Art Laffer
Arthur Laffer 2019.jpg
Laffer at the White House in 2019
Born
Arthur Betz Laffer

(1940-08-14) August 14, 1940 (age 81)
FieldPolitical economics
School or
tradition
Supply-side economics
Alma materYale University (BA)
Stanford University (MBA, PhD)
Doctoral
advisor
Ronald McKinnon
ContributionsLaffer curve
AwardsPresidential Medal of Freedom (2019)

Arthur Betz Laffer (/ˈlæfər/;[1] born August 14, 1940) is an American economist and author who first gained prominence during the Reagan administration as a member of Reagan's Economic Policy Advisory Board (1981–1989). Laffer is best known for the Laffer curve, an illustration of the concept that there exists some tax rate between 0% and 100% that will result in maximum tax revenue for government. In certain circumstances, this would allow governments to cut taxes, and simultaneously increase revenue and economic growth.

Laffer was an economic advisor to Donald Trump's 2016 presidential campaign.[2] On June 19, 2019, President Donald Trump awarded Laffer with the Presidential Medal of Freedom for his contributions in the field of economics.[3]

Early life and education

Laffer was born in Youngstown, Ohio, the son of Marian Amelia "Molly" (née Betz), a homemaker and politician, and William Gillespie Laffer, president of the Clevite Corporation. He was raised in the Cleveland, Ohio area.[4][5][6] He is a Presbyterian,[7] and graduated from Cleveland's University School high school in 1958.[8] Laffer earned a B.A. in economics from Yale University (1963) and an M.B.A. (1965) and a Ph.D. in economics (1972) from Stanford University.[9]

Academia

Laffer was an Associate Professor of Business Economics at the University of Chicago from 1970 to 1976 and a member of the Chicago faculty from 1967 through 1976.[10] From 1976 to 1984 Laffer held the status as the Charles B. Thornton Professor of Business Economics at the University of Southern California School of Business.[11] During this time Laffer helped pass Proposition 13, the California initiative that drastically cut property taxes in the state in 1978.[12] In the mid-1980s, Laffer was the Distinguished University Professor at Pepperdine University in Malibu, and a member of the Pepperdine Board of Directors.[13]

Politics

Laffer was the first to hold the title of Chief Economist at the Office of Management and Budget (OMB) under George Shultz from October 1970 to July 1972.[13] During the years 1972 to 1977, Laffer was a consultant to Secretary of the Treasury William Simon, Secretary of Defense Donald Rumsfeld and Secretary of the Treasury George Shultz.[14]

Laffer was a member of President Reagan's Economic Policy Advisory Board for both of his terms (1981–1989) and was a founding member of the Reagan Executive Advisory Committee for the presidential race of 1980.[15] Laffer served as a member of the Executive Committee of the Reagan/Bush Finance Committee in 1984.[13]

In 1986, Laffer was a candidate for the Republican nomination for the U.S. Senate—which he lost in the California primary to U.S. Congressman Ed Zschau, who lost in the general election to the incumbent, Democrat Alan Cranston.[16] Laffer identifies himself as a staunch fiscal conservative. However, he has stated publicly that he voted for President Bill Clinton in 1992 and 1996.[17] Laffer references President Clinton's conservative fiscal and unregulated market policies as cornerstones of his support.[18]

In 2018, Laffer wrote the book Trumponomics with conservative economic commentator Stephen Moore, wherein they lauded the Trump administration's economic policies.[19] In the book, Moore and Laffer argue that the Trump administration's 2017 tax plan would raise growth rates to as much as 6% and not increase budget deficits.[19] In a 2019 review of the book, Greg Mankiw, a conservative economics professor at Harvard University, characterized Laffer and Moore as "rah-rah partisans" who "do not build their analysis on the foundation of professional consensus or serious studies from peer-reviewed journals...The Laffer curve is undeniable as a matter of economic theory. There is certainly some level of taxation at which cutting tax rates would be win-win. But few economists believe that tax rates in the United States have reached such heights in recent years; to the contrary, they are likely below the revenue-maximizing level."[19][20] The one issue where Moore and Laffer disagree with Trump is on the issue of free trade, which the duo supports.[19] Previously, in 2016, Laffer said that he believed that then-candidate Trump was "going to be okay on trade" and lauded Trump's understanding of trade.[21][22]

Laffer regularly writes opinion articles in The Wall Street Journal and The Washington Times.[23][24]

On April 15, 2019, Laffer blamed the Great Recession on Barack Obama, "who I believe was the reason why we had the Great Recession. As he got closer and closer to winning the markets collapsed."[25]

In 2020, Laffer advised the Trump administration on how to re-open the economy during the COVID-19 pandemic.[26][27][28] Laffer argued for halting stimulus, calling instead for payroll tax cuts.[29][30] He advocated for taxes on non-profit organizations in education and the arts, as well as for salary reductions for professors and government officials.[30] He argued against expansion of unemployment aid, arguing it discouraged people from working.[30]

Presidential Medal of Freedom

Laffer receives the Presidential Medal of Freedom from President Trump in 2019
Laffer receives the Presidential Medal of Freedom from President Trump in 2019

In 2019, President Trump awarded Laffer the Presidential Medal of Freedom, the nation's highest civilian honor.[3] The Trump White House said Laffer was receiving the award for "public service and contributions to economic policy that have helped spur prosperity for our Nation" and that Laffer was "one of the most influential economists in American history" due to popularizing the "Laffer Curve."[3] Trump praised Laffer for policies that he said brought "greater opportunity for all Americans."[31]

Laffer curve

Main article: Laffer curve

Although he does not claim to have invented the Laffer curve concept (Laffer, 2004), it was popularized with policy-makers following an afternoon meeting with Nixon/Ford Administration officials Dick Cheney and Donald Rumsfeld in 1974 in which he reportedly sketched the curve on a napkin to illustrate his argument.[32] The term "Laffer curve" was coined by Jude Wanniski, who was also present. The basic concept was not new; Laffer himself says he learned it from Ibn Khaldun and John Maynard Keynes.[33]

The Laffer curve is an economic theory that shows the relationship between tax rates and the amount of tax revenue collected by governments. The Laffer Curve shows that there is a certain point between 0% and 100% where tax revenues are maximized. The curve suggests that starting from zero, an increase in tax rates will increase the government's tax revenue; after a certain point, however, continuing to increase tax rates will cause a decrease in tax revenue.[16] This decrease in tax revenue can be explained by decreased incentives for work, production, etc.[34] Laffer's postulate was that the tax rate that maximizes revenue was at a much lower level than previously believed: so low that current tax rates were above the level where revenue is maximized. While many economists believe that government spending to stimulate demand for products should be the solution for a poorly performing economy, Laffer argues that heavy taxes and regulation impede production, and therefore, government revenue.[34]

Numerous leading economists have rejected the view that a tax rate cut of current federal U.S. income taxes can lead to increased tax revenue. When asked in a 2012 University of Chicago business school survey whether a "cut in federal income tax rates in the US right now would raise taxable income enough so that the annual total tax revenue would be higher within five years than without the tax cut", none of the economists surveyed agreed and 71% disagreed.[35] According to Greg Mankiw, most economists have been very skeptical of Laffer's contention that decreases in tax rates could increase tax revenue, at least in the United States. In his textbook, Mankiw states, "there was little evidence for Laffer's view that U.S. tax rates had in fact reached such extreme levels."[36] Under the direction of conservative economist Douglas Holtz-Eakin, the Congressional Budget Office conducted a 2005 study on the fiscal effects of a 10% cut in federal income tax rates, finding that it resulted in a significant net revenue loss.[37][38] Economist John Quiggin distinguishes between the Laffer curve and Laffer's analysis of tax rates, writing that the Laffer curve was "correct but unoriginal" and that Laffer's analysis that the United States was on the wrong side of the Laffer curve "was original but incorrect."[39]

Laffer was an economic adviser to Kansas Governor Sam Brownback, who in 2012 zeroed out state tax liability for approximately 330,000 of the top wage earners in the state, called the Kansas experiment, contending it would be a "shot of adrenaline into the heart of the Kansas economy."[40][41] Laffer was paid $75,000 to advise in the creation of Brownback's tax cut plan, and gave Brownback his full endorsement, stating that what Brownback was doing was "truly revolutionary"[42] and would bring "enormous prosperity" to Kansas.[41] The state, which had previously had a budget surplus, experienced a budget deficit of about $200 million in 2012. Drastic cuts to state funding for education and infrastructure were implemented to close budget deficits and the Kansas economy underperformed relative to neighboring states.[43] Brownback's tax overhaul was described in a June 2017 article in The Atlantic as the United States' "most aggressive experiment in conservative economic policy".[44] The drastic tax cuts had "threatened the viability of schools and infrastructure" in Kansas. A supermajority of lawmakers in the Kansas legislature, both Democrats and Republicans, repealed the tax cut in June 2017, overriding Brownback's veto.[44]

Awards and recognition

Awards that Laffer has received for his economic work:

Laffer has been widely acknowledged for his economic influence, including:

Publications

The following is a partial list of publications written primarily by Laffer, with co-authors indicated, in order by date:

Laffer has written two children's books with Michelle A. Balconi: "Let’s Chat About Economics" (2014) and "Let’s Chat About Democracy" (2017).[53]

References

  1. ^ "Laffer curve | Define Laffer curve at Dictionary.com". Dictionary.reference.com. Retrieved December 13, 2012.
  2. ^ Advisors to Trump
  3. ^ a b c "President Donald J. Trump to Award the Medal of Freedom". The White House. Retrieved June 20, 2019.
  4. ^ Armstrong, Alice Catt (1994). Who's who in California – Alice Catt Armstrong – Google Books. Retrieved December 13, 2012.
  5. ^ "Betz, Marian Amelia (Molly)". Laufferproductions.com. Retrieved December 13, 2012.
  6. ^ "Arthur Laffer Fiance Of Traci Hickman". The New York Times. September 5, 1982.
  7. ^ Zonana, Victor F. (March 22, 1985). "Eyeing Senate Seat : Economist Laffer: Life in Fast Lane". Los Angeles Times.
  8. ^ "It's the Economy". University School Alumni Journal: Back Cover. May 2018.
  9. ^ Koba, Mark (September 22, 2011). "The Laffer Curve: CNBC Explains". www.cnbc.com. Retrieved January 28, 2019.
  10. ^ Tankersley, Jim (April 9, 2015). "Arthur Laffer has a never-ending supply of supply-side plans for GOP". Retrieved January 28, 2019.
  11. ^ a b c d e f g "FBN TV Personalities". Fox Business. Retrieved January 28, 2019.
  12. ^ "Arthur Laffer Is a Man with All the Reasons for a Big Tax Cut". PEOPLE.com. Retrieved January 28, 2019.
  13. ^ a b c "Arthur B. Laffer, PhD". Evidence Care. Retrieved January 28, 2019.
  14. ^ "NexPoint Residential Trust, Inc. Appoints Arthur Laffer and James Dondero to Board of Directors". www.businesswire.com. May 12, 2015. Retrieved January 28, 2019.
  15. ^ "Arthur Laffer Speaker Pricing & Availability from AEI Speakers Bureau". AEI Speakers Bureau. Retrieved January 28, 2019.
  16. ^ a b "Arthur B. Laffer | American economist". Encyclopedia Britannica. Retrieved January 28, 2019.
  17. ^ "Up, Up and Away: The Art Laffer Interview « Yale62.org". Yale1962.org. Retrieved December 13, 2012.
  18. ^ Arthur B. Laffer and Stephen Moore,Return to Prosperity, Threshold Editions, p. 26, Feb 2010
  19. ^ a b c d "Snake-Oil Economics". Foreign Affairs : America and the World. No. January/February 2019. January 29, 2019. ISSN 0015-7120. Retrieved March 23, 2019.
  20. ^ https://scholar.harvard.edu/files/mankiw/files/snake-oil_economics.pdf[bare URL PDF]
  21. ^ Jagoda, Naomi (June 21, 2016). "Economist Laffer defends Trump on trade". TheHill. Retrieved April 17, 2019.
  22. ^ "Trump to award Medal of Freedom to tax-cut guru Arthur Laffer". www.cbsnews.com. Retrieved May 31, 2019.
  23. ^ Laffer, Arthur (October 19, 2011). "Cain's Stimulating '9-9-9' Tax Reform". The Wall Street Journal. Retrieved November 14, 2011.
  24. ^ http://www.washingtontimes.com, The Washington Times. "STEPHEN MOORE: What the economy needs now". The Washington Times. Retrieved June 6, 2016. ((cite web)): External link in |last= (help)
  25. ^ "Fox "straight news" guest says Bernie Sanders being elected president would cause a total market collapse". Media Matters for America. April 15, 2019.
  26. ^ "Conservative groups advising White House push fast reopening, not testing". Reuters. May 2, 2020. Retrieved May 21, 2020.
  27. ^ "34 days of pandemic: Inside Trump's desperate attempts to reopen America". The Washington Post. 2020.
  28. ^ "Reopening the economy vs. keeping it shut longer. What's more costly?". Los Angeles Times. April 23, 2020. Retrieved May 21, 2020.
  29. ^ Reuters (May 1, 2020). "Conservative Groups Advising White House Push Fast Reopening, Not Testing". The New York Times. ISSN 0362-4331. Retrieved May 14, 2020.
  30. ^ a b c Zeballos-Roig, Joseph. "A former Reagan economist wants to slash the salaries of professors and public officials — while simultaneously proposing tax cuts to stimulate the coronavirus-stricken economy". Business Insider. Retrieved May 21, 2020.
  31. ^ Tankersley, Jim (June 19, 2019). "Trump Awards Presidential Medal of Freedom to Arthur Laffer, Tax-Cut Guru". The New York Times. ISSN 0362-4331. Retrieved June 20, 2019.
  32. ^ "To Donald Rumsfeld". Polyconomics.com. Archived from the original on May 3, 2011. Retrieved December 13, 2012.
  33. ^ "The Laffer Curve: Past, Present, and Future". Heritage.org. Retrieved December 13, 2012.
  34. ^ a b Kenton, Will. "Laffer Curve". Investopedia. Retrieved January 28, 2019.
  35. ^ Popp Berman, Elizabeth (June 1, 2019). "Trump is giving Arthur Laffer the Presidential Medal of Freedom. Economists aren't smiling". The Washington Post.
  36. ^ Mankiw, Greg (2014). Principles of Economics. Cengage. pp. 164–165.
  37. ^ Leonhardt, David (April 23, 2008). "Weighing a McCain Economist". New York Times.
  38. ^ Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates, Congressional Budget Office, December 1, 2005:https://www.cbo.gov/sites/default/files/109th-congress-2005-2006/reports/12-01-10percenttaxcut.pdf
  39. ^ Quiggin, John (May 21, 2012). Zombie Economics. Princeton University Press. p. 142. doi:10.2307/j.ctt7rg7m. ISBN 978-1-4008-4208-7.
  40. ^ Topeka Capital Journal, 2013
  41. ^ a b Willaim G. Gale (November 29, 2017). "What Congressional Tax Cutters Can Learn From Kansas". Tax Policy Center.
  42. ^ Alvord, Daniel R. (March 1, 2020). "What Matters to Kansas: Small Business and the Defeat of the Kansas Tax Experiment". Politics & Society. 48 (1): 27–66. doi:10.1177/0032329219894788. ISSN 0032-3292.
  43. ^ Kansas City Star, 2015
  44. ^ a b Berman, Russell (June 7, 2017). "The Death of Kansas's Conservative Experiment". The Atlantic. Retrieved June 7, 2017.
  45. ^ "Arthur Laffer and Horace Fleming Appointed Distinguished University Professors". Mercer News. May 20, 2008. Retrieved January 28, 2019.
  46. ^ "LAFFER, Arthur B." TaxCOOP. Retrieved January 28, 2019.
  47. ^ Fernández, Federico N. (December 6, 2016). "Arthur Laffer: 2016 Hayek Lifetime Achievement Award Recipient". Medium. Retrieved January 28, 2019.
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  51. ^ "The 85 Most Disruptive Ideas In Our History".
  52. ^ Bloomberg, Dick Cheney, Donald Rumsfeld and Arthur Laffer on the Dinner Napkin that Changed the Economy, retrieved January 28, 2019
  53. ^ "Let's Chat Books".