The Art of the Laffer Curve

It can never be repeated enough - high levels of taxation are self-defeating. We have the third highest marginal rate of income tax in the world. This is bonkers economics. The man who wrote the book on this and has had his theory proved time and again is one of a panel that the Speccie asked to address our no-growth problem (a problem that is NOT being addressed in No. 11 Downing Street). Here is his cut-out-and-keep easy aide memoire to articulate the argument:

Cut the 50p tax Arthur Laffer, Chairman, Laffer Associates
Reducing the burden which government places on the economy, through tax cuts, is the surest way to promote growth. I have never heard of a country that taxed itself into prosperity. Yet Britain last year raised the top rate of income tax from 40 per cent to 50 per cent. For more economic growth, and more tax revenue, this rate should be lowered immediately.

This paradox — lower rates, but higher yield — has been demonstrated time and time again, the world over. Between 1980 and 2007, the US cut tax rates on every form of income, the highest, the lowest and all those in the middle. The result was that the rich paid more, even if their tax levels were reduced. Let’s take the top 1 per cent of earners. Over this 27-year period, their contribution to the income tax collected in America doubled from 19.5 per cent to 40 per cent. The same dynamics applied in Britain: when the top rate of income tax was lowered to 40 per cent in 1988, the share of income tax collected from the richest 1 per cent rose from 14 per cent then to 27 per cent last year. Raising tax rates on the rich is about as bad an idea for the UK as I could imagine.

The government doesn’t need to do something. It needs to undo much of what it already has done. If you want poor people to do better, create jobs, not welfare — and to do this make taxes lower, not higher. ‘The best form of welfare,’ in the words of John F. Kennedy, ‘is still a good high-paying job.’

Not nearly enough people articulate this basic argument. If you test the alternative socialist argument to destruction - tax the rich more and more and they will pay more and more - you will find that the 'rich' (and the wealth creators, and the job creators) have moved abroad, and not just to Switzerland, because ANY other jurisdiction will be an improvement. Remember the old maxim:

Socialism is the equal distribution of misery.

Another Villain or Three

The interesting thing about the Nat Rothschild verdict and the media reporting of it is how teflon-coated Mandelson has proved to be this time.

Rothschild is obviously a disgusting individual, deeply unattractive in almost every way. Born into plutocracy, and obviously with a sharp brain, he appears to be interested in money and power and nothing else. He might have done any amount of good in this world, given his wealth, brains and opportunities. Instead he surrounds himself with the skidmarks of the financial/political/celeb society in which his type move.

Mandy is attracted by his money, doubtless, and the doors that he can open to other billionaire sleazebags. But Mandy is politically savvy, if accident-prone. The two sackings from Cabinet were entirely justified, even if the Hinduja brothers did lead him astray. He should have known that jumping, spontaneously, on board a billionaire's lear jet and heading off for a bit of homo-eroticism in the Siberian tundra would go down poorly, even if he wasn't actively taking bribes or promising to use his influence in corrupt fashion. (He wouldn't, would he?)

So I find it interesting that the court seems to have gone out of its way to exonerate Mandy of any wrongdoing and to have heaped all its scorn upon ugly Nat. God knows Mandy is a moth to a flame when unworthy billionaires are there to be befriended, and his appetite for being thrashed on his noble but naked buttocks with birch twigs whilst rolling in the snow is almost certainly enormous. But he knew why he was there, who he would meet, and what might become of it all. It surprises me that none of the press felt like pointing this out.

A Villainous Woman

Yes, she may look like a harmless little red squirrel or chipmunk, with her wide, innocent Bambi eyes, fragrant teeth and glossed lips. But take it from me, she's a wrong'un; an ocean-going, copper-bottomed, weapons-grade villain.

Her company, A4e -"a social purpose company with the sole aim to improve people's lives around the world" - (pass the sick-bag, please), turns over the thick end of £200m, ALL OF IT government contracts. That's you and me, idle blog readers.

We are mugs. Mugs! Because guess what the sweet-looking Emma Harrison is doing with the wonga? I'll tell you what: she's producing a dividend of £11m for her board, of which doe-eyed Emmykins takes £9.5m.

The cross-party group of MPs (yes, I know, hardly beacons of competence and integrity themselves) have described the performance of her company on these contracts as 'abysmal'. Will the contracts be withdrawn? I think we know the answer. There will be hand-wringing and obfuscation, lies and excuses. And the same contracts will be awarded again, with assurances that A4e's performance will be scrutinised more closely, yadda yadda.

Meanwhile, that poor blameless bastard Stephen Hester has not been allowed to take his bonus in shares, tied up for years and directly dependent upon his company's shareprice, because those slimeball politicians have given in to ignorant populism and ganged up on him because he's a banker. He is deemed to be doing a pretty good job, by the way. He was asked to go in and sort out Mr Fred Goodwin's mess. He didn't cause it. He wasn't even in the banking industry in the last few years before the bubble burst.

Hester can't get his highly conditional £1m bonus, with all its strings attached, despite his good hard work. This ginger witch, however, has just pocketed ten times that amount, ALL OF IT TAXPAYERS MONEY, despite being incompetent.

What does the coalition DO all day? The low-hanging fruit of usless spending that they could eradicate without a squeak of justifiable protest is there for all of us to see. Have they got rid of any of those gissajob Quangos? Have they hell.

This government may be slightly better than the Brown Terror that preceded it. But it is the most disappointing government of my lifetime. Given a golden ticket by the electorate to get a grip on things, with the polls still in their favour (astonishing, but that's the Ed Miliband effect for you), they arse about like the PG Tips chimps trying to move that upright piano and make a predictable bloody mess of it. With the exception of Gove and Duncan Smith, they deserve our contempt.

Weird

Just a thought:

Who, in their right mind, would come up with a pair of 'mascots' for the Olympic and Paralympic Games which were stub-legged, short-armed and one-eyed?

The one on the right looks as though he's wet himself.

Not, surely, the image one is trying to project.

Oh No It Won't

"The last sigh of liberty will be heaved by an Englishman"

Montesquieu, in 1749

Janice Mason owns a house in Walthamstow, East London, which had been her childhood home and she was about to sell. She suddenly discovers that it is occupied by a family of Moldovan squatters — four adults and four children — who have changed the locks.
The police say they are powerless to intervene, because squatting is a civil, not a criminal matter.
Mrs Mason therefore faces a huge bill for securing these people’s eviction.
Yet any of us can see the injustice of her being obliged to pay a penny to get back her own property.

Mr Mason took this picture as police quizzed the squatters in the £250,000 three-bedroom house, but they say there is nothing they can do to force them out
In a properly ordered society, the Moldovans would be summarily removed by the police as soon as it is plain they have no legal title.
Beyond that, since the squatters have breached the code of behaviour we should expect to be observed by all newcomers here, they should be marched smartly aboard a plane back to Moldova. However, nothing of the kind will happen, of course.
Mrs Mason will pay one set of lawyers to get her unwelcome interlopers removed, if she is lucky. Another set, who parade themselves as crusaders, will leap to the Moldovans’ defence, their fees paid by us. (Max Hastings, Mail Online)



For a moment, Idle imagines himself as Prime Minister:
PM Idle (for it is HE): This should be against the law.
SPAD: It is, Sir (!), but it's civil, not criminal.
PM Idle (to staffer): Hargreaves, find out what the usual lefty liberal objections are to making squatting a criminal offence.
Hargreaves: Yes Sir.
PM Idle (to SPAD): You have a month - then I want to see draft legislation to deal with this.
SPAD: The BBC will hate this.
PM Idle: Hmmm. Patten, Thompson, Humphrys, those 'comedians' from Radio 4...... round them up. Then kill them.

One-Way Ticket on the Oblivion Express

I read over at the estimable http://cityunslicker.blogspot.com/ that the rough cost of creating a new $35,000 pa job in America (via the endless trillions of stimulus) is $235,000. The economics of the madhouse? Not necessarily; economic growth is about optimism more than anything and if the US is now back onto a sustainable growth path, so be it.

For a real madhouse decision, stay closer to home, and prepare for it next week. Cameron, despite being a classic home counties squire by upbringing, is going to give the go ahead for an unfeasibly expensive railway line to Birmingham, cutting through fine English countryside, making hundreds of square miles of it un-huntable. And for what? Jobs? Not many. GDP? Minimal impact. Crucial infrastructure development? Hardly. Time-saving necessity? 20 minutes, at HUGE cost per minute per punter; so huge, in fact, that the minimum ticket price for a one-way ticket on the Great White Elephant Line (trademark, Idle) looks like being £80 (in today's money) when the thing finally gets rolling. This is, in other words, a line for people travelling on expenses - businessmen and public servants. Or the carelessly rich. All of whom, obviously, have smartphones and tablets at their disposal to work in transit. The pro-HS2 lobby, unsurprisingly, provide their cost/benefit analysis on the basis that time spent on a train is time wasted. This isn't so much stupid as plainly dishonest. As for improving the Midlands and Northern economies.... how? High speed trains don't build cars or widgets or train hairdressers or teach Mandarin. All they do is allow professional types to whizz up from London a few minutes quicker. It may even be actively harmful to Midlands service industries.

We are talking £30bn here. And who amongst us doesn't believe it will be subject to MASSIVE cost overruns and delays? The mind boggles. I'd even wager that the majority of the ditchdiggers and line layers will be foreign workers, thankful for work from the bottomless pocket of the dear old UK taxpayer.

If Cameron wants to spend £30bn-£50bn on trains, let him take the mainline services back into public ownership, provide more trains and better signalling, and above all subsidise ticket prices so that mass railway travel takes more cars off the road. Railway travel for ALL, in other words, rather than this idiotic grand projet which will benefit few and hang around his neck like an albatross until the day he dies.

Blimey

NEW YEAR HONOURS 2012

DIPLOMATIC SERVICE AND OVERSEAS LIST

OBE

Paul Edward ADAMSON

Editor-in-Chief and Publisher, E!Sharp, Brussels. For services to promoting the European Union

I don't mean to be personal; for all I know Mr Adamson is a top man, kind to others, self-effacing and charitably minded. But what in the name of all that is holy is the world coming to when we award gongs to people doing this kind of 'work'?

All I can say is that he's not exactly hitting the bulls eye with this, is he? The EU is less popular than ever before in this country, and if he is being honoured by the British government for promoting the EU to the Europeans...... why? Let the scoundrels in Brussels strike a medal and pay for the insignia and scrolls out of their slush funds, rather than asking the poor bloody UK tax payer to cough.

Oh, and further to my last post, did you see a nice little dividend being paid up front to the Olympic panjandrums? TWO knighthoods, if you don't mind. One to someone called Allen and another to a poor fellow called Armitt. I know what we would have called HIM at prep school.

Thanks to the loyal commenters on the last post. I'll keep you posted on Somerset trips, Lil & Elby.