In a recent interview with Newsmax, Arthur Laffer stated that the only hope for America’s current economic crisis is to adopt “common sense” Reaganomics.
Laffer, an American economist and former member of President Reagan’s Economic Policy Advisory Board, is known for the Laffer Curve which helps calculate what tax rate between 1% and 100% provides the maximum amount of tax revenue for governments. He currently serves as Policy Co-Chairman of Free Enterprise Fund.
When asked about the current economic situation in the US, Laffer replied:
“There’s a wedge driven between wages paid and wages received and that wedge is the tax/government spending wedge.
“That wedge has grown dramatically in the last 4 ½ years…under W and a Republican administration and…under Obama. Bipartisan ignorance has led us to this very disastrously desolate state.”
Earlier this year, Laffer was asked to speak with Austen Goolsbee, at that time he was Obama’s chairman of the Council of Economic Advisors. Laffer, in the Newsmax interview, said that he told Goolsbee:
“Reaganomics would fix any economy that’s in the doldrums. It’s not a magic sauce, it’s common sense.
“You’ve got to get rid of all federal taxes in the extreme and replace them with a low-rate flat tax on business net sales, and on personal unadjusted gross income. That’s number one.
“Number two, you have to have spending restraint. Government spending causes unemployment, it does not cure unemployment.
“Number three, you need sound money. Ben Bernanke is running the least sound monetary policy I’ve ever heard of.
“Number four you need regulations, but you don’t need those regulations to go beyond the purpose at hand and create collateral damage. The regulatory policies are really way off here.
“And lastly you need free trade. Foreigners produce some things better than we do and we produce some things better than foreigners. It would be foolish in the extreme if we didn’t sell them those things we produce better than they do in exchange for those things they produce better than we do.”
Laffer not only agreed with the US credit downgrading by Standard and Poors, he feels it should have been done much earlier. He explained it this way:
“If you had a company that had revenues of $2½ million and expenses of $4 million, with no change in sight, $1½ million in losses each year as far as the eye can see and it had already borrowed $10 million, what would you rate that company? I surely wouldn’t rate it AAA.
“That is the U.S. situation today. Taxes are about $2½ trillion, government spending is about $4 trillion and we have about $10 trillion in net national debt. I don’t see that as being a AAA country.
“If the S&P and the others were doing their jobs correctly, they should have downgraded a long time ago.”
As for raising taxes, Laffer said:
“People don’t work to pay taxes, people work to get what they can after taxes. It’s that very private incentive that motivates them to work. If you pay people not to work and tax them if they do work, don’t be surprised if you find a lot of people not working.”
Laffer also had high praises for the Tea Party when he said:
“The tea party is not the problem, the tea party may well be the solution. They are critical to the future of the country in a positive way. They are the only fiscally sound people I know out there all the time.”
Obviously, Laffer’s advise given at the meeting with Goolsbee and Obama’s Council of Economic Advisors fell on deaf ears. Instead of listening to the sound advice of Reaganomics, Goolsbee resigned from his position and Obama continued to do things his way.
Since Obama and the Democrats refuse to listen to Laffer’s advice, one can only hope and pray that the Republican winner of the White House not only listens to him, but hires him to help get the nation’s economy back on track.