Arthur Laffer - the Happy Supply-Sider
Interview with economist Arthur
Laffer by Bill Steigerwald
By Bill Steigerwald
August 15, 2005
Last time I talked to economist Arthur Laffer was in 1979 when
I interviewed him at the University of Southern California in
Los Angeles. In those miserable economic times, before he was
dubbed "The Father of Supply-Side Economics," Laffer
was considered a kook by the liberal econ-establishment for pushing
his idea that cutting taxes in certain circumstances can simultaneously
stimulate economic growth and put more tax revenue into government
coffers. Today his famous "Laffer Curve" is no longer
ridiculed, and the former member of President Reagan's Economic
Policy Advisory Board is famed for sparking a worldwide tax-cutting
revolution. I talked to him by telephone from his home in San
Q: How do you define your politics?
A: I'm pro-growth. I'm Democrat when Democrats are into pro-growth,
and I'm Republican when they are. I vote the issues really hard-core,
and they're all economic issues. That doesn't mean that I don't
have strong views on social issues. That's just not where government
is involved in my life.
Q: What grade do you give Bush
A: I'm really shocked by it. As you probably know, I was not
a fan of his father's. I voted for Clinton twice. I really thought
Bush (the elder) and Bob Dole were tax collectors for the welfare
state. The reason I voted for Bush W. was more Al Gore than it
was Bush. And now I am just totally a fan. This guy is just incredibly
good at economics.
Q: You are not concerned about
the big deficits or the former steel tariffs?
A: Oh, the steel tariffs (were) terrible. They're embarrassing.
By putting on steel tariffs, what you do is cause U.S. companies
that buy steel to pay higher prices for lower-quality steel.
Now you tell me what happens to the American automobile industry
and the other products that use steel as an import? I was born
and raised in Youngstown, and I know steel pretty well. It does
not help America, it doesn't help steel, and it doesn't help
Youngstown. It hurts everyone.
Q: The biggest economic issue
of the moment?
A: I like low, flat-rate taxes. I like sound money. I like free
trade. And I like minimal regulation for serving social purposes.
Q: Is that a definition of
A: (It's) the supply-side definition in each of the major areas
of macroeconomics. There are four areas: fiscal policy, monetary
policy, trade policy and a sort of catchall, incomes policy.
Those are all the indirect ways government affects business --
regulations, restrictions, minimum wage, wage and prices, etc.
Q: What's something that's
true about economics right now that every layperson should know
A: If you tax people who work and you pay people who don't work,
do not be surprised if you find a lot of people choosing not
Q: What's the most prevalent
and most dangerous economic myth that the public believes that
needs to be debunked?
A: Bottom line, I think the public's got it.
A: I'm really impressed with the public. The electorate really
sees through all this crap. They understand free trade. They
understand low, flat-rate taxes. They understand sound money.
The electorate is really cool. I'm superbly impressed by democracy
-- and I'm not natively that way inclined, just so you know.
Q: I was going to ask you whether
the public and its leaders were getting smarter in economics.
I guess you answered it.
A: They've been great. Look at what's happening. Since that '79
interview we had, OK, let's take a look at what happened to marginal
tax rates. The highest rate has gone from what -- 70 percent
-- down to what, 35 percent? What's happened to inflation? What's
happened to regulation restrictions? What's happened to America
and the world? What's happened to the stock market? What's happened
to everything you and I believe in? Do you remember what unemployment
rates looked like back in 1979? Do you remember what the prime
was when Ronald Reagan came into office on Jan. 20, 1981? It
was 21 percent.
Q: This is a happy economist.
It's not dismal at all, is it?
A: I cannot believe how wonderful it is. When (Nobel Prize-winning
economist) Bob Mundell and I sat there at the University of Chicago
in 1967, '68 and '69, we dreamt of a world. That world is now.
Can you imagine a world with no inflation? Everything that's
happened. It's absolutely spectacular. I'm just so happy about
what's happened to this world. Don't you feel that way?
Q: I'm a libertarian, and I'll
probably never be satisfied. But I think in economics a lot of
people have gotten a lot smarter over the last 20 or 30 years.
A: If you look at (House Minority Leader) Nancy Pelosi and (Senate
Minority Leader) Harry Reid (on TV), they look really, really
uncomfortable. They were running everything in 1979. They had
the president, the Senate, the Supreme Court, the Fed chairman.
They had every damn position in the world. They had everything
-- the states, the houses, the governors. It was a Fabian redistributionist
nightmare. Now it's really beautiful. I'm an old man, and old
men are supposed to be curmudgeons and hate the modern day and
love the ancient. But the truth of the matter is, we've won.
Bill Steigerwald is
a columnist at the Pittsburgh Tribune- Review.
©Pittsburgh Tribune-Review, All Rights Reserved.
Distributed exclusively by Cagle Cartoons, Inc.
E-mail Bill at firstname.lastname@example.org
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