Tag Archives: economics

Why does anyone still listen to Arthur Laffer?

When I first started studying politics seriously, I read about Arthur Laffer. He is the economic guru behind supply-side economics. He was in fact the intellectual power behind Reagan’s plan to cut taxes for the wealthy so everybody will profit.  To be honest, I don’t know that he has been wrong about everything. Nobody can be wrong about everything, but he has been wrong about most things. Look, as far as I’m concerned, Arthur Laffer may be a great guy. He has, however, led us on a 30-year misguided adventure which has drained our public coffers and has simply killed the middle class. Trickle down economics has now been proven not to work. It never worked. It never made sense.

Paul Krugman has more:

Jim Tankersley has a good article on Arthur Laffer’s never-stronger influence on the Republican party, with just one seriously misleading statement:

Laffer’s ideas have also grown out of fashion with much of the mainstream economic community. There is an entire branch of economic literature that uses detailed equations to show cutting top tax rates does not spark additional growth.

No, Laffer hasn’t “grown out of fashion” with mainstream economics — he was never in fashion. There was never any evidence to support strong supply-side claims about the marvels of tax cuts and the horrors of tax increases; even freshwater macroeconomists, despite their willingness to believe foolish things, never went down that road.

And nothing in the experience of the past 35 years has made Lafferism any more credible. Since the 1970s there have been four big changes in the effective tax rate on the top 1 percent: the Reagan cut, the Clinton hike, the Bush cut, and the Obama hike. Republicans are fixated on the boom that followed the 1981 tax cut (which had much more to do with monetary policy, but never mind). But they predicted dire effects from the Clinton hike; instead we had a boom that eclipsed Reagan’s. They predicted wonderful things from the Bush tax cuts; instead we got an unimpressive expansion followed by a devastating crash. And they predicted terrible things from the tax rise after Obama’s reelection; instead we got the best job growth since 1999.

And when I say “they predicted”, I especially mean Laffer himself, who has a truly extraordinary record of being wrong at crucial turning points. As Bruce Bartlett pointed out a few years ago, Laffer was even wrong during the Reagan years: he predicted that the Reagan tax hikes of 1982, which partially reversed earlier cuts, would cripple the economy; “morning in America” promptly followed. Oh, and let’s not forget his 2009 warnings about soaring interest rates and inflation.

The question you should ask, then, is why this always-wrong economic doctrine now has a stronger grip on the GOP than ever before.

It wasn’t always thus. George W. Bush’s inner circle clearly had little use for the likes of Laffer; they engaged in a lot of deceptive advertising about the economy (and a few other things), but they never made extravagant supply-side claims — and remember that Greg “charlatans and cranks” Mankiw served as chairman of the Council of Economic Advisers. But since 2009 the GOP has swerved hard right into fantasy land — and it has done so despite a remarkable string of dead-wrong predictions by the people peddling that fantasy. (more…)

 

President Obama on Trayvon Martin

Epic moment. Obama spoke about Trayvon Martin and race today.

Transcript:

I wanted to come out here, first of all, to tell you that Jay is prepared for all your questions and is very much looking forward to the session. The second thing is I want to let you know that over the next couple of weeks, there’s going to obviously be a whole range of issues — immigration, economics, et cetera — we’ll try to arrange a fuller press conference to address your questions.

The reason I actually wanted to come out today is not to take questions, but to speak to an issue that obviously has gotten a lot of attention over the course of the last week — the issue of the Trayvon Martin ruling. I gave a preliminary statement right after the ruling on Sunday. But watching the debate over the course of the last week, I thought it might be useful for me to expand on my thoughts a little bit.

First of all, I want to make sure that, once again, I send my thoughts and prayers, as well as Michelle’s, to the family of Trayvon Martin, and to remark on the incredible grace and dignity with which they’ve dealt with the entire situation. I can only imagine what they’re going through, and it’s remarkable how they’ve handled it.

The second thing I want to say is to reiterate what I said on Sunday, which is there’s going to be a lot of arguments about the legal issues in the case — I’ll let all the legal analysts and talking heads address those issues. The judge conducted the trial in a professional manner. The prosecution and the defense made their arguments. The juries were properly instructed that in a case such as this reasonable doubt was relevant, and they rendered a verdict. And once the jury has spoken, that’s how our system works. But I did want to just talk a little bit about context and how people have responded to it and how people are feeling. Continue reading President Obama on Trayvon Martin

Ronald Reagan and economics, Part 2

So a couple of days ago, I discussed Ronald Reagan and the economy because many Americans are under the impression that life was better under Reagan. I discussed real GDP per capita per year and found that Ronald Reagan wasn’t the best, nor even the second best. He was the third best president if we look at this economic indicator. So, today, I would like to get into something a little more personal than the GDP. Let’s look at real income.

Real median income is median income adjusted for inflation.

Just from the naked eye, we can see that it looks as if real median income took off during the Kennedy/Johnson administrations. Americans also did well during the Clinton and Reagan administrations. Again, if we look at real median income per capita per year, we come up with exactly what the naked eye is seeing in the above graph. John F. Kennedy/ London Baines Johnson came in first with 3.48 percent per year. Bill Clinton came in second with 2.49% per year. Finally, Reagan came in third with 2.45% per year.

So with these two real world measures of the economy, Reagan doesn’t come in first or second. He was the third best president in the last 50 years with regards to economic performance. Third. (Check some more facts in the book Presimetrics.)