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Arthur Laffer ( Scroll down to last post to comment)

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Arthur Laffer ( Scroll down to last post to comment)

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Greetings! I am Arthur Betz Laffer, an American economist, born on August 14, 1940, in Youngstown, Ohio (which means I am 78 years old). My mother is Marian Amelia, a politician and my father is William Gillespie Laffer. I dedicated my life in the field of political economics, and more specifically the supply-side economics. I was known for the Laffer curve where I investigate the tax rate and the government revenue. I was also an advisor for Donald Trump's presidential campaign back in 2016. Trump is an intelligent man who I truly believe will shed new light on America.

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I was raised in Ohio Cleveland. In year 1958, I Graduated from Hawken School High school, when I was 18 years old. Later in life (from year 1965-1972 ), I earned a B.A in Yale University in 1963 and M.B.A and Ph.D. In Stanford university.

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After I graduated, I went to work at the University of Chicago from 1967 to 1976, becoming an Associate Professor of Business Economics in the year 1970. From then till 1984, I became an actual professor at the University of Southern California School of Business. In this period of time, I assisted the passing of Proposition 13, the initiative that remarkably cut property taxes in the state of California in 1978. By the mid-1980s, I was already a Distinguished University Professor at Pepperdine University in Malibu, as well as a member of the Pepperdine Board of Directors.

It was my honor to be the first to hold the title of OMB, Chief Economist at the Office of Management and Budget, under George Shultz from October 1970 to July 1972. During the years 1972 to 1977, I was a consultant to Secretary of the Treasury William Simon, Secretary of Defense Donald Rumsfeld and Secretary of the Treasury George Shultz.

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Throughout my life I have over 40 publications. In year 2008 I wrote the book called The End of Prosperity: How Higher Taxes Will Doom the Economy—If We Let It Happen , with Stephen Moore  and Peter J. Tanous). This is a book I wrote during financial crisis, at that time the economy around the world is under depression. In this book, Stephen Moore, Peter J. Tanous and I focus on this economic issue, and through multiple arguments of the supply side economy, we were able to discussed about the policies and principles that America will need to bring back stability and prosperity.

Recently, in 2018, I wrote the book: Trumponomics: Inside the America First Plan to Revive Our Economy. This is a book I wrote with  Stephen Moore about Trump's economics policies, wee call it Trumponomics. It is a book about Trumps economic views and ideas. In this book, I talked about Trump's Idea of cutting personal and corporation taxes, and also to reform the trade deals.

I also wrote or contribute to books like Return to Prosperity: How America Can Regain Its Economic Superpower Status,  Handbook of Tobacco Taxation: Theory and Practice and Should We Tax the Rich More? The Munk Debate on Economic Inequality.

Here are a list of some of my publications:
"The Laffer Curve: Past, Present, and Future"
"Wealth of States: More Ways to Enhance Freedom, Opportunity and Growth"
"The Ellipse: An Explication of the Laffer Curve in a Two-Factor Model," "Heightened foreign competition only route for American prosperity,"

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View on the Government

“President Trump has been brilliant so far in negotiations. He told me long ago that it was going to work and this is exactly the way it works”

“He loves doing this. Trump is good at this and he’s done a great job so far. You gotta give it to him, this is going to be the year of free trade, brought on by Donald Trump"

"Who I believe was the reason why we had the Great Recession. As [Obama] got closer and closer to winning the markets collapsed."

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Throughout my lifetime I have won a number of awards for my works in economics. They range from awards for my article, services, speeches, books, profession, to awards of everything as a whole. Among those, there are a few that are the most memorable to me or I feel most honored to receive.

The Graham and Dodd Awards from the Financial Analyst Federation is quite significant to me because it was one of the earliest awards officials awards I've received. It was for outstanding feature articles published in the Financial Analysts Journal. In 2016, I received The Hayek Lifetime Achievement Award. Mr. Hayek is one of the most influential economists and a respectable senior. Till this day, I still struggle to find it real that back in December of 2017, I became the first recipient of the American Legislative Exchange Council's Laffer Award for Economic Excellence.

Aside from the awards, it warms my heart to also been acknowledged for my economic influence. I've been named by multiple credible sources such as The Wall Street Journal, Los Angeles Times, Institutional Investor, Time magazine, and Bloomberg Businessweek. These lists had been for the section for the most influential, the most memorable, the greatest minds, and the most disruptive ideas in the past century. These mentions span across time from the 80s to the past five years. Although I am just an old man now, I believe discoveries shall never end.

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The Laffer curve remains my most acclaimed achievement. As a supply-side economist, I believe that progressive income tax decreases people's incentive to work. Though it was generally believed that lowering income tax will reduce government's tax revenue, I demonstrated that it is not necessarily true.
Back in the 1970s, as the American economist, I began to advocate for lowering tax rates actually yielded a higher government revenue. This idea was inspired by antecedents such as John Maynard Keynes. It is important to note that I am not saying cutting income tax completely will raise tax revenue, merely stating that an optimal percentage would stimulate work and greater income of the workers would bring in more tax through the direct tax system. The key is to find the peak on the curve below. Fun fact: I wasn't didn't name this curve after me initially, the Laffer curve was a term coined by a wall street journal writer.
Please welcome the Laffer curve!

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Ever since this curve was developed, many years have passed and the US economy provided empirical evidence on whether the prediction is correct. It is found that the graph I have proposed is incorrect to a certain extent. The original graph I introduced is a symmetrical bell-shaped curve that peaks at around 50% tax rate. In reality, the effect of tax is also determined by the elasticity of the curve, which will not be in a parabola shape. The actual shape of the Laffer curve would be lope-sided depending on the economy. In the US, and other developed countries, the curve is skewed to the right. A 2011 paper by Trabandt and Uhlig estimated the Tax revenue would be maximized when the tax rate is at 70%. This is not consistent with my argument that a lower tax will actually generate more revenue, rather a higher tax rate will yield more revenue.

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https://www.newsmax.com/us/laffer-tax-gop-curve/2013/10/15/id/531181/
https://www.brainyquote.com/quotes/arthur_laffer_753447
https://www.forbes.com/sites/kenrapoza/2019/05/23/do-not-doubt-trumps-tariffs-on-all-made-in-china-goods/#3b49113f5479

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1. What is the proper role of government in the economy?
I think the government has the obligation to help our economy reach its full capacity. This means we should cut corporate tax, create new jobs, and place tariffs on import goods coming into the US.

2. Is inequality a major obstacle to growth?
I completely agree with Trump's policy to reduce tax and make new jobs. Although this act might make wealth inequality in the country worst than before, these acts would increase the GDP of a country, which is equivalent to economic growth. So no, wealth inequality is not an obstacle to growth, rather, it is a way to stimulate growth. It is a solid indication that our economy is as efficient as it should be. The ultimate economy I envision doesn't necessarily mean equality, but equity should be achieved through a free education system, allowing everyone an equal chance of achieving economic success.

3. Governments should always stay with a certain range of GDP to debt ratio and under no circumstances should they exceed it.

I agree with this. If what you owe is more than what you earn, how can that be healthy? I believe that my following my Laffer curve, which, accepts the assumption that tax rates are the main factor driving economic growth, there would be less debt. Sadly people have disagreed with me saying my curve will lead us further into debt because the maximum shouldn't be at 50%, but more skewed to the right, at 70%. Therefore, many argued that cutting debt will create a bigger ratio.

4. Should Central Banks raise and lower interest rates in order to reduce or expand consumption?

The current interest rates are way too high. I believe we should at least cut down the interest to 2%. Just think about it, the interest we have now is the highest interest rate in the past decade. The central bank definitely shouldn't have raise interest. The Fed had made a mistake when it raised interest rates. Low inflation demonstrates the central bank’s actions were unwarranted. Had the Fed left rates lower, the U.S. and global economies would be stronger.

5. Supply side and top down economics is the best way to stimulate long term growth.

I strongly believe supply side and top down economics is the best way to stimulate long term growth. Although not my creation, some have even called me the father of supply side economics. Supply side policies aim to enhance the productive capacities of an economy while improving the quality and quantity of the four factors of production: land, labor, capital, and entrepreneurship. While immigration policy, cultural shifts, or social issues matter, more important are what I call the four pillars of prosperity – monetary policy, trade policy, tax policy, and fiscal policy.

6. Economies would be better off without central banks and currency controls, markets should be self correcting.

Yes, the central bank shouldn't be interfering with the reserve ratio. It will slow down economic growth and given that our economy is self correcting, slowing economic output is an act of stupidity.

"Markets are set by borrowers and lenders"
"I'm a free trader "

7. Should Central Banks aim for 0% inflation?

I don't think that there is a general theory for inflation, I believe that
"inflation is not a simple thing to understand.”   Back in 2009, I published this article on the wall street journal predicting that inflation is coming back, but I was wrong, not only are the numbers I predicted wrong, my models are wrong. I think If you just focus on prices and interest rates you will be good, like as long as w keep the inflation low. Inflation is an area of economics that really "defies" calculations. In the US I think we are heading in a good direction, yeah.

8. Tax rates should be heavily progressive, taking from the rich to supplement social programs.

I think that tax should not be progressive because the rich will lose their incentive to work, and it is not beneficial to society as a whole. I believe "A lower rate and Broader base flat tax" is the best.  We should have one flat rate tax and we should use government spending to help with the other problems. I had a debate on this topic a while ago about the "correct " tax rate and I believe that a lower rate and Broader base flat tax" is what works. Check out this debate link. https://www.youtube.com/watch?v=z2WnMuIwoQQ (12:50)

we could be looking at the tax rate according to my Laffers Curve!  We want to earn tax revenue and use it for probably supplement social programs but we don't want to make rich people lose their incentive to work.

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Dear Laffer,

Hi, I’m Paul Krugman. It was great hearing your theories, although to be honest, there was never any evidence to support strong supply-side claims about that marvel of tax cuts and the horrors of tax increases. Nothing in the past 35 years has made Lafferism any more credible. We’ve seen various changes in the effective tax rate on the top 1%, like Clinton hike, and the Obama hike, and applying the tax system has clearly affected the economy—yes some positively, but mostly negatively. I believe that the tax cuts are going to be harmful to the nation. The tax cuts enlarged the budget deficit without improving the economy, and that they enriched the wealthy – worsening the income distributions.

Best wishes,
Paul Krugman

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Hi, first I would like to thank you for all your effort in trying to criticize "Lafferism", a term that is never heard of. It is also very unfortunate that you have been blinded by your own ignorance. You believe cutting taxes is harmful to the economy?  This is a misunderstanding on your own part, if you keep corporate taxes down then businesses will have more money to spend on research and development of new products and services, shifting the SRAS of our economy to the right. Even an IB year 1 student can understand such simple concept and apply it to the real world. With that being said, maybe you should reread what supply-side policies really aim for. In addition, inequality of income is a solid indication that our economy's output is increasing. Income equality is a fantasy that is never achievable, even in a communist society. Equity and free education for all in what we REALLY need.

- Laffer

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Dear Mr. Laffer,
I believe that we have the same vision for monetary policy as we both prioritize low, stable inflation and unemployment issues. I think that although the central bank should not be tempering with issues of required reserve ratio if it is not need be as it is a sledge hammer, it is a useful tool to implementing quick changes. I disagree with your viewpoint that current interest rates are too high, it is my opinion that under the expansionary fiscal policies that Donald Trump is implementing we are getting close and closer to full employment if not already beyond it. It is the high interest rates that are stopping us from entering an inflationary spiral.

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Hi Mr. Powell

It is great to hear that we have the similar views on monetary policies, prioritizing low inflation and unemployment! You mentioned that "the current interest rate is too high", I dont think so. I believe that Fed should lower short term interest rates. The Fed has always followed the in the bond market but not led them. I think that the chance of lowering interest rate is quite high and I believe that low interest rates can create a really strong economy.

-Arthur Laffer.

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Dear Mr. Laffer,

Though you have some good works, your ideas on government roles and the effectiveness of monetary policy should be evaluated again. Government are the governing body of a nation, and their role is not to interfere with the free-market. Their role should be, instead, limited to enforcing the law and providing a measure of defense, not controlling our economy. Secondly, monetary policy, and thus the central bank, should be the the factor to maintaining price levels in the economy. However, I do believe that the central bank should not increase demand by injecting money, as this will inevitably result in sustained increases in price level.

Milton Friedman

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Hi Mr. Friedman, that is complete non-sense. What do you think will happen to the economy if the government did not step in to help out the financial crisis in 2008?

- Arthur Laffer

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Mr. Laffer,

I’m very glad to hear that you are a fan of mine. Although I do agree with some of your ideas, there is one that I cannot support. Government’s should not have such a large role in the economy, as this leads to totalitarianism. I stand by my belief that governments should only be limited to maintaining the law, keeping intervention in the economy at a minimum. When you say that governments should “cut corporate tax, create new jobs, and place tariffs on import goods coming into the US”, I disagree. We should let the market run free, as government intervention with the goal to improve the economy might come with consequences. However, I do agree with your idea that the central bank should not be interfering with the reserve ratio, as the economy is self-correcting. I also agree with your quote that markets are set by borrowers and lenders. In the end, it is the free market that will be the one to succeed!

-F.A. Hayek

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Hi Mr. Hayek,
I'm glad to hear that there are some ideas that we agree on! I understand your concerns come from for government intervention, but please realize that you are going down the slippery slope fallacy. Just because we let the government have some control in the economy doesn't mean they going to control everything. Although I too very much like the idea of free markets, they can be slow and messy at time. There are a lot of citizens that need help that the free market isn't going to provide. This is why we need the government to come in.

Sincerely,
Laffer

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Hello Mr. Laffer, I am Irving Fisher.
I am very impressed and interested on your theories and approaches to the economy through supply side policies. However, it seems like you don't really focus on taxations, interest rates, and economic growth, which is a concern to me since I am a monetary economist. One of my major theories, the Fisher hypothesis, focuses on the effect on money that interest rates pose, ultimately affecting the present and future through savings and investments. So I was wondering your thoughts on approaching the macroeconomics goals through interest rates.

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Hi Mr. Fisher,
Thank you for the comment. My apologies if I hadn't been clear, but my main study, the Laffer curve, is entirely on tax. The Laffer curve is a representation of the relationship between rates of taxation and the resulting levels of government revenue. The aim of this curve is to find the ideal place where people won't lose work ethic from being tax too high (meaning they have money for consumption), and where the government can collect more revenue (which they can help balance wage gaps or decrease the debt ratio). Although I think tax rates are the main factor driving economic growth, I do believe lower interest rates are better.

Sincerely,
Laffer