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Close your eyes and imagine it's 1975. Inflation is high, jobs are scarce and the government decides the best way to stimulate the economy is to raise taxes. Nowadays, that approach doesn't seem to make much sense, but smart people once believed that the best way to help the common man was to tax him as much as possible, then turn around and dole out entitlements to keep folks afloat.
What changed this thinking was a little curved line on a piece of graph paper. During the Ford administration, a young economist named Arthur Laffer decided to prove graphically that higher taxes were bad and lower taxes were so good, they could actually boost government revenue, not shrink it. (There's an apocryphal story about him excitedly drawing a picture on the back of a cocktail napkin.)
How? Think of a pure curve, starting at zero and going to 100, with the peak of the hump somewhere in between (more on that later). At zero, if the government assessed no taxes, the government would have no revenue. But, at 100, if the government taxed all the income at a dollar-for-dollar rate, the government would have nothing either, since folks would have no incentive to work if they were handing over all their paycheck to the Feds.
Somewhere in between was the ideal rate between taxing so the government can stay in business, but not crippling regular folks. Ideally, low taxes are better, according to Laffer, since it gives more money to consumers to spend and thus stimulate the economy. In fact, the Laffer curve was the foundation of what became Supply-Side Economics.
And, for the record, Laffer never took credit for the idea, saying economists had been promoting the idea for centuries. Of course, none of them had a napkin.
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Friday, May 09, 2008
Northwest Airlines Matches Fuel Charge Increase Implemented by Other Network Carriers
Comtex
EAGAN, Minn., May 09, 2008 (BUSINESS WIRE) ----In response to record-breaking fuel costs, Northwest Airlines (NYSE: NWA) today announced it will match the fuel charge increase put in place by other air carriers.
Northwest will increase the fuel surcharge $10 each way, matching the increase first implemented by Delta Air Lines and matched by United Airlines, American Airlines, and Continental Airlines. This brings the fuel surcharge on domestic fares to $65 each way.
Crude oil, which is Northwest's largest operating expense, closed at $123.69 per barrel on Thursday. Oil accounts for nearly 40% of Northwest's costs and continues to represent an extraordinary challenge for Northwest and the airline industry.
Today's fuel surcharge increase comes on the heels of the NWA's first quarter earnings report, where the Company reported a $445 million increase in year-over-year fuel expense.
Last month, the airline announced a plan to mitigate the dramatic fuel cost increases. That plan included revenue enhancements from increased fees, fares and fuel surcharges; domestic capacity reductions of five percent; a fleet reduction of 15 to 20 aircraft; an estimated $100 million reduction in non-aircraft capital expenditures; and a $100 million improvement to the airline's bottom line, profit and loss statement, that will be achieved through other cost reductions, productivity improvements and revenue enhancements.
Northwest Airlines is one of the world's largest airlines with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 1,000 cities in excess of 160 countries on six continents.
SOURCE: Northwest Airlines
Northwest Airlines
Copyright Business Wire 2008
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