WHATEVER HAPPENED TO THE FOUNDER OF SUPPLY SIDE ECONOMICS?

Lim, Paul (2004) “Update: Arthur Laffer” U.S. NEWS & WORLD REPORT, July 19/ July 26, p. ee5

Urban legend has it that Laffer drew his famous economic curve on a napkin at the TWO CONTINENTS RESTRUANT in Washington D.C. in 1974. Both Donald Rumsfeld and Dick Cheney were there. Later, he presented the theory to the late President Ronald Reagan. The Laffer curve became the foundation for tax cuts to the wealthy. The overall premise is that tax cuts encourage economic growth.

Laffer claims not to remember the episode at the restaurant, but U.S. News does provide a photo of him presenting his theory to someone. The senior Bush (George H.W) called it “voodoo economics’ because he believed that it didn’t work. That statement was made when he was running against Ronald Reagan in the primaries. Once elected as vice president, Bush supported the tax policy. The Reagan administration ended on a 3 trillion dollar debt to be serviced by the next administration.

Critics maintain that tax cuts to the rich do not stimulate the economy as fast as cuts only to the middle class or spending on infrastructure and related where money quickly circulates through the economy. The younger Bush is an avid fan of Laffer. Laffer also consults with the Bush administration every financial quarter.

That is a problem, because Laffer voted for Clinton both times. One of the main agendas of Clinton’s program was to NOT use the Laffer curve. Taxes were raised on the top 1.3% and Clinton noted repeatedly that the tax cut money did not rain down on the rest of the population. Rather, the cuts were used to outsource and invest in overseas operations where the money invested is the most profitable.

Laffer ran for the senate in California in 1986. He has since been in and out of businesses and now consults on a management fund. He once sold Cadillacs. He also proposed a flat tax policy for Democrat Jerry Brown in his presidential quest in 1992.

Laffer work history has been checkered, but his name and theory are well known.