It’s nice to know that the political left in America has produced economists and economic commentators you can always count on to be wrong — the right course is always 180 degrees from the policies they urge. Now we can add to this list Steven Rattner, a former New York Times reporter who now is a Wall Street executive.
Rattner has joined this auspicious company with his recent op-ed, “The Dangerous Folly of Lafferism,” in which he attacks the reality that high tax rates will cut tax revenues and reduce economic growth. Rattner’s indignation was triggered by President TrumpDonald TrumpTrump goes after Cassidy after saying he wouldn't support him for president in 2024 Jan. 6 panel lays out criminal contempt case against Bannon Hillicon Valley — Presented by Xerox — Agencies sound alarm over ransomware targeting agriculture groups MORE’s awarding Arthur Laffer the Presidential Medal of Freedom because his Laffer Curve has been guiding official U.S. government policy, and America’s world-leading booming economic growth, for 34 of the past 55 years.
Steve Moore, who was an economic adviser to President Trump’s 2016 campaign, writes that the Trump administration has increased American wealth by $10 trillion to $12 trillion, more than the entire economies of most countries in the world, measured by stock market and gross domestic product (GDP) growth. The Dow is now over 27,000 for the first time in American history. The other stock exchanges have set recent records, too. And even the Fed now has recognized that Moore and Trump were right on interest rates all along, with no apology.
Laffer’s theory, which can no more be disputed than can gravity, demonstrates that at some point taxation becomes counterproductive, actually producing less revenue than more. That has been demonstrated in the real world, particularly in regard to capital gains taxes, several times in recent decades. Tax revenues grow when the economy is growing. That is why federal revenues doubled while Ronald Reagan was president, despite his four unprecedented big tax cuts — the last, bipartisan one in 1986.
President Obama ridiculed Trump’s economic program as a “magic wand.” But neither Obama nor today’s Democrats have any idea how jobs and rising wages are created in a capitalist economy.
As Presidents Reagan and John F. Kennedy demonstrated, that involves just three components: income tax rate cuts for middle-class workers and their employers; deregulation, particularly in energy, where Obama was trying to drive the coal industry out of business; and stable dollar monetary policy, which provides incentives for investors to create jobs and businesses that pay rising wages, knowing the payoffs on their investments would be in dollars undisturbed by inflation.
As top Trump adviser Larry KudlowLarry KudlowMORE explained in his book, “JFK and the Reagan Revolution: A Secret History of American Prosperity,” those policies restored America’s world-leading economic growth and the American Dream that still draws people from the world over to participate in and raise their families. Kennedy restored booming economic growth in the 1960s and Reagan’s economic recovery continued for 25 years, from late 1982 to 2007.
The voters and working people recognize and appreciate that Trump’s policies have created more than 6 million jobs, restoring rising wages more for those at the lowest end, rather than for the highest. That is why America now enjoys the lowest unemployment since 1969, reaching the lowest unemployment ever among blacks, Hispanics, Asians and youths.
Rattner claims that Laffer “unleashed nearly four decades of mostly runaway deficits and exploding national debt.” But it was Obama who doubled the national debt during his two terms in office, adding more to the debt than all prior presidents combined, from George Washington to George W. Bush.
Deficits and debt decline when the economy grows, but rise when growth is slow, as under Obama. The Democrats’ promise to repeal Trump’s tax reform — which would become the biggest tax increase in American history — and the democratic socialist, anti-American stances of today’s progressive Democratic Party, point to a Trump victory in 2020 — just as Reagan prevailed over Walter Mondale, and Richard Nixon did over George McGovern. Promising free handouts, and increasing federal spending to over 100 percent of GDP, isn’t going to bail out the Democrats.
Lewis K. Uhler is founder and chairman of the National Tax Limitation Committee and National Tax Limitation Foundation (NTLF). He was a contemporary and collaborator with both Ronald Reagan and Milton Friedman in California and across the country.
Peter Ferrara is the Dunn Liberty Fellow in economics at The King’s College in New York, and a senior policy advisor to NTLF. He served on the White House Domestic Policy Council under President Reagan and as associate deputy U.S. attorney general under President George H.W. Bush.