The Armey Curve was developed by United States Representative Richard Armey. The term describes the concept that in anarchy [when there. first question, the literature on the Armey Curve suffers from a theoretical That led us to propose a theoretical explanation of the Armey curve. This paper discusses the theoretical and empirical basis for the existence of an optimal size of government as depicted by Armey Curve, which.
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Somewhere between those two poles lies a point at which government will maximize revenue collection. In the early s, when the top federal income tax rate was 91 percent, President John F. Kennedy and many economists argued Washington was far above that point.
They were clearly correct. In the s, when Laffer was drawing his revenue-maximization curve on a napkin and the top income tax rate was 70 percent, he and other economists thought Washington was still on the downward-sloping side of the curve. They were probably correct. President Ronald Reagan and bipartisan majorities in Congress responded by reforming the tax code and, ultimately, pulling the top rate down to furve percent.
The Armey Curve – truthful politics
It went up a bit during subsequent administrations. But will likely never reach the stratospheric levels that predated Reagan, because the supply-siders clearly won the revenue-maximization argument. It was to maximize employment, curvs, and economic growth.
Recessions, they argued, were the result of sudden, irrational drops in consumer demand. During those periods, governments ought to prop up demand with spending, funded primarily by borrowing. During boom years, they ought to raise taxes and rein in spending to pay off the debts incurred during recessions.
Moreover, the argument went, governments should impose high tax burdens on the wealthy, who save and invest much of their money, and redistribute the proceeds to those who will spend virtually all of it.
They pointed out that investment is how the economy becomes more productive. That, in turn, is how workers gain incomes and average living standards rise. Supply-side economics is a broad policy of promoting work, savings, and investment through tax and regulatory reforms — which boost private investment — and through budget and policy reforms that raise the payoff from public-investment activities such as infrastructure and education.
The best symbolic representation of supply-side thinking wrmey the Armey Curve, named after economist and former Congressman Dick Armey. It grants that the absence of government would be economically disastrous. But it also observes that after a certain point, taxing people to pay for more services makes them worse off. The Armey Curve has lots of empirical support. That suggests most states and localities are larger than they ought to be. They are on the wrong side of the Armey Curve.
The goal of North Carolina conservatives is not to reduce it curce zero. The goal is keep government from encroaching too much on the private investment that is the primary driver of economic progress. Art LafferDick Armeysupply-side economics.
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