Arthur Laffer & The End of Prosperity

Commentary by Timothy Horrigan; October 27, 2008


Original URL: http://www.youtube.com/watch?v=u6JmEdG9oL0

I gratuitously dragged Arthur Laffer's name into an October 10, 2008 DailyKos diary about the New Hampshire First Congressional District race. I was criticizing Republican Jeb Bradley for continuing to spout supply side economic cliches even as the supply-side economy was collapsing.

I was a student of Arthur B. Laffer at the USC business school. He is regarded by many (though not by himself personally) as the inventor of supply side economics. He is widely credited as the authority for the common (and erroneous) assertion that raising taxes is never good and that lowering taxes always leads to more growth and higher tax revenues. His theories are actually much more subtle than that: he doesn't just believe that taxes should be low, he also believes that taxes should encourage activities which contribute positively to the economy and that government should only the things which it can do better than the private sector. I am a far-left liberal who is not opposed on principle to raising taxes, but I still agree with my former mentor on most economic issues.

He picked a time which is either very bad or very good to release his first trade book in many years: it is aptly entitled The End of Prosperity.

On or shortly before October 21, 2008, he appeared on FoxNews to plug his book. He said that he was voting for McCain even though McCain's support of the bailout made no sense to him. He also said both candidate "seem like "fine, fine people." (This reminds of one of the classes I took with him, back in 1984. Even though he had been President Reagan's economic advisor, he frequently made a point of saying what a good man Walter Mondale was. In fact I think was quite fond of Mondale.) This intro has dragged on too long already, but I take issue with one thing he says, which is that helping one person always harms someone else. Sometimes, helping one person helps everyone else as well, and I think the bailout (even though I urged Congresswoman Carol Shea-Porter to vote against the bills which the Congress voted on) is such a situation. Having the government and the stronger financial institutions step into keep banks from collapsing and individual borrowers from going broke is something which in the long run benefits everyone, including the government and the surviving banks. And in the short run, the harm is going to be relatively bearable.

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