Free Republic

The 1930s has become the sole object lesson for today's monetary policy. Over the past 12 months, the Federal Reserve has increased the monetary base (bank reserves plus currency in circulation) by well over 100%. While currency in circulation has grown slightly, there's been an impressive 17-fold increase in bank reserves. The federal-funds target rate now stands at an all-time low range of zero to 25 basis points, with the 91-day Treasury bill yield equally low. All this has been done to avoid a liquidity crisis and a repeat of the mistakes that led to the Great Depression. Even with...

The Laffer Curve is a simple idea: a government can’t raise taxes forever and expect to increase revenue along the way. Eventually you’re taking so much in taxes that people don’t have any reason to earn income. The argument is simple (and correct): if you have zero tax rate you get zero tax revenue. If you raise taxes just a bit, nobody will be discouraged from working, and you will collect some amount of revenue; therefore, the curve of revenue versus tax rate starts at zero and initially rises. But if the tax rate is 100%, nobody has any reason...

Kurt Hauser is a San Francisco investment economist who, 15 years ago, published fresh and eye-opening data about the federal tax system. His findings imply that there are draconian constraints on the ability of tax-rate increases to generate fresh revenues. I think his discovery deserves to be called Hauser's Law Like science, economics advances as verifiable patterns are recognized and codified. On this page in 1993, he stated that "No matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5% of GDP." The chart nearby, updating the evidence to 2007, confirms Hauser's Law....

AMERICA’S recent history has been a relentless tilt to the West—of people, ideas, commerce and even political power. California and Texas, the nation’s two biggest states, are the twin poles of the West, but very different ones. For most of the 20th century the home of Silicon Valley and Hollywood has been the brainier, sexier, trendier of the two: its suburbs and freeways, its fads and foibles, its marvellous miscegenation have spread around the world. Texas, once a part of the Confederacy, has trailed behind: its cliché has been a conservative Christian in cowboy boots, much like a certain recent...

Rahm Emanuel was only giving voice to widespread political wisdom when he said that a crisis should never be "wasted." Crises enable vastly accelerated political agendas and initiatives scarcely conceivable under calmer circumstances. So it goes now. Here we stand more than a year into a grave economic crisis with a projected budget deficit of 13% of GDP. That's more than twice the size of the next largest deficit since World War II. And this projected deficit is the culmination of a year when the federal government, at taxpayers' expense, acquired enormous stakes in the banking, auto, mortgage, health-care and...

From Art Laffer, economist and inventor of the Laffer Curve, comes an excellent and timely piece explaining why we should all care about the death tax, its effect on society and on people's behavior: Spend it in Vegas or Die Paying Taxes President Barack Obama has proposed prolonging the federal estate tax rather than ending it in 2010, as is scheduled under current law. The president's plan would extend this year's $3.5 million exemption level and the 45% top rate. But will this really help America recover from recession and reduce our growing deficits? In order to assess the pros...

Arthur Laffer, an economic advisor to President Reagan, says the idea of a new world reserve currency has merit. Chinese officials recently proposed the concept. “What China is doing is amazing,” Laffer told Bloomberg TV. “China is taking a far better leadership role than I ever would have imagined.” China’s suggestion “is clearly in the right direction,” Laffer says.

Here is video from today of Neil Cavuto talking with famed conservative economist Arthur Laffer about how to best stimulate small business growth. As you might expect, Laffer, who was a chief economist for Ronald Reagan, disagrees completely with what Obama is doing. He believes cutting taxes is the key, and the Obama administration is only increasing future taxes for Americans with all the spending that is taking place. He used the image of Democrats being like "kids with their hands in the candy jar," unable to keep themselves from doing more and more to damage the economy with their...

I very seriously doubt that things could get worse if this man's advice was followed.

If President Obama wants to help the economy enormously - and make life simpler for countless Americans - he has a powerful tool at his disposal: the flat tax. My advice for him would be to push for an efficient, low-rate flat tax to replace the entire current maze of confusing, complicated, counterproductive federal taxes. If he succeeds, the results would be stunning. Obama certainly has both the political mandate and content of character to get this done. Remember, too, that the idea has a long pedigree in Democratic politics: Its origins lie with Presidents Harry Truman and John Kennedy...

Arthur Laffer of the famous Laffer curve comes across rather poorly. No conservative, he argues in favor of giving the government more money so it can do more.

This video of Peter Schiff debating Arthur Laffer back in 2006 has been making the rounds on the web. Schiff was Ron Paul's economic advisor during Paul's run for the Republican presidential nomination this year. Paul lost that race, but just about everything he predicted has come true in the interim. Paul's most depressing - in both the emotional and economic senses - prediction was that the U.S. couldn't maintain an economy based on the easy money flowing out of the Fed.

About a year ago Stephen Moore, Peter Tanous and I set about writing a book about our vision for the future entitled "The End of Prosperity." Little did we know then how appropriate its release would be earlier this month. Financial panics, if left alone, rarely cause much damage to the real economy, output, employment or production. Asset values fall sharply and wipe out those who borrowed and lent too much, thereby redistributing wealth from the foolish to the prudent. This process is the topic of Nassim Nicholas Taleb's book "Fooled by Randomness." David GothardWhen markets are free, asset values...

Just two weeks ago, a book on economic policy was released that will be a classic for the ages. Entitled The End of Prosperity, by Art Laffer, Steve Moore, and Peter J. Tanous, the book explains in full detail the economic disaster that will befall America if it takes a sharp left turn to neo-socialism under the leadership of the far left President Barack Obama, the ultraleft Speaker of the House Nancy Pelosi, Senate Majority Leader Harry Reid with 60 liberal Democrat Senators, and their pal the ultraliberal Howard Dean heading the Democrat party. Indeed, one of the insights of...

A seven and one half minute explanation of what the Laffer curve is. This is one of three parts; the remaining two have not been posted at YouTube yet. Enjoy! http://www.youtube.com/watch?v=fIqyCpCPrvU

Over the past 30 years, the U.S. has seen large changes in income tax rates as well as other tax rates. And, as would be expected, the budgetary implications of these tax changes have once again become a hotly debated partisan issue. But missing from the discussion are the huge differences in how the top 1% of income earners respond to changes in tax rates versus, say, the bottom 75% or 80% of taxpayers -- the so-called middle class and lowest income groups. The "rich" quite simply are not like the rest of us. (snip) The important point here is...

The choice is stark, according to a new report by economists Art Laffer and Steve Moore published by the American Legislative Exchange Council. State policymakers can choose growth and prosperity or they can choose economic hari-kari. During the 1990s, Arizona chose growth and prosperity. Where Arizona's total state and local tax burden had risen to 11.8 percent by 1991, it has since fallen to 10.3 percent. The result has been phenomenal growth and unparalleled peacetime economic opportunity for this state. Michigan, on the other hand, has chosen a different path in recent years. While that state historically had a lower...

If you're searching for the next big thing in American politics, it's wise to keep an eye on the states. Here's one possibility: the abolition of state income taxes. In Georgia, Missouri and South Carolina, Governors and state legislatures are drafting serious proposals to repeal their income taxes to promote economic development. St. Louis, one of America's most distressed cities, may overturn its wage/income tax as a way to spur urban revival. And in Michigan, the legislature is in the last stages of phasing out its hated business income tax -- the most onerous in the land. "States are now...

Although most economists keep insisting that their discipline is all about peaceful competition, it’s increasingly clear that they need to do violence to language and logic when defending today’s U.S. globalization policies. The latest example: Arthur B. Laffer’s recent suggestion in a Wall Street Journal article that the term "trade deficit" is a misnomer. Instead, insisted the "Father of Supply-Side Economics" and former guru to President Reagan, Americans should call their country’s bloated excess of imports over exports a "capital surplus" – reflecting the borrowing from abroad needed to sustain it. Unfortunately for the United States, word games can’t possibly...

... CBO informed lawmakers in May 2003 that the tax cuts would cost the treasury $94 billion in 2006. But it now appears that the cuts generated so much “unexpected” economic activity that the original CBO projection for 2006 was off by an astounding $124 billion! Add in last year’s underestimation of $89 billion, and the $25 billion oversight in 2004, and you have a cumulative CBO mistake that now totals $238 billion.

July 10, 2006 Edition Laffer's Victory New York Sun Editorial July 10, 2006 It's official — Arthur Laffer wins. New data show federal revenues surged in the first three quarters of the current fiscal year. Corporate tax receipts are up more than 26% over the same period last year, ringing in at $250 billion. Individual income tax collections, at $791 billion, are up 14% over the first nine months of fiscal 2005. The Congressional Budget Office projects corporate tax receipts will total $330 billion by the end of the fiscal year. As a result, the deficit for the year is...

WASHINGTON, 8 July — An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year, even though spending has climbed sharply because of the war in Iraq and the cost of hurricane relief. On Tuesday, White House officials are expected to announce that the tax receipts will be about $250 billion above last year's levels and that the deficit will be about $100 billion less than what they projected six months ago.

In this column, I'm focusing on bad economics. In fact, I'm going to write about what I consider to be the two worst economic ideas -- or at least ideas that pass as economics, though both have been thoroughly repudiated by nearly all credible thinkers. .... For the sake of political balance, I'll skewer a favorite of the right in this column, and then a favorite of the left in my next piece. The Laffer Curve Economist Arthur Laffer made a very interesting supposition: If tax rates are high enough, then cutting taxes might actually generate more revenue for the...

Stop Lying About Tax Cuts March 29, 2006 By Herman Cain Every good liberal will tell you that low tax rates cause tax revenues to drop, hurt the economy, benefit only the wealthy and cause skyrocketing budget deficits. A Wall Street Journal article last week blew a hole in those liberal lies. The Journal reported that federal tax revenues for the first five months of fiscal year 2006 are up 10.3 percent from the same period a year ago. The 2006 revenue growth adds to a 15 percent tax revenue increase from 2004 to 2005. This good fortune for U.S....

But how likely is it that the Laffer curve is causing revenues to rise, as opposed to normal operation of the business cycle? Not much, in my opinion. First of all, the Laffer curve came to prominence during a period when the top tax rate on dividends was 70 percent, and the rate on long-term capital gains was 40 percent. Economist Arthur Laffer correctly pointed out that a 100 percent tax rate would raise no revenue and that rates close to this would reduce revenue below what a lower rate would bring in. Given the tax rates in existence, it...

Ronald Reagan once said an economist is someone who sees something that works in practice and wonders if it would work in theory. So why is it that when confronted with a concept that works in both practice and theory, so many people refuse to believe it? The Laffer Curve, popularized by economist Arthur Laffer, says the government can maximize tax revenue by setting the tax rate at ... The logic is obvious on the ends of the spectrum: if the tax rate is 0%, the government collects no money. If it is 100%, people have no reason to earn,...

Increase of 2.8 cents a gallon will begin Jan. 1 -- the biggest one-time jump in nearly 20 years, the N.C. Department of Revenue told the Observer Thursday. The latest tax increase, to 29.9 cents a gallon, will push North Carolina from having the nation's eighth-highest state gas tax to the sixth. "They're imposing a higher tax when the pain will be getting worse," said Mark Cooper, research director for the Consumer Federation of America. Republican state lawmakers proposed capping the gas tax at 24.6 cents to ease the pain of pump prices that passed $3 after Hurricanes Katrina and...

Invented by Arthur Laffer, this curve shows the relationship between tax rates and tax revenue collected by governments... as taxes increase from low levels, tax revenue collected by the government also increases. It also shows that tax rates increasing after a certain point would cause people not to work as hard or not at all, thereby reducing tax revenue. Eventually, if tax rates reached 100% , then all people would choose not to work because everything they earned would go to the government.

The Laffer Curve in Action Can tax receipts rise if taxes are cut? Yes. Here’s more proof. By Jerry Bowyer Another month, another vindication of the Laffer curve. The Treasury Department has released its budget report for the month of November. The report shows that federal receipts for the last two months (the first two of fiscal year 2006) amount to $288 billion. This is up from the first two months of fiscal year 2005 ($271 billion), fiscal year 2004 ($254 billion), and fiscal year 2003 ($244 billion). In other words, federal tax receipts have risen over this time period...

Will someone please explain why the Bush White House and the Republican Congress are not trumpeting this economic boom on a daily basis? Their polls are sagging, but the economy is soaring. This simply shouldn’t be.

Can you imagine the Dow Jones Industrial Average at, say, 3000? Can you visualize inflation and interests in double digits? And per capita income maybe two-thirds of what it is now? It's not so difficult to see those things in your mind's eye -- provided you can also visualize the American people re-electing the 39th president, Jimmy Carter. Instead, 25 years ago today, on November 4, 1980, the voters in 44 states chose Ronald Reagan. So this day, like any happy anniversary, is worth celebrating. But in addition, we should remember that while Reagan demonstrated the importance of optimism, another...

WASHINGTON (AP) -- A record amount of tax revenue flowed into federal coffers in July, helping to keep the government on track to significantly lower the budget deficit this year. The Treasury Department reported Wednesday that revenue collections jumped 5.7 percent last month from a year ago, pushing total receipts to $142.09 billion, the largest amount ever collected by the federal government in the month of July. The Bush administration last month significantly lowered its estimate for this year's budget deficit - to $332.65 billion, down 22 percent from its February estimate that the deficit this year would total $427...

In 1970, Ohio had one of the lowest tax burdens in the Union--it now has one of the highest. As of 2005, the state's tax burden, as estimated by the Tax Foundation, is 35.8% higher than it was in 1970, the largest increase in the nation over this period. The next largest, 26.5% in Arkansas, was far smaller, and the average increase in the U.S. tax burden was just 3.1%. Over the past decade alone, Ohio's state and local government direct spending per $1,000 of personal income has risen 19.6%, by far the highest such spending growth in the region...

TAX CUTS--especially the supply-side tax cuts of May 2003--were the controversial center of the Bush administration's first-term economic policy. Most Democrats opposed most of the tax rate reductions. John Kerry promised to repeal many of them if elected president. The president, and Republicans running for the Senate and House, promised to make them permanent. (For reasons having to do with artificial out-year budget calculations, most of the Bush tax cuts are scheduled to expire over the next few years.)Bush won and Kerry lost. Republicans increased their margins in Congress. So a bill to make the tax cuts permanent should be...

As legend has it the famous Laffer Curve was first drawn by economist Arthur Laffer in 1974 on a cocktail napkin during a small dinner meeting... attended by the late Wall Street Journal editor Robert Bartley and such high-powered policy makers as Dick Cheney and Donald Rumsfeld. The Laffer Curve helped launch the Reaganomics Revolution here at home and a frenzy of tax rate cutting around the globe.... The theory is really one of the simplest concepts in economics. Yet its logic continues to elude the class-warfare lobby whose disbelief is unburdened by the multiple real-life examples which validate its...

When "W" ran for president in 2000, I voted for him but not enthusiastically. I had voted for Bill Clinton in the prior two presidential elections, but with Al Gore as the Democratic candidate in 2000 the choice was easy for me even if I wasn't all that excited about George Bush. I am now flabbergasted by the performance of Bush 43. George W. Bush could well turn out to be the best president in recent history. His inaugural address and his State of the Union speech were as good as any I've ever heard. He has also shown unbelievable...

An article titled "Laffering all the Way to the Bank" appeared in the National Review Online on April 30, 2004. It can be found online at http://www.nationalreview.com/nrof_buzzcharts/buzzcharts200404300829.asp. It contains a chart showing that federal tax receipts increased from $825 billion in the first half of fiscal year 2003 to $850 billion in the first half of fiscal year 2004. Following are the final two paragraphs of the article: President Bush’s most recent tax cut proves that tax rates were, in fact, too high. This is demonstrated through the simple fact that the first half of fiscal year 2004 is showing...

Laffer Lines Be discerning when reading explanations of the supply-side’s landmark curve. By Thomas E. Nugent Ever since Time magazine selected supply-side economist Arthur Laffer as one of the hundred greatest minds of the 20th century, economists, authors, and media commentators have attempted to define supply-side economics and the Laffer curve. As with any second-hand explanation of an “idea,” there are often distortions and misunderstandings. So, to be sure the record is straight on the origin and meaning of the Laffer curve, here’s the inside scoop. At a dinner in 1974, Dr. Arthur Laffer met with Donald Rumsfeld, the current...

Some of you may share the mistaken belief that the Laffer Curve, named for Dr. Arthur Laffer, was tested and found wanting during the Reagan Administration. Nothing could be farther from the truth. There are two possible causes for your error. The first is that you may simply not know what the Laffer Curve is. This, combined with a natural tendency to agree with the "conventional wisdom," may lead you to just mindlessly nod your head in agreement every time you hear some T.V. network reporter blithely dismiss the "discredited Laffer Curve." The second possible cause for your error may...

January 09, 2004, 9:36 a.m. Tax rates were cut, but government's tax receipts are rising. By Jerry Bowyer A cornerstone of supply-side economic principles is that cuts in marginal tax rates can, at times, actually lead to an overall increase in governmental tax revenues. The idea is best demonstrated through a thought experiment: Would you bother to work if the government took, say, 125 percent of your profit? That is, would you still work if the government took every dollar you made plus a quarter from your personal savings for each of those dollars? Of course not. In such...

There is a long and tragic tradition that runs through American politics in which politicians spend themselves into a fiscal crisis during good economic times and then raise taxes to bail themselves out when a recession hits and revenues plummet. This is precisely what's going on today in Alabama and California. In both states between 1997 and 2000, state spending increased more than three times faster than the combined rate of inflation and population growth. Not only does government continuously get bigger and more intrusive, politicians on the left forever manipulate the tax system as a mechanism of income redistribution...

Memo To: Website Fans, Browsers Clients From: Jude Wanniski Re: Part I Today I’m posting the first of a two-part brief history of the Supply-Side Revolution, written by a distinguished Los Angeles attorney, Wayne Jett, a 60-year-old man I’ve never met. He clearly has gone to a great deal of trouble to assemble this account, which he first sent to Professor Robert Mundell of Columbia University – Mundell being the prime mover in reviving classical theory. When Mundell gave it his seal of approval, Mr. Jett sent it to me, wondering if I could suggest a place where it might...

DO TAX CUTS pay for themselves? That's been the hot debate of American political economy for the better part of three decades. But it ended last week -- with a whimper. The great argument got its start in 1974, when a White House chief of staff named Donald Rumsfeld sent his deputy, Richard Cheney, to have lunch with an ebullient young economist named Art Laffer and his journalistic sidekick, Jude Wanniski. According to local lore, Mr. Laffer sketched a curve on a cocktail napkin suggesting that a cut in income taxes could provide such a spark to the economy that...

<p>We don't usually tout Russia as a model of economic enlightenment. But with the tax-cutting debate in full cry here in Amerika, it's a good time to review Russia's recent tax revolution. We hope President Putin's "very frank" discussions with President Bush last Friday included talk of tax reform.</p>