I met Arthur Laffer in July of this year, at the Libertarians FreedomFest Convention in Las Vegas. I found him to be, by far, the most entertaining and provocative speaker (He is also, btw, a HUGE illegal immigration supporter). Since then, I added him to my “Must Read Anything They Write” list of economists. So I was excited to find this interview of Arthur Laffer, though surprised to find him say this:
The evidence I cited there on Kennedy, it’s clear. Kennedy went from a deficit to a surplus with the tax cuts and the pro-growth policies. I do not believe that was luck. I don’t believe that Reagan was luck. I don’t believe that Bill Clinton was luck. I think Clinton did a great job as president.
One income tax cut that almost cost him almost everything. Then he became more Reagan than Reagan the day afterwards. He lost the House, he lost the Senate, he lost the governorships, he lost the state legislatures. And then he became more Reagan than Reagan: He got Nafta through Congress, against the unions, against his own party. He reappointed Reagan’s Fed chairman twice. He signed welfare reform, that you actually have to look for a job to get welfare. He cut government spending as a share of GDP by 3.5 percentage points. No president ever has come anywhere near him on that. He had the biggest capital gains tax cut in our nation’s history in ’97. He got rid of the retirement test on Social Security. This guy was a great president and I voted for him twice.
An argument I have made several times in the past – Bill Clinton was one of the best conservative Presidents this country has had in a long time (speaking w.r.t. economics, not social issues).
He gets even better, he states:
What Chait did in his article was he said the income disparity has increased dramatically. I’ll stipulate that, counselor. There’s no question that income disparity has risen. I don’t mind rich people making more money. That doesn’t bother me. What bothers me is poor people making less money. That bothers me a lot.
Now the question is, how do you raise the income levels of the lowest group? If you wanted to reduce income distribution discrepancies, let me go to the extreme, you would reduce it to zero. Everyone who made above the average wage, you would tax them 100% of the excess. And everyone who made below the average wage, you’d subsidize them up to the average wage.
That will reduce income discrepancies. That will. But you’ll have everyone making the same at zero. And that’s intolerable.
I don’t believe that Chait and these other people are aware or care about that by reducing the incomes of the upper incomes you’re going to lower the incomes of the lower incomes. That I really believe is true. That to me is far more important than any goddamned Laffer curve. I don’t mind running deficits, if you make people better off. Do you?
It’s what you’re investing the money in. With Reagan it ended up looking like a good investment to spend all that money on the military.
And with Clinton he did it perfectly correctly paying down the debt. He didn’t need the money. What Clinton did was he gave Bush the fiscal flexibility to do what was right, fiscally. By the time Bush took office on Jan. 20, 2001, we were in the midst of a real problem. The market had been crashing for a year. And then we get bombed 8 months later. What was the guy supposed to do? Raise taxes on the last three people working? He needed to stimulate the economy and spend for defense spending, and Clinton gave him the ability to do that. I mean, my hat’s off to Clinton. As I told you I voted for him twice.
As I said, Art Laffer is a must read. I wish he would write a book explaining his overall view of the economy, I’d immediately put it at the top of my reading list.