

Our children are in peril, and we must act now! Contact your Senators and Representatives! Contact the EPA and FDA! Contact the Sierra Club, Earth First, and Al Gore! Let them know that we must end this assault on our health and our environment today! Before it is too late.

Duh Vinci Code

One of the biggest movies of the summer is sure to be The Da Vinci Code. I read the book, and I could write pages and pages about the mis-information in the book. If you are interested in that, there are plenty of sources which will provide a thorough debunking of the pseudo-historical premise of the book. In the end, it is easier to list the factual content of the book than the misinformation. The facts in Dan Brown's Da Vinci Code can be summarized as follows:

1. London is in England
2. Paris is in France
3. Leonardo Da Vinci was a painter

Some people will defend the book and the movie on the basis that it is a work of fiction, and therefore by definition, is not factual. However, Dan Brown, the author of The Da Vinci Code, on a page right after the title page asserts that "All descriptions of artwork, architecture, documents, and secret rituals are accurate." Thus, from the beginning, the book claims to be more than pure fiction. Brown went to great lengths to muddle fact and fiction, leading readers to believe that the premise of the book is plausible and supported by fact. The following is the most recent review on the Amazon web site. It is typical of many of the other reviews:

Once I began this extraordinary book, I could not put it down. "The Da Vinci Code" is so much more than a gripping suspense thriller. Dan Brown takes us beyond the main plot and leads us on a quest for the Holy Grail - a Grail totally unlike anything we have been taught to believe. With his impeccable research, Mr. Brown introduces us to aspects and interpretations of Western history and Christianity that I, for one, had never known existed...or even thought about. I found myself, unwillingly, leaving the novel, and time and time again, going online to research Brown's research - only to find a new world of historic possibilities opening up for me. And my quest for knowledge and the answers to questions that the book poses, paralleled, in a sense, the quest of the book's main characters. What a trip! What a read!

People are looking to this fictional work in their search for truth. It is a sad sign of our times that people will accept a novel as their source of truth, but we should not be surprised. The Apostle Paul said that this would happen:

For the time will come when they will not endure sound doctrine; but wanting to have their ears tickled, they will accumulate for themselves teachers in accordance to their own desires, and will turn away their ears from the truth and will turn aside to myths. (II Timothy 4:3-4)

One response is to blame Dan Brown for writing the book, or Hollywood for making the movie. The reality is that these people are simply responding to a need for answers to spiritual questions, and this need exists because the Church is failing to provide those answers. As believers, we are partially to blame for Brown's success at passing off fiction as fact. We, as a group, don't know what we believe and why we believe it, and we are not adequately prepared to offer something better than Brown's myth.

I see this movie not as a cause for outrage, but as an opportunity to address real issues which people struggle with every day. The interest in this book and movie shows that people want to know who God is, who Jesus is, and what He means to their lives. The Church has the only real and lasting way to meet this basic need. The response of the Church will distinguish Christianity from other world religions: we will not take to the street in angry mobs burning cars, hurling stones, and killing people in rage at the perceived indignity. But we must go one step further than simply refraining from these reactions by proclaiming the truth that people are searching for: Jesus offers grace and forgiveness which changes our lives and gives us fellowship with God.

The tag line of the movie is "Seek the truth." If people are willing to honestly seek the truth, I am confident that fiction will be revealed as false, and the truth of the Bible will stand. If this movie causes people to embark on this kind of search, it is a good thing.

But we, the Church, must be ready to address the questions which will arise and help to direct people to the truth of the transforming power of Jesus Christ. Instead of looking for truth in a fictional novel, perhaps they should start in the non-fiction section of the library. Then examine the Bible in the light of historical reality. Most importantly, we need to let them see that Jesus is more than a hisorical figure. He is alive and active in our lives today.

This is how Paul instructed us to respond:

Preach the word; be ready in season and out of season; reprove, rebuke, exhort, with great patience and instruction. ... But you, be sober in all things, endure hardship, do the work of an evangelist, fulfill your ministry. (II Timothy 4: 2,5)

Let's not miss the opportunity that this movie provides, but use every opportunity to let the light of Jesus shine. When we present the truth to the world, they won't need to look to pulp fiction pretending to be fact for their answers.

CBS News hires Moussaoui

(05-08-2006) CBS News today announced plans for convicted terror conspirator Zacarias Moussaoui to take the place of Dan Rather as anchor of their evening news. It was unclear when Moussaoui, who "defeated" America by being sentenced to spend the rest of his life in a concrete room instead of dying by lethal injection, would be available to perform his anchor duties.

CBS President Arnold Harbinger said, "Mr. Moussaoui is an ideal replacement for Dan Rather because the two share many common interests, viewpoints, ideologies, and delusions of self-importance. Both exhibit the zeal to advance these viewpoints, using unconventional methods when necessary. Mr. Moussaoui's improvised identification documents prove that he is up to the high standard set by Dan Rather. And we believe that Mr. Moussaoui will bring depth and balance to our news desk. The 'wave the white flag, cut and run, appease the terrorists' crowd is already well represented, and CBS is a bit thin in the 'kill Americans and destroy the Zionist Satan' department."

In related news, an audio tape has surfaced in which Osama Bin Laden can be heard, speaking from his subterranean headquarters, expressing gratitude to America for sparing the life of Moussaoui, and repealing the murder of 3,000 Americans on 9/11 as a token of his new appreciation for the American justice system.