Laffer’s curve changes America’s economic trajectory
By Jim Waters
President Trump could not have chosen a more worthy recipient for the Presidential Medal of Freedom than Art Laffer — arguably America’s greatest champion ever of low taxes and tax rates.
Neither could he have chosen a better time to hang the nation’s highest civilian honor around this patriot’s neck as America’s economy continues its record period of growth.
“Unemployment is close to a half-century low and inflation is so subdued that some have pronounced it dead,” Bloomberg on June 16.
Considering these two economic gauges added together to determine the “misery index,” Justin Waring, an investment strategist at UBS in New York, told the online publication that the latest economic results indicate “Americans are less miserable than they’ve ever been.”
Well, most Americans anyhow.
Whereas lower misery indexes cause incumbents’ approval ratings to rise, the correlation between such increasing support and progressives’ rising misery in general is undeniable.
The root of this misery can be found in the progressives’ passionate need to convince Americans that tax rates don’t matter and tax cuts favor only the wealthy.
Yet Laffer’s economic model, which history has repeatedly confirmed, leaves little doubt that raising taxes too high reduces the incentive for people to work and produce.
President Reagan, who worked in Hollywood when Laffer first drew his curve and whom the economist would later advise during his presidency – claimed he quit making movies because the tax rate exceeded 90 percent and making another movie just wasn’t worth it.
Leftists become unhinged at the thought that the Laffer Curve, which revolutionized modern conservatives’ approach toward the economy and was drawn on a napkin while Laffer dined with President Gerald Ford’s economic advisers 35 years ago, has changed the overall trajectory of America’s economy since that time.
“We’ve been taxing work, output and income and subsidizing non-work, leisure and un-/employment,” Laffer scribbled on the napkin now displayed in the Smithsonian. “The consequences are obvious!”
Kentucky’s political leaders might want to take another glance at that napkin.
Our commonwealth still punishes productivity with punitive income taxes while one-third of our population is disincentivized through previous Gov. Steve Beshear’s Medicaid expansion which has led to taxpayer-supported subsidies to avoid work and its accompanying insurance.
Leftists jealously lash out in frustration at their own inability to match the simplicity found on Laffer’s napkin or the effectiveness of such economically conservative principles even though one of their own Democratic heroes displayed the powerful consequences of taking this curve long before it was ever drawn
President John F. Kennedy, who successfully stared down the Soviet Union during the Cuban missile crisis, also faced down America’s greatest economic enemy – a recession forecasted to take hold in 1962.
After Kennedy cut individual federal income tax rates by a whopping 21% — from 91% to 70% — there was an eight-year run of 5.1% economic growth with no recessions, even though such downturns had occurred every two to three years since World War ll had ended.
While Kennedy’s plan also reduced federal income taxes by 20%, it was his reduction in tax rates, which — like Reagan’s similar approach later — would pull the nation out of the economic doldrums and fling open the doors of economic prosperity.
Leftists frequently employ racial politics and emotional drama based on victimization and entitlement, which have produced disastrous results in America’s history such as the big-government Great (Disaster) Society program implemented by Kennedy successor Lyndon Johnson.
Conservatives’ successes, however, are more often rooted in principles resulting in positive results from the past rather than personality and ideology.
For example, the fact that Trump’s approach involved the same Laffer-curve principles in the form of cutting both taxes and tax rates is a story at least as big and as loud as the current president’s personality or bombast.
Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. He can be reached at firstname.lastname@example.org and @bipps on Twitter.