Supply-Side Economics and The Laffer Curve

There seems to be a bit of talk going on about the Laffer Curve. For anyone interested, wiki describes it as:

"In economics, the Laffer curve is a theoretical representation of the relationship between government revenue raised by taxation and all possible rates of taxation. It is used to illustrate the concept of Taxable Income Elasticity (that taxable income will change in response to changes in the rate of taxation)."
http://en.wikipedia.org/wiki/Laffer_curve

It's part of the arguments for supply side economic theory.
(http://en.wikipedia.org/wiki/Supply-side_economics).

In the description of supply side economics we find this:

"On January 3, 2007, George W. Bush wrote an article claiming "It is also a fact that our tax cuts have fueled robust economic growth and record revenues."

Andrew Samwick, who was Chief Economist on Bush's Council of Economic Advisers from 2003-2004 responded.

Here is that response:

"To anyone in the Administration who may read this blog, I have one small wish for the new year. Please stop your boss from writing or saying the following:

It is also a fact that our tax cuts have fueled robust economic growth and record revenues.
You are smart people. You know that the tax cuts have not fueled record revenues. You know what it takes to establish causality. You know that the first order effect of cutting taxes is to lower tax revenues. We all agree that the ultimate reduction in tax revenues can be less than this first order effect, because lower tax rates encourage greater economic activity and thus expand the tax base. No thoughtful person believes that this possible offset more than compensated for the first effect for these tax cuts. Not a single one.

If I'm wrong, show me the evidence ... and tell me why the tax cuts were so small given their effects on revenues."

http://voxbaby.blogspot.com/2007/01/new-years-plea.html


Remember, a theory isn't a fact.

In science, a scientific theory is a tested and expanded hypothesis that explains observations and fits ideas together in a framework. If anyone finds a case where all or part of a scientific theory is false, then that theory is either changed or thrown out.

So how scientific is the study of economics?

Well, this is interesting http://www.scientificamerican.com/article.cfm?id=the-economist-has-no-clothes

And so is this:
http://streamer.perimeterinstitute.ca/Flash/afa2290d-2a19-46b8-8dcf-c2fbc86a0a17/viewer.html