Art Laffer is arguably the nation’s preeminent cheerleader for a ridiculous idea: tax cuts are self-financing. He’s spent decades telling policymakers they can slash tax rates, especially for the wealthy, and the tax breaks would necessarily pay for themselves through stronger growth and increased revenue.
The trouble, of course, is that Laffer’s theory hasn’t worked. To be sure, the economic model made his fellow Republicans happy, but Laffer’s ideas have been largely discredited through decades of experimentation.
As Slate’s Jordan Weissmann recently put it, “There may be no man alive who has done more damage to America’s understanding of economics than Art Laffer.”
And yet, there was Laffer in the Oval Office yesterday, receiving the Presidential Medal of Freedom – the nation’s highest civilian honor – from Donald Trump. The president devoted his remarks in the Oval Office ceremony to pretending Laffer hadn’t spent the last several decades being discredited by the real-world effects of his ineffective model.
“Few people in history have revolutionized economic thought and policy like Dr. Art Laffer.
“He developed a brilliant theory, shaped unprecedented economic reforms, and helped turn a severe recession into a remarkable boom. He proved that the most powerful way to grow the economy and raise government revenue was not to increase tax rates but to adopt strong incentives that unleash the power of human freedom and innovate, create jobs, and deliver greater opportunity to all Americans. And he’s proved it over and over again.”
And yet, the president insisted on presenting his alternate reality as the accurate one.
“Prominent academics called this theory ‘insanity,’ ‘totally wacky,’ and ‘completely off the wall.’
“With optimism, confidence, and exceptional intellect, Art would go on to prove them all wrong. He proved them wrong on a number of occasions.”
Nope, that never happened. Laffer’s critics were right; he was wrong.
“After President Reagan’s election, Art served on the President’s Economic Policy Advisory Board. He played a vital role in both the 1981 and 1986 tax rate cuts, which ultimately lowered the top marginal tax rate from 70 percent to 28 percent. That’s not bad. That’s a pretty big reduction, I would say.
“The Reagan economy soared, creating sustained economic growth, shrinking poverty, expanding incomes, and dramatically increasing federal revenue.”
What Trump neglected to mention is that Reagan raised taxes in 1982, at which point Laffer predicted the Republican White House’s agenda would do real harm to the economy. Laffer got this backwards, too.
“I’ve heard and studied the Laffer Curve for many years in the Wharton School of Finance. It’s a very important thing that you’ve done, Art. Very important.”
First, it was tough not to laugh at Trump’s insistence on squeezing in a reference to his Wharton degree. Second, raise your hand if you believe the president has spent “many years” studying literally anything.
And third, if Trump had spent “many years” studying the Laffer Curve, he’d know it doesn’t work.