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Dr. Arthur Laffer has been the toast of conservative economic policy all the way back to the late 1970s. In the final segment of our series of conversations with Dr. Laffer, he spoke about what the American economy needs in order to improve, and his feelings on President Obama.
When asked about what America’s economic future holds, Laffer says he hopes the bleeding is staunched soon. But for now, he says, the future seems grim.
“It’s terrifying,” said Laffer of the outlook for the economy over the next two to three years. “What you’ve got is an ideological administration hell-bent on these proposals. There’s no amount of contradictory evidence that will ever get them to change their minds on economic growth – and they’re going to hang tight.”
Laffer’s antidote is traditional supply-side policy. Speaking broadly, he told FrumForum that the United States ought to immediately adopt the following policies:
1. Low rate flat tax
2. Spending restraint
3. Sound money
4. Minimal regulations in the economy
5. Free-trade agreements expanded
You may have noticed that these policies are hardly what Congress has opted to do in its last session. That, argues, Laffer, is why we’re in this quagmire:
“You cannot have a prosperous economy when they’re raising tax rates, when they’re way overspending, when they’re debauching the currency, when they’re over-regulating the private sector, and when they’re restricting the free flow of goods and services across national boundaries… and all five of those things are being done by this administration, and this Congress.”
Even with his ideological differences with President Obama, Laffer is a rare conservative who has a deep amount of personal respect for the President:
“Obama is a fine, fine man. He’s well-educated, he’s got so many wonderful traits. His only problem is that he’s wrong on every issue he faces… But that’s not because he’s not a good person – he’s got a good family, good family… he’s an American success story.”
But this is where Laffer draws the line. On an ideological level, Laffer finds the President to be too inflexible, and not willing to enact conservative ideas. “He’s wrong! And being wrong requires you to be flexible so you can see the errors of your ways, and change. But this guy is not flexible – he’s doctrinal, and dogmatic, and that’s too bad,” said Dr. Laffer.
He tells FrumForum that he’s a non-partisan economist – he voted for Clinton twice, supported Kennedy – but that President Obama “just doesn’t understand” — an assertion that Laffer repeats several times.
“He real believes that imports cost Americans jobs. He doesn’t understand that imports are the way that foreigners earn the income to buy U.S. exports. He doesn’t know who David Ricardo is. He doesn’t understand the gains from trade, or comparative advantage,” said Laffer. “And it’s a real problem.”
“I’d like a broad-based, intellectually deep president,” said Laffer. But he’d also like one that understands his brand of economics.
Asked whether he had a pick for Republican candidate in 2012, the economist laughed and said, “Not really. I’ve got a couple of non-picks,” but declined to elaborate.
“I don’t want Hillary Clinton to be the nominee, how about that?” he joked.
This is part three of a series of discussions with Dr. Arthur Laffer. Read about part one, “Soaking the Rich Won’t Cut It” here and part two, “A Carbon Tax Gore (and the GOP) Could Love” here.
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balconesfault // Sep 2, 2010 at 6:13 pm
jabbermule: 1. Low rate flat tax? Tax rates of 17%, 28% and 36% are hardly flat. Do you need remedial math?
OK – now consider the effects on the total effective tax rates for income by people in those classifications when paired with a long-term capital gains tax rate of 15%? How about when only the first $104K of income is subject to payroll tax?
There’s a reason why Warren Buffet noted that he paid a lower overall tax rate than his secretary. And it’s not because Warren Buffet needs remedial math.
jabbermule // Sep 2, 2010 at 6:15 pm
Ok, I’m sorry, but I gotta run…nice debating you brain-dead liberal morons…it’s always fun to take a peek inside a damaged, brain-washed skull. Enjoy your anger and rage this November when you lose Congress again
easton // Sep 2, 2010 at 6:15 pm
ACORN??? You have officially jumped the shark.
As to why I post here, though the site is dedicated to having responsible, sane Republicans in power (and having responsible and sane Republicans is in the best interest of the Republic) it also has a lot of well written articles, many of which I agree with. I am a Conservative Democrat.
I support the war in Afghanistan, supported the war in Iraq, I supported the Stupak amendment since I am pro life.
Look, not everything is black and white, there are areas that Democrats and Republicans can agree with. Welfare reform was a great idea and it worked.
Dude, it is you who belong at the FreeRepublic or the Blaze or Daily Caller, or any of those right wing nutsites.
In case you haven’t noticed, nobody here is coming to your defense, you whined above “oohh, everyone is picking on me, wah wah” like a little girl.
By the way, I hate the Dailykos, and Moveon. Always have. They are leftwing fanatics. I also despise them for the whole General Betrayus crap, and labelling everyone who favored getting rid of the genocidal monster and cancer on the middle east Hussein a Nazi.
I am also an ardent free trader, I favored NAFTA, CAFTA, and would love for their to be far more of an open market in North America, you know the part of the free movement of trade and labor. Xenophobes like you scream at the thought of any Mexxy can working in the states.
So I am more of a Capitalist than you.
easton // Sep 2, 2010 at 6:23 pm
jabbermule stop with the childish insults, can you possibly imagine that anyone would feel insulted by the likes of you?
Obviously you have a incredible insecurity complex. Most of us are normal, we don’t “rage” at politics. We have families, kids, jobs. I don’t even live in the US so it is going to be kind of hard for me to rage while I am sitting on the beach drinking Tequila. I do this for fun and because I am on Summer vacation and I can’t sit every day on the beach because if I did I would get skin cancer. (which a co worker of mine has)
I am actually starting to feel sorry for you. So much misplaced hatred and anger.
For the record, I have friends who listen to Rush Limbaugh and another who loves Michael Moore. They are all just people, none of them are morons. I might think their ideas are wrong but like they say opinions are like a-holes, everyone has one. But not everyone has to be one. You are starting to go in that direction.
You have what is known as Magical thinking, that your life is somehow dependent on others “oh my life will be unicorns and snow fairies come November.” I think you will probably feel a major let down after November. Dude, enjoy every day. You might die before then. Don’t live for this, it ain’t worth it.
Rabiner // Sep 2, 2010 at 7:02 pm
Jabbermule:
“Why do I feel like I’m arguing with the same liberal moron with different screen names? I make a comment to Rabiner, Slide takes up the argument; I make a comment to Slide, boom! Tag team with easton. Hmmmm…”
Maybe it’s because I was correct in my statements and instead of waiting for me to respond to your mischaracterization of my initial comments and allowing others to think you were right he decided to respond in my stead. I said ‘flatter’ as Bush’s tax cuts make the income rates FLATTER, not flat, but flatter. We expanded free trade zones during Bush and reduced regulations as well. So my statement is factually correct unlike what you’ve been typing.
Rabiner // Sep 2, 2010 at 7:05 pm
Jabbermule:
“It was a tax-cutting measure, so it’s conservative. Nice try.”
So tax cuts are always conservative? That’s pretty impressive revision. Perhaps top heavy tax cuts are conservative but generic tax cuts are not.
MSheridan // Sep 2, 2010 at 7:50 pm
easton, just thought I’d mention that the Betrayus thing really didn’t go over that well at DailyKos either. Yes, there were a few nuts there trying to push that meme. But they generally picked up an astounding number of negative responses and/or hide ratings from the community at large. Unlike you, I am not a conservative Democrat. My favorite congressman is Bernie Sanders. But the range of opinion on DailyKos is more than wide enough to accommodate the both of us, with posters well to the left of me and far to the right of you. I’ve seen self-described Republicans post there. So long as they are polite and reality-based (i.e., don’t invent their own facts), they are generally treated with a modicum of courtesy.
I wrote a diary on progressive taxation there once upon a time. It showed how much flatter the tax rates are today than they were the first few decades we had income tax. You might find it of interest.
llbroo49 // Sep 2, 2010 at 8:17 pm
OK , here is the problem with the Laffer curve- it is a half thought out theory. In effect he is arguing the “law” of diminishing returns. Fair enough. However, he fails to carry his hypothesis to the next step- to determine the ideal tax rate. The laffer curve without the needed reccomendations is like a doctor stating that too much or too little medication is a bad thing -without stating how much is too much or too little to be effective. It ends up being unactionable data.
Now I understand that any reccommendation for the ideal tax rate will be filled with caveats (ie current interest rates, total debt, current defict etc). But even his statement of a “low flat tax rate” is undefined. What is an acceptable rate? Sadly, Laffer has come across as being profound , but all he appears to have done is to put information that we already knew in to a graph. We already know that zero tax rates =zero tax revenue and that 100% tax rates= zero tax revenue. That leaves the Laffer curve to be nothing more than a algerbra problem that fails to provide the variables to determine the correct answer. I seriously doubt that this failure to provide the basis for an ideal tax rate slipped Laffer’s mind- so IMO he intentionally ignored it.
dante // Sep 2, 2010 at 8:24 pm
Anyone complaining of high taxes now is either an idiot or blatantly partisan. I was just going through our taxes, and while my wife and I made ~double the national average, our *actual* tax rate was about 10%. After you figure in the itemized deductions, mortgage interest deduction, 401(k)s, etc, we paid a whopping 10% of our income in federal income taxes.
I’d be *shocked* if anyone here paid much higher. We don’t even have kids, and we have a modest home. A family member of ours who is always complaining about taxes makes less money, spent more on a house, and has 3 kids. They’re probably paying a net 4-5% of their income on taxes, and yet continuously talk about the upcoming “tax revolution”. I don’t think that they realize that they’d be net losers if taxes (and correspondingly, services) were cut….
llbroo49 // Sep 2, 2010 at 8:39 pm
dante // Sep 2, 2010 at 8:24 pm
A lot of people that complain about high taxes, lump all of their taxes together. For example your relatives when complaining about taxes could be subconciously including Federal income tax, Medicare, SS, property taxes, state taxes, and municipality taxes. Since most don’t want to see SS and Medicare go away, they don’t explicitly complain about those particular taxes. Since renters won’t get behind property tax complaints- you can’t gather a big enough following. Complaining about state and municpality taxes is not a national issue. So when people look at their checks and see the total taxes removed- the only thing to complain about is the federal income tax.
Oldskool // Sep 2, 2010 at 8:55 pm
I’d be *shocked* if anyone here paid much higher.It’s even better if you have a business of any size. Wage earners would riot in the streets if they knew the kinds of deductions businesses are allowed to take off the top before their actual taxable income comes into view.
dante // Sep 2, 2010 at 8:58 pm
Ilbroo49 – What is ABSOLUTELY pissing me off right now is the debate on “saving SS”…. The way I see it, last year I paid 10% in federal income taxes, but I paid a combined 15% in SS and Medicare taxes (half by me, half by my employer). I paid a higher SS tax than my federal income tax, and this is the tax program that they’re using to push for continuation of the federal income taxes?? The way I see it, the *progressive* Federal Income Taxpayers (of which I paid 10% of my salary to) are being subsidized by the *regressive* SS/Medicare tax (of which I paid 15% of my salary to). How is that fair?? The Federal Government owes 3.5 trillion dollars to the SS/Medicare taxpayers, enough to fund SS through 2037 (and 75% from then on). But politicians want to reform SS now so that it continues bringing in more than it pays out, and then they will NEVER have to pay that money back.
Cut services, raise the federal income tax and balance the budget once and for all. WITHOUT the SS subsidy….
Oh, sorry, got off on a tangent. To your point, I wish people would wake up and realize that when the federal government cuts the money it gives to the states, the states have to make it up through higher sales and state income taxes. When that gets cut, school districts have to make it up through higher property taxes. So complaining about federal income taxes (which people aren’t paying very much of) actually means they pay higher taxes elsewhere…… People deserve the government they vote for.
dante // Sep 2, 2010 at 9:02 pm
It’s even better if you have a business of any size. Wage earners would riot in the streets if they knew the kinds of deductions businesses are allowed to take off the top before their actual taxable income comes into view.
A local US Senate candidate here in WI (Terrence Wall) is a multi-million dollar real estate investor and didn’t pay personal income taxes 9 out of the last 10 years. An effective tax rate of ZERO. Must be nice…..
Oldskool // Sep 2, 2010 at 9:14 pm
An effective tax rate of ZERO. And those zero rate people are subsidized by the people living on the edge of poverty who will tell anyone who listen that when the rich get richer, they do better too… and so they go to the polls and pull the lever for the people who told them so.
llbroo49 // Sep 2, 2010 at 9:16 pm
dante // Sep 2, 2010 at 8:58 pm
I don’t know if it is Constitutional, but I think a good idea would be to let the Treasury Department make factual tax rate reccommendations to Congress and to force them to vote on it. Or perhaps the CBO could propose budgets to Congress. As it currently stands we are told by politican that we should raise or lower taxes with very little understanding of the impact on current or future budgets.
Instead we allow politicians with little or no economic or financial backgrounds (admittedly they have professionals on their staffs- but they are inclined to provide the reccommendations their bosses want to hear) dictate the make up of our budgets.
Lastly, both parties should treat SS the way they make corporations treat pension funds.
Having said that – the first thing either the CBO or Treasury department should do is look at the Laffer curve and for once determine what is the ideal tax rate.
LauraNo // Sep 3, 2010 at 9:35 am
jabbermule managed to be wrong in everything he/she said. He should probably change his name and try again.
Watusie // Sep 3, 2010 at 9:49 am
LOL – jabbermule claims to know about “the real business world” and then proceeds to blame the subprime crisis on Acorn and the CRA. Dude – no one told the mortgage companies to create no-documentations loans, or to actively encourage people to lie on their applications; furthermore, neither Acorn nor the CRA had much interest in McMansions in the suburbs.
And then there is this:
Biggest Defaulters on Mortgages Are the Rich
LOS ALTOS, Calif. — No need for tears, but the well-off are losing their master suites and saying goodbye to their wine cellars.
The housing bust that began among the working class in remote subdivisions and quickly progressed to the suburban middle class is striking the upper class in privileged enclaves like this one in Silicon Valley.
Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.
More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.
By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.
http://www.nytimes.com/2010/07/09/business/economy/09rich.html?_r=2&hp
So much for your knowledge about “the real business world”.