Laffer curves are empirically corroborated [1][2]. For most taxes, there is a point past which raising the tax rate starts decreasing revenue.
The problem was politicians defining a made-up number as that point and voters going along with it.
[1] https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.47...
[2] https://www.sciencedirect.com/science/article/abs/pii/S03043...
The issue has always been using these points to extrapolate any policy you want because where you land on the curve or even the shape of said curve IS up for debate.
An article Krugman wrote in 1999:
> Later Mundell would broaden this initial insight by proposing the concept of the “impossible trinity”; free capital movement, a fixed exchange rate, and an effective monetary policy. The point is that you can’t have it all: A country must pick two out of three. It can fix its exchange rate without emasculating its central bank, but only by maintaining controls on capital flows (like China today); it can leave capital movement free but retain monetary autonomy, but only by letting the exchange rate fluctuate (like Britain–or Canada); or it can choose to leave capital free and stabilize the currency, but only by abandoning any ability to adjust interest rates to fight inflation or recession (like Argentina today, or for that matter most of Europe).
* https://slate.com/business/1999/10/o-canada.html
His theoretical work allowed the Euro to be developed (which may or may not have been a good idea).
It's pretty much one of the most dysfunctional currencies out there.
> Here's how the story has been told: a year or two or three after the introduction of the euro, a recession develops in part - but only part - of Europe. This creates a conflict of interest between countries with weak economies and populist governments - read Italy, or Spain, or anyway someone from Europe's slovenly south - and those with strong economies and a steely-eyed commitment to disciplined economic policy - read Germany. The weak economies want low interest rates, and wouldn't mind a bit of inflation; but Germany is dead set on maintaining price stability at all cost. Nor can Europe deal with "asymmetric shocks" the way the United States does, by transferring workers from depressed areas to prosperous ones: Europeans are reluctant to move even within their countries, let alone across the many language barriers. The result is a ferocious political argument, and perhaps a financial crisis, as markets start to discount the bonds of weaker European governments.
* https://web.mit.edu/krugman/www/euronote.html
Which is basically what happened in ~2010:
* https://www.nytimes.com/2011/01/16/magazine/16Europe-t.html
Germany being 'fiscally obstinate' is a continuing issue:
* https://www.irishtimes.com/opinion/paul-krugman-the-world-ha...
Europe is basically like the US was pre-Civil War, where people would say "these United States": not quite culturally whole, and pulling in all sorts of directions. Given the pull of (economic) gravity Germany has, everyone is kind of forced to follow their lead, even when it doesn't make much sense.
Supposedly lots of German banks were investing in Greece and Spain because returns there were good compared to the abysmal rates in Germany. So the ECB/IMF 'bail out' ended up being a bit of a rescue of the German banks:
> According to a study by the European School of Management and Technology only €9.7bn or less than 5% of the first two bailout programs went to the Greek fiscal budget, while most of the money went to French and German banks.[84] (In June 2010, France's and Germany's foreign claims vis-a-vis Greece were $57bn and $31bn respectively. German banks owned $60bn of Greek, Portuguese, Irish and Spanish government debt and $151bn of banks' debt of these countries.)[85] According to a leaked document, dated May 2010, the IMF was fully aware of the fact that the Greek bailout program was aimed at rescuing the private European banks – mainly from France and Germany. A number of IMF Executive Board members from India, Brazil, Argentina, Russia, and Switzerland criticized this in an internal memorandum, pointing out that Greek debt would be unsustainable. However their French, German and Dutch colleagues refused to reduce the Greek debt or to make (their) private banks pay.[86][87]
I rest my case.
> The four often cited criteria for a successful currency union are:[6]
> * Labor mobility across the region. […]
> * Openness with capital mobility and price and wage flexibility across the region. […]
> * A risk sharing system such as an automatic fiscal transfer mechanism to redistribute money to areas/sectors which have been adversely affected by the first two characteristics. […]
> * Participant countries have similar business cycles. When one country experiences a boom or recession, other countries in the union are likely to follow. This allows the shared central bank to promote growth in downturns and to contain inflation in booms. […]
* https://en.wikipedia.org/wiki/Optimum_currency_area
* https://www.jstor.org/stable/1812792?seq=1
In 2012 Krugman laid out three things that needed to be done to make the Euro work better:
* https://www.journals.uchicago.edu/doi/full/10.1086/669188#_i...
We have shortages of semiconductors, congested ports, all of the supply issues with early COVID PPE, absurdly low housing supply in the most desirable places to live, and so on.
> Supply-side economics is a macroeconomic theory that postulates economic growth can be most effectively fostered by lowering taxes, decreasing regulation, and allowing free trade. According to supply-side economics, consumers will benefit from greater supplies of goods and services at lower prices, and employment will increase.
Cf. Demand-side economics[2]:
> Demand-side economics is a term used to describe the position that economic growth and full employment are most effectively created by high demand for products and services. According to demand-side economics, output is determined by effective demand. High consumer spending leads to business expansion, resulting in greater employment opportunities. Higher levels of employment create a multiplier effect that further stimulates aggregate demand, leading to greater economic growth.
> Proponents of demand-side economics argue that tax breaks for the wealthy produce little, if any, economic benefit because most of the additional money is not spent on goods or services but is reinvested in an economy with low demand (which makes speculative bubbles likely). Instead, they argue increased governmental spending will help to grow the economy by spurring additional employment opportunities. They cite the lessons of the Great Depression of the 1930s as evidence that increased governmental spending spurs growth.
As soon as you have a developed nation with an aging population where everyone is scrambling to save for their own retirement, you get the exact opposite problem. People are deferring spending, which means deferring incomes, which means deferring jobs which means unemployment.
There is lots of money available to invest into businesses, in fact, people are investing too much, interest rates fall through the floor. Low interest rates allow unproductive companies to stay alive and when the long term debt cycle ends they all die at once. That's not good for your retirement.
When you expect to retire in 10 years, you want your savings to actually be able to buy things, by making sure there are people in the future willing to work for your money. That's why you invest your savings, to make sure companies exist that sell stuff to you in the future, but how are those companies supposed to survive the 10 years until you retire, if you never buy anything?
Another example is the healthcare and Pharma industry: more incentives should result in more competition and lowered costs, but exactly the opposite is happening: consolidation and higher costs.
The theory ignores everything else that affects supply and only focuses on complaining about taxes and regulation.
But at the same time, I see basic limits in our water supply, and less absolute constraints in the crowding around a handful of urban hubs, and wonder if more housing is truly a good idea, or if we might already be near the practical limits on capacity for the geography/hydrology and geometry we're working with.
the 50-year plan for LA (the city) from about 50 years ago was projecting something like 7-8 million residents being housed here by now with basically the same current infrastructure. instead, we've only grown from 3 to 4 million in that time, largely because of various restrictions on development (zoning, prop 13, etc.). note that LA city is ~470 sq mi, in contrast to NYC which is twice the population and ~300 sq mi.
[0]https://en.m.wikipedia.org/wiki/Kansas_experiment