Art Laffer has a Plan for the Economy

It would be laughable, but the White House might be interested.

Via Reuters: Cut salaries, taxes to reopen U.S. economy says Laffer, conservative fave

Republican economist Art Laffer, an architect of the Reagan era tax cuts that paved the way for historic budget deficits in the United States, has a plan to rejuvenate today’s pandemic-crippled economy.

Tax non-profits. Cut the pay of public officials and professors. Give businesses and workers who manage to hold on to their jobs a payroll tax holiday to the end of the year.

It is somewhat remarkable that he has finally found a tax he likes: taxing non-profits, which is a well-known source of massive wealth reserves (or not). Setting snark aside, this seems like (as per further thoughts below) just an attack on the public sector (in this case, institutions that receive some level of public sector funding).

Also, the payroll tax cut notion feels a lot like “if you’re a hammer, everything looks like a nail.” Tax cuts do not solve all ills. Further, I simply do not understand how anyone thinks that a payroll tax cut is going to be a huge boon at this time. The problem right now is rapidly growing unemployment and an economy halted due to a pandemic. As such, a few more dollars in employed people’s pockets from a payroll tax cut won’t help the underlying problem. A payroll tax cut might be useful in the context of short term stimulus if the problem was one of demand. That is not the problem right now.

CNBC reports: US weekly jobless claims jump by 6.6 million and we’ve now lost 10% of workforce in three weeks.

Jobless rolls continued to swell due to the coronavirus shutdown, with 6.6 million Americans filing first-time unemployment claims last week, the Labor Department reported Thursday.

That brings the total claims over the past three weeks to more than 16 million. If you compare those claims to the 151 million people on payrolls in the last monthly employment report, that means the U.S. has lost 10% of the workforce in three weeks.

How does a payroll tax cut help these people? How does it ameliorate the economic damage created by their sudden unemployment?

It seems to me that direct cash benefits are the best route in this context.

To that point, however, back to the Reuters piece:

What about the extra aid funneled to newly jobless workers by the $2.3 trillion fiscal rescue package? Such government spending, Laffer told Reuters in an interview, will only serve to deepen the downturn and slow the recovery.

“If you tax people who work and you pay people who don’t work, you will get less people working,” Laffer said. “If you make it more unattractive to be unemployed, then there’s an incentive to go look for another job faster.”

This is utter nonsense, but it is the kind of thing that Laffer and his ilk have been pushing since at least the Reagan administration. It is a strawman predicated on the notion that any government assistance is enough to dissuade people from working. It also assumes that human beings are naturally lazy and care only about subsistence living. It further assumes that government assistance is always enough to provide said subsistence.

Are some people lazy? Of course. Are some satisfied with not working? Sure. But the logic Laffer is using is warped. It is assuming that people who were recently employed and now find themselves jobless will find short-term, emergency aid enough to incentivize them not to go back to work?

Also: if having government assistance programs (which we had before the pandemic) are enough to lure people to homebound sloth on the government teat, why did we have record unemployment just a few weeks ago? Are a few short-term checks going to push of over the edge to a population on the dole?

Laffer said that people whose jobs are safe during this pandemic – such as taxpayer-funded workers like White House staffers, lawmakers, public employees and university professors – should share in the economic pain of the pandemic by taking a pay cut of 15%.

And to make things more fair, he said, government should impose levies on nonprofit educational, arts and other institutions.

“We all should lock arms, figuratively, and have mutual sacrifice for the benefit of the country,” Laffer said.

And to make things more fair, he said, government should impose levies on nonprofit educational, arts and other institutions.

I would take calls to mutual sacrifice more seriously if Laffer wasn’t using the situation to basically attack public sector workers. Are we going to ask private sector employees who are still able to work to take a 15% pay cut? For that matter, where is the money from the pay cuts supposed to go? To pick on the area that I know the best, university payrolls: if the faculty at a public university were to take a 15% pay cut, those dollars go back into the university’s budget–they don’t somehow flow somewhere else.

Quite frankly, rather than some arm-in-arm solidarity move, this sounds like a way to cut public sector payrolls so that Laffer and friends can then call for more tax cuts later because public sector costs will have been lowered.

Regardless of that, the notion that we need stimulus via a payroll tax cut on the one hand but are going to take almost two month’s salary away from public sector workers on the other makes no sense if the alleged goal is money being circulated in the economy by consumers. His proposals are not consistent.

It’s as if all this is driven by ideology, not logic (and that it has been for decades), which brings me to this passage in the article:

Laffer is a long-time booster of tax cuts as a strategy to increase economic growth, ideas embraced decades ago by the Republican Party and U.S. President Ronald Reagan, and more recently, Trump himself.

One of the reasons I don’t take Laffer seriously is that the promise that tax cuts bring GDP growth lacks empirical foundation. Note, for example, the GDP growth after the Trump tax cuts–it is not especially different from the pre-tax cut growth figures.

In regards to potential work with the Trump administration:

Laffer is also being floated in influential right-wing circles as a good candidate to head a proposed new industry task force aimed at re-opening the U.S. economy as soon as possible. “Bring in the minds like Art Laffer,” Sean Hannity, the Fox News host said April 6 of the proposed task force.

Trump tweeted his support for the new economic task force on April 4, calling it a “good idea.” He hasn’t yet mentioned Laffer, but on Tuesday reiterated his support for a payroll tax cut, saying it would be a “fantastic time” to deliver it.

Trump awarded Laffer the Presidential Medal of Freedom last year.

[…]

Laffer said he had not been approached by anyone in the White House about joining the proposed task force, but that he’s willing to do the work for free.

“I don’t have any reason to believe that I will be asked, but if I were asked to do it, I would love to do it, gratis,” he said.


Given Trump’s penchant for liking identifiable names who are popular in conservative media, a Laffer appointment would not surprise me in the least.

FILED UNDER: COVID-19, US Politics
Steven L. Taylor
About Steven L. Taylor
Steven L. Taylor is Professor of Political Science and Dean of the College of Arts and Sciences at Troy University. His main areas of expertise include parties, elections, and the institutional design of democracies. His most recent book is the co-authored A Different Democracy: American Government in a 31-Country Perspective. He earned his Ph.D. from the University of Texas and his BA from the University of California, Irvine. He has been blogging since 2003 (originally at the now defunct Poliblog). Follow Steven on Twitter

Comments

  1. Scott says:

    I’ll just repeat what I put on the Thursday Forum thread:

    This should be broadcast to the masses.

    “If you tax people who work and you pay people who don’t work, you will get less people working,” Laffer said. “If you make it more unattractive to be unemployed, then there’s an incentive to go look for another job faster.”

    My question is this: 1% owns 40% of the wealth. Isn’t this a disincentive for the rich to create jobs. Shouldn’t we take their wealth away to restore their self-esteem and job creation abilities?

    Let me add that way back when I was in business school, organization behavior theory (especially by McGregor, Maslow, etc.) was just the opposite what is expressed by Laffer.

    Why is it that “theory” expressed by people like Laffer are just dark reflections of their own twisted belief systems.

    30
  2. Kathy says:

    “If you make it more unattractive to be unemployed, then there’s an incentive to go look for another job faster.”

    I guess for Laffer there’s nothing unattractive about losing one’s home, piling up late payment fees, loosing health insurance, etc. which goes along with losing one’s job.

    So we need to make it hurt more, right? Add a $100 per month unemployment tax, lest people out of work become free riders. The tax will be paid in full for each ,month or portion of a month the individual does not work. So if you were unemployed for one day, you pay $100 that month.

    If they can’t or wont’ pay, no problem. We’ll give them a whole year to get the money together, at a 15% anual interest rate. At the end of one year, they’ll be charged with tax evasion and face a mandatory 25 year sentence. What? That’s less than what Jean Valjean got.

    20
  3. Jen says:

    I don’t understand why anyone takes Art Laffer seriously. This is yet another dumb idea from someone whose prior ideas have been largely discredited. Laff-able.

    He’ll fit in perfectly in this administration.

    8
  4. Mikey says:

    One of the reasons I don’t take Laffer seriously is that the promise that tax cuts bring GDP growth lacks empirical foundation.

    I don’t think there’s much Republicans care about less than whether their proposed solutions have any empirical foundation.

    17
  5. Stormy Dragon says:

    Tax non-profits.

    Does that include taxing religious non-profits?

    23
  6. Stormy Dragon says:

    “If you make it more unattractive to be unemployed, then there’s an incentive to go look for another job faster.”

    Note here that he thinks you can quit your voluntarily quit your job and still collect unemployment.

    10
  7. Teve says:

    @Jen: billionaires pay a few million smackers so conservative “scholars” like Laffer, Richard Epstein, Heritage, etc. keep pushing bullshit ideas that make the billionaires more money.

    16
  8. Jay L Gischer says:

    The thing is, Laffer’s reputation is based on work that is solid, and good. There is, in fact, a point where overall taxes are so high that reducing them will not only produce growth, it will produce enough growth that your tax revenue goes up despite cutting taxes.

    Of course, the Republican hack-o-sphere has turned this into “any tax cut increases revenue” which is corollary to “taxes are way, way, WAY too high”.

    As it turns out, we are nowhere near this point nationally. We might hypothetically be close in some state, but here in CA, it sure doesn’t seem like it. It doesn’t seem like, frankly, we need to speed anything up at all, it’s already growing so fast.

    Laffer makes a great sock puppet, because he said something that has been blown up and overused in the intervening 40 years. I have no idea who the person Laffer is, but the remarks Stephen has quoted seem pretty out of touch. Of course, he’s 79 years old now.

    I kind of think this is his equivalent to “you kids get off my lawn!”

    10
  9. inhumans99 says:

    @Stormy Dragon:

    Heh. We both know the answer to that question.

    Also, for the most part isn’t Laffer’s tut-tuting about how the government chose to help people academic as his words may worm their way into President Trump’s head and might effect future stimulus bills but we have a bill that passed and as Kevin Drum keeps harping on about is actually a pretty good bill that will actually help folks most in need of immediate cash to survive/keep a roof over their heads.

    I would also like to note that President Trump is trying his hardest to personally put his hands into the 500 Billion cookie jar but he is not trying to change how the rest of the funds are disbursed to those that are unemployed, etc.. If he tried to screw the poor unwashed filthy masses now he would be strung up in the rafters and he knows it.

    No, he just wants to keep appointing new folks to oversee the 500 billion until he finds one who creatively comes up with a way for President Trump to push some of the money towards his hotels/golf courses.

    I guess us liberals did dodge a bullet in that Laffer would have liked to change how the bill disperses funds and helps folks in the U.S. well after the horse has already left the barn and has enjoyed a post-coital smoke after his tryst with that sweet young filly in Paris. As the saying goes, there ain’t no going back after you have poked Paris.

    1
  10. gVOR08 says:

    Tax non-profits. Cut the pay of public officials and professors. Give businesses and workers who manage to hold on to their jobs a payroll tax holiday to the end of the year.

    Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system. – Secretary of the Treasury Andrew Mellon 1929

    Is Laffer still allowed out in polite society? Back during the ‘wish Rand Paul dead’ foofaraw I complained that treating asshats with respect because they were in high places was one reason we have so many asshats in high places. Can I comment that the space Art Laffer occupies would be more valuable than his company?

    10
  11. Stormy Dragon says:

    @Jay L Gischer:

    The problem is that it’s hard to argue that Republican’s are just distorting Laffer’s work when it’s clear he’s an enthusiastic participant in the Republican messaging about it. His “work that is solid, and good” is clearly just the motte in a motte-and-bailey strategy.

    2
  12. @Jen:

    He’ll fit in perfectly in this administration.

    And that’s what worries me.

    2
  13. gVOR08 says:

    @Jay L Gischer:

    The thing is, Laffer’s reputation is based on work that is solid, and good.

    Indeed, John Maynard Keynes’ work. From WIKI,

    Although he does not claim to have invented the Laffer curve concept (Laffer, 2004), … Laffer himself says he learned it from Ibn Khaldun and John Maynard Keynes.

    …Laffer’s postulate was that the tax rate that maximizes revenue was at a much lower level than previously believed: so low that current tax rates were above the level where revenue is maximized.

    Laffer was wrong.

    5
  14. @Stormy Dragon:

    Does that include taxing religious non-profits?

    That’s an excellent question, and one I meant to include in the OP, but forgot about it.

    3
  15. inhumans99 says:

    @gVOR08:

    “Can I comment that the space Art Laffer occupies would be more valuable than his company?”

    That may very well be the case but we both know that President Trump will now hang onto every work that comes out of his mouth so yeah…something to deal with for future bills being negotiated in Congress but currently his suggestion is more all bark and no bite.

    Look, Red State Congress-Critters want to get re-elected just as much as Blue State critters so it is possible that McConnell will scoff at using Laffer’s suggestions as a template in the next round of stimulus talks.

  16. @Stormy Dragon:

    The problem is that it’s hard to argue that Republican’s are just distorting Laffer’s work when it’s clear he’s an enthusiastic participant in the Republican messaging about it.

    I concur. While there is likely a tax rate that is so high that cutting taxes leads to increased revenues, Laffer clearly has bought into the simplistic ideology that has grown up around this notion. I mean, why not? He makes money off of it, gets endless praise, and even had a medal hung around his neck.

    9
  17. Stormy Dragon says:

    @gVOR08:

    The Laffer curve itself is true, but not particularly notable either. It’s just a straight forward application of the extreme value theorem from calculus.

    The issue isn’t the existence of a revenue maximizing tax rate, it’s whether the current tax rate is above or below that point. Republican dogma is that we’re above it, when all the empirical data says we’ve been below it since the Revenue Act of 1964 passed

    9
  18. Something else I forgot to comment on:

    “I don’t have any reason to believe that I will be asked, but if I were asked to do it, I would love to do it, gratis,” he said.

    In this offer to work for free Laffer undercuts his own alleged logic about human motivation. If he is willing to work for free that means that some human beings make calculations about their actions based on more than just recompense.

    It is as if money doesn’t explain everything. Who knew?

    20
  19. PJ says:

    @Stormy Dragon:

    Does that include taxing religious non-profits?

    Depends.
    Christian non-profits? No.
    Jewish? Maybe.
    Other? Yes.

    6
  20. Michael Reynolds says:

    @Scott:
    The fallacy of giving more to those what’s already got:

    I stayed mostly out of stocks since Trump and as a result I did not run up big profits which all then went away. Gosh, three years of thinking I had more, only to have it evaporate, such a shame to have missed out. But three days ago I bought $175,000 worth of stock in three companies, Occidental Petroleum, Darden Restaurants and MGM Resorts. I have now made close to 20 grand, in three days.

    Now, how shall I enjoy that money while boosting the economy and creating jobs? Hmm? Buy a new car? I can’t drive the car I have. Take a trip to Portugal? Yeah, no. Maybe go out to eat at a Michelin-starred restaurant and have a 15 course tasting menu? Right. But even if we were not in lockdown that money would not change my spending habits by a sou.

    It’s nice having more, but will me having more do anything for anyone? No. Including, incidentally, me. That is Republican economics. I should have my taxes cut so I’ll have more which will mean nothing to me and affect my spending not at all. Indeed, the marginal extra security disincentivizes me. And since I actually create a product which can still be consumed even in a pandemic, disincentivizing me is not helpful for the economy.

    Tax that money and send it to the poor people and it’s a godsend for them. And it will be instantly recycled through the economy. Give me more, and it sits in an account. Give a working poor person more, it creates jobs for people supplying that person’s needs. It seems awfully clear to me.

    I’ll add that many years ago before Dave Schuler banned me for disagreeing with him, I had a long running debate with him and our old pal Guarneri. I pointed out that in my case high taxes made me more productive. ‘Cause I had to pay my taxes, see, but I still wanted nice things, so I worked harder and more efficiently so I could both pay my taxes and still burn $25 cigars.

    15
  21. 95 South says:

    Any sources about Laffer’s opinion about taxing religious non-profits?

  22. Monala says:

    @Stormy Dragon: Let’s be more explicit: does it include taxing churches and other houses of worship? Because a religious nonprofit such as Catholic Charities is actually using their revenues to benefit the community, rather than its members.

    2
  23. @95 South:

    Any sources about Laffer’s opinion about taxing religious non-profits?

    I will guess he is opposed. His quotes target artistic and educational institutions, as per the OP.

    3
  24. Michael Reynolds says:

    We don’t really have to speculate about whether Laffer would tax churches. He’s a Republican lickspittle, of course he wouldn’t.

    6
  25. Monala says:

    @inhumans99: Based on what I’m seeing on Twitter, rightwingers have a new talking point: Trump has saved 900,000* Americans! To criticize him means you don’t care anything about the 900k American lives he has saved!

    * I’m assuming they mean that some were predicting a million deaths from Covid-19, so if only 100,000 Americans die, Trump has saved the other 900,000.

    5
  26. I would love for our phantom down-voters to provide a positive defense of Laffer’s position.

    14
  27. Moosebreath says:

    How unexpected — yet another Republican domestic policy proposal which can be summarized as “Class warfare on behalf of the upper class.”

    8
  28. Jay L Gischer says:

    I think the remark about Laffer being a willing volunteer is strong, and fair.

    I think what I really want to do is distinguish between Laffer, who has real knowledge and skill, and familiarity with, for instance, calculus. Unlike, say, that hack Larry Kudlow. Larry Kudlow very likely doesn’t know any higher math. There’s nothing in his bio that says he does. The only reason he’s called an “economist” is because he calls himself an “economist”. It’s all politics and public policy, all the way down. I guess he might. But this is a guy who is wrong from beginning to end, and he just keeps climbing higher. Laffer would probably make a much better person in Kudlow’s job, even if he is a willing participant in hackery. That’s kind of a requirement for that job, but it’s nice when the holder actually knows something.

    2
  29. Sleeping Dog says:

    @Jay L Gischer:

    When asked for evidence that tax cuts lead to greater government revenue, Laffer and his ilk point to the rate cuts in the Kennedy administration where the top rate went from ~90% to ~50%. What they neglect to add was that the tax code was significantly re-written to eliminate tax shelters that the wealth used to avoid the higher rates. Subsequent tax cuts have not shown any increase in revenue, even Reagan’s which did include tax code reform, but not enough deductions were eliminated to balance the decline in revenue.

    As far as Laffer’s contention on when a tax rate is too high, comparisons to other modern nations that have bustling economies and higher tax rates than the US.

    7
  30. SC_Birdflyte says:

    Lighten up, Art. IIRC, candidate Trump claimed that the actual unemployment rate (this back in early 2016) was actually 40%. He’s doing his best to make that a reality.

    5
  31. MarkedMan says:

    @Steven L. Taylor:

    In this offer to work for free Laffer undercuts his own alleged logic about human motivation.

    Ah, Steven, I think you misunderstood. Certain types of people are hardworking and motivated, while certain other types are lazy and shiftless. And we all [ahem] know who is who, now don’t we? And of course the proper course of a sensible government is to have the harshest rules but for the wise leaders to exercise their discretion and make exceptions for the former types.

    11
  32. 95 South says:

    @Michael Reynolds: So you’ve never spoken to a libertarian?

  33. MarkedMan says:

    @95 South: I don’t think anyone claimed that Laffer had said anything about religious non-profits, but rather were musing on whether he would or wouldn’t.

    3
  34. @MarkedMan: Well, there is that.

    1
  35. Kurtz says:

    @Michael Reynolds:

    Cause I had to pay my taxes, see, but I still wanted nice things, so I worked harder and more efficiently so I could both pay my taxes and still burn $25 cigars.

    Opus X?

  36. Michael Reynolds says:

    @95 South:
    I used to be one, way back when the party first came into existence. I was 17, a high school drop-out and already trending criminal. So of course I was LP. I even had the weird hair that is de rigueur in the LP.

    But then my frontal lobes continued to develop, so I outgrew libertarianism.

    15
  37. Daryl and his brother Darryl says:

    If this plan includes taxing Churches…I’m in.

    2
  38. Jen says:

    @Teve: I met Laffer back in the late ’80s. He was smarmy and irksome then, which does not seem to have changed. I disliked him intensely almost immediately, something got under my skin about him.

    3
  39. Michael Reynolds says:

    @Kurtz:
    I’m favoring Nicaraguan smokes, lately. There’s a Davidoff I quite like. But I’m not brand/origin loyal, I try everything. I smoke a fair number of Macanudo Golds and Ashtons (both maduro and VSG) which are Dominican IIRC. At the moment I am firing up an Aladino Corojo Reserva, which is a very nice Honduran stick.

    2
  40. wr says:

    @Jay L Gischer: So you’re saying it’s better to knowingly commit evil than to do it out of ignorance?

    2
  41. DrDaveT says:

    Tax cuts do not solve all ills.

    If you believe that taxes are the only ill worth caring about, then tax cuts solve all ills worth caring about.

    6
  42. Kathy says:

    @Michael Reynolds:

    Please. he’s a clever Republican. Of course he would.

    With credits, exemptions, and deductions that would net some churches public money, all while claiming to now be forced so unfairly to pay taxes.

    3
  43. grumpy realist says:

    @95 South: libertarians are notorious for saying “well, that’s not a TRUE libertarian!” when you confront them with the incompetence of their ideas.

    (Much like idealists of any flavour, in fact….the insufficiency of their theories to deal with reality is always brushed aside as being an irrelevant point. Once the entire population is converted to the idealist’s mindset, such failures within Utopia will never occur…)

    4
  44. Jay L Gischer says:

    @wr: Wow. That’s your takeaway from what I said?

    Is that how you describe Dr. Fauci, too?

    You seem to live in a very black-and-white moral universe, and you seem to believe that any wrong cancels out all right.

    At this point I’m used to the fact that my refusal to trash opponents wholeheartedly gets me heat from people who are my political allies. This happens over and over on the internet.

    I used to care about this, it once bothered me. This is more about my own self-respect than it is about Fauci, or Laffer, or anyone else. I just don’t want to engage in character assassination, and this puts me at odds with, well, a lot of people.

    And if you want to call me arrogant or conceited for that, well, I guess that’s fair.

    5
  45. Dave Schuler says:

    A payroll tax holiday has merit. If you can think of a faster way of putting more money in the hands of the people who are still actually employed and getting paid, propose it.

    The defect, obviously, is that an increasing number of people are employed but not being paid or are unemployed. They’re even more in need of relief than those who are fortunate enough to remain employed. Getting money in their hands is a logistical nightmare which is why it will take months which is far too long.

    The balance of his proposal looks to me as though it’s just exercising old grievances. Won’t have much pragmatic effect.

    The only policy that really makes sense is doing whatever is necessary to end the locking down of the economy. Necessarily, that must be done one bite at a time. Identify a target. Do epidemiological and serological testing. Re-open as prudent. Move to the next target.

    That, too, is a logistical nightmare but, as me auld mither used to say, grasp the nettle. It needs to be done.

    4
  46. @Dave Schuler:

    A payroll tax holiday has merit. If you can think of a faster way of putting more money in the hands of the people who are still actually employed and getting paid, propose it.

    As you note, that really isn’t the problem (i.e., getting more money into the hands of people currently employed). Hence, it is the wrong solution for the current problem and constantly proposing it sounds like more like knee-jerk anti-tax policy than any kind of solution to real problems.

    The balance of his proposal looks to me as though it’s just exercising old grievances.

    Indeed.

    Do epidemiological and serological testing

    This is key.

    11
  47. @Dave Schuler:

    Getting money in their hands is a logistical nightmare which is why it will take months which is far too long.

    This is especially key. I don’t recall how long it took under Bush 43, but we were able to mail refund checks to every taxpayer at that time. I am not sure why we can’t do the same thing now, even as I understand it is a massive undertaking. I have refrained from too much criticism on this point as I do not have a full grasp of the logistics.

    I will, however, say that McConnell and his allies were disingenuous of their criticisms of the Dems holding up aid, given that a couple of days to debate the merits of the bill are going to be a rounding error in the wait to get those funds out.

    12
  48. Daryl and his brother Darryl says:

    @95 South:

    So you’ve never spoken to a libertarian?

    I have…they sound just like a Republican, only not as smart…and Republicans are not smart.

    8
  49. Modulo Myself says:

    People need money in their hands not to stimulate the economy but to survive. Likewise, reopening needs to happen only to keep people sane, not for Trump to blather about like an idiot. The focus should be on letting people be with their friends and letting children have some social contact outside the home and that’s it. That’s the only purpose for testing right now. Until a vaccine comes along, the economy is tanked unless you think that people are going to start living like they did in January. People will risk their lives for many things, but not to go to a store or a conference in Orlando at a Marriot, and they probably won’t do it to go out to eat.

    4
  50. Sleeping Dog says:

    @Dave Schuler:
    @Steven L. Taylor:

    It’s probably too late now, but the US should have taken the approach the several European countries have and simply funded the payrolls of companies. The logistics would me much easier. Even if the compensation was done at a reduced rate with a monthly cap, you would have frozen the payrolls, gotten money to workers and been in a better situation when the economy opens again. Now we’re up to what 20M unemployed?

    8
  51. SteveCanyon says:

    Its not lost on me that the groups targeted for the 15 percent cut are those reviled by the Republican base – government workers, academics, and certain non religious nonprofits (say Planned Parenthood). I rather expect that somehow there would be a carve out for conservative nonprofits. Similar to the SALT cap in the Republican tax cut a couple of years ago, this is political retribution masquerading as economic policy.

    6
  52. 95 South says:

    @Michael Reynolds: Did you support tax exemptions for religions back in your libertarian days? If not, why would you assume Laffer supports them?

  53. Kathy says:

    @Modulo Myself:

    People need money in their hands not to stimulate the economy but to survive.

    This. A million times this.

    [..]not for Trump to blather about like an idiot.

    I don’t think he can blather about like anything else.

    5
  54. dazedandconfused says:

    @Sleeping Dog:

    Sleeping,

    The USG is doing that too (kindasorta) through the SBA. Loans which are forgiven if you don’t lay anyone off. The problem is, obviously, that’s a LOT of loans to write up. It’s a “The cavalry is a-commin’….like oh, maybe in a few months.” situation.

    1
  55. Stormy Dragon says:

    @Steven L. Taylor:

    The payroll tax holiday isn’t really about fixing the economy (as you note, it only helps the still employed), but using the economy as an excuse to destabilize medicare and social security, so that they can later say they needs benefits cuts.

    12
  56. Michael Reynolds says:

    @95 South:
    Laffer’s beliefs are irrelevant. He serves Republicans. Republicans would never confront the Christians. Therefore Laffer won’t, either. The willingness of white men to abandon their beliefs, their morals, their decency and dignity to grovel before Cult Leader is a thing of wonder.

    8
  57. mattbernius says:

    @Steven L. Taylor:

    His quotes target artistic and educational institutions, as per the OP.

    The most frustrating thing about the Reuter’s piece is that for an “interview” verbatim quotes are remarkably sparse. In fact, the portion about artistic and education institutions is the Saphir and Mason’s summation of Laffer’s statements, not his own words. So we don’t actually know what he said.

    I did a quick Google search to see if Laffer has ever spoken one way or the other about taxing churches (or made any comments on religious institutions) but could find nothing. I have a very difficult time thinking he feels that churches should be taxed with the other nonprofits. More importantly, I don’t think rational person would agree that idea (taxing religious institutions) would possibly be a starter under this (or any) GOP presidency.

  58. mattbernius says:

    @95 South:

    Did you support tax exemptions for religions back in your libertarian days? If not, why would you assume Laffer supports them?

    Unless I missed something, Laffer has always identified himself as a fiscal conservative and Republican (running for Senate as one in 1986). I can find no reference to him identifying as a Libertarian.

    3
  59. Gustopher says:

    @Scott:

    My question is this: 1% owns 40% of the wealth. Isn’t this a disincentive for the rich to create jobs. Shouldn’t we take their wealth away to restore their self-esteem and job creation abilities?

    Or just tax their wealth so they have to work, or create jobs, or watch their wealth evaporate over time. And then there are the children of the wealthy… I worry that they will not experience the redeeming benefits of work.

    I would be in favor of a tax cut targeted towards actual job creation — cutting the business side of the payroll tax and replacing lost revenue with increased capital gains taxes.

    6
  60. mattbernius says:

    @Steven L. Taylor:

    As you note, that really isn’t the problem (i.e., getting more money into the hands of people currently employed). Hence, it is the wrong solution for the current problem and constantly proposing it sounds like more like knee-jerk anti-tax policy than any kind of solution to real problems.

    I’m not sure I can upvote this enough. I am supporting people working on the front lines trying to maintain the social safety net in a number of States and the issue isn’t with currently employed people.

    The challenge is recently employed people who were living at (or close to) paycheck to paycheck (for any variety of reasons). Now that they are out of work, they (and their families) are either in or rapidly approaching a literal existential crisis.

    In many cases these are people who have never needed public assistance before — though they definitely need it now.

    (The challenge is also people who were already reliant on the social safety net too, as they’re also struggling right now as well — but they are not the people currently overwhelming the system.)

    6
  61. Kurtz says:

    @Michael Reynolds:

    I’m not really brand loyal either. I do like the Macanudo Golds quite a bit. If you like Cameroonian wrappers, I highly suggest New World. Tasty.

    I’ll put the Aladina Corojo Reserva at the top of my list.

    1
  62. Erik says:

    @Steven L. Taylor: unless of course he means “gratis” with respect to the government but expects to more than make up for that financial loss through payment from other, shall we say, less public sources.

    4
  63. Nightcrawler says:

    @Modulo Myself:

    People will risk their lives for many things, but not to go to a store or a conference in Orlando at a Marriot, and they probably won’t do it to go out to eat.

    Yeah, when the Mango Manchild throws open the doors on May 1, some percentage of employers (not all) will force their employees to go back to work in office complexes or factories or whatever. Most of those people will obey, at least at first (until they and their co-workers start getting sick).

    However, what they cannot be forced to do is go to restaurants, bars, or concerts, take vacations, or do anything other than go back and forth to work, and maybe the grocery store. People will risk their lives for a paycheck, but not to go to the movies.

    There’s also the issue of only being able to push people so far before they simply snap. When those people start getting sick and/or watching their co-workers get sick, they’ll come to the realization that dead people can’t make any money and quit their jobs, even if they don’t have replacement work. People who are in fear for their lives don’t tend to make rational decisions. If they get too sick to work, the decision will be made for them.

    5
  64. Scott F. says:

    From the OP:

    And to make things more fair, he [Laffer] said, government should impose levies on nonprofit educational, arts and other institutions.

    Because it the coronavirus pandemic has shown us anything, society needs to maker it harder to educate, enlighten, and even entertain people. Good grief…

    I’m sure it’s clearer to me due to the circles I’m in, but Laffer needs to be reminded that museum curator, stage hand, concert promoter, and cellist in a symphony are all legitimate jobs with legitimate paychecks that are taxed. And with Stay at Home, these places that are in the business of bringing people together somewhere outside their home are being absolutely devastated without the ticket sales that keep them afloat.

    6
  65. JohnSF says:

    I wonder, does Laffer genuinely believe this nonsense, or is he just, shall we say, a pro, providing boob-bait for the base?

    As @gVOR08: pointed out, the diminishing returns at very high levels of taxation due to increased avoidance and/or economic damage is a pretty obvious; it is also fairly clear from the evidence that the revenue maximising rate on higher incomes is around 50% to 70%.
    (Estimating how to optimise capital taxes is less clear cut).

    Asserting otherwise is either mistaken or misleading.

    This is setting aside the questions of the possible social utility of taxation beyond simple revenue maximisation.
    Especially in the realm of a political economy where wealth translates very directly into political influence, connects to corporate oligopolies, and generates damaging distortions of the markets and financial systems.

    Given that the empirical basis of this is shaky, it seems likely that this proposal is based on it’s merits for the base in “pwning the lib elite” and as @MarkedMan points out, differing assessments of differing “types” of the indigent.

    2
  66. Kathy says:

    @Scott F.:

    Old Conventional Wisdom:

    Conservatism: the morbid fear that somewhere, someone is having sex.

    New Conventional Wisdom:

    Conservatism: the morbid fear that somewhere, someone is learning something.

    5
  67. JohnSF says:

    In short his plan is Laffer-bull
    *ducks*
    *runs*

    10
  68. Jen says:

    @JohnSF: I giggled.

    4
  69. Michael Reynolds says:

    @Kurtz:
    I’ll give it a try. Thanks.

    I used to occasionally buy Cubans when I’d go to the UK but they tax the living shit out of the things. I’ll burn a $25 stick but there has to be a limit and I think that’s mine. $75 dollar cigars are not on. And honestly the quality difference is disappearingly small.

    That said, if travel ever happens again, and if you happen to find yourself in London, there’s this place I Googled my way to called Cigars at Number 10 which is almost a parody of what you might expect of a London cigar bar. While there I find it saves my sanity just to pretend that a pound is a dollar.

    3
  70. JohnSF says:

    @Kurtz:
    @Michael Reynolds:
    Not a cigar smoker myself, but according to some, specialist shops in Belgium are (or were, talking some ten years ago now) worth a look if you happen to be there. Tax levels much lower than UK.

    1
  71. Just nutha ignint cracker says:

    @Michael Reynolds: The exchange rate is $1.25 to the Pound, so you’re fine thinking that a Pound and a Dollar are about the same. Even in my circle that’s close enough to par, and you’re in the ozone by comparison. 🙂

    1
  72. Kathy says:

    @Michael Reynolds:

    Have you tried finding them in Mexico? It’s a bit closer than the UK, I think.

    I don’t smoke cigars, but I’ve seen Cohiba for sale at tobacco shops.

    For that matter, once the lock downs are lifted, can you get in much trouble for flying from Mexico to Cuba? Plenty of flights from Mex City to Havana, some by Cubana de Aviación if you’re in the mood for vintage Soviet jets.

    1
  73. OzarkHillbilly says:

    Laffer was appropriately named. Too bad most conservatives can’t take a hint.

    3
  74. grumpy realist says:

    @Michael Reynolds: If Boris Johnson and his entourage insist on the U.K. following the Brexit schedule they originally put forth, I suspect that 1$ == 1 pound will in fact soon occur.

    Getting the cigars into the U.K. may become less feasible, however.

    1
  75. Pete S says:

    The more I see the Republicans not supporting distancing, and pushing to “open the economy”, the more worried I get about us getting ahead of this. Easing restrictions with limited testing and a virus that seems to still be spreading seems like trying to stretch a short recession to a major depression. On purpose. And now considering putting Laffer in a position of authority?

    This temporary layoff is starting to look more and more like early retirement.

    5
  76. DrDaveT says:

    @JohnSF:

    it is also fairly clear from the evidence that the revenue maximising rate on higher incomes is around 50% to 70%

    Actually, I think that’s low. When the experiment was done in the 50s and 60s, wealth inequality was considerably less than it is today, and investing was a relatively awkward and labor-intensive activity. These days, wealth makes more wealth effortlessly and automatically. I suspect that a top marginal tax rate of 90% on people earning $10M/year or more would have no noticeable impact on what those people do with the small portion of their wealth that they actually manage directly (e.g. consumption, philanthrophy, starting businesses, or venture capital).

    6
  77. Michael Reynolds says:

    @Kathy:
    It’s weird but despite having been born in LA, and spent a fair bit of my like in CA or TX, I have never been to Mexico. Europe, Japan, ANZ, sure. Somehow I’ve never crossed the border.

    2
  78. Just nutha ignint cracker says:

    @Kathy: Mexico produces some pretty good cigars itself. My ex wife took a group of Spanish-language students to Mexico one year and brought back a small box of cigarino/Toscano type cigars for me that were really nice smokes.

  79. Kathy says:

    @Michael Reynolds:

    Well, then, maybe for the celebratory OTB get together in April-May 2021, should The Magnus Moron loose, can be held in Tijuana instead of Vegas 😛

    6
  80. Kathy says:

    @Just nutha ignint cracker:

    I’ll take your word for it, same as I do when people tell me Mexican beer is good.

    Coffee, now, I do know. there’s some really nice coffee down here.

  81. JohnSF says:

    @DrDaveT:
    Well, on multi-millions levels of income, 90% might be revenue maximising.
    OTOH when the UK had levels of 80 to 90% in the 1940’s to mid 70’s people put a lot of effort into tax avoidance.
    And the rich can often afford very good tax lawyers and accountants.
    Without other measures I suspect a lot of such personal income would be creatively redefined as company revenues or personal capital. But that can be compensated for.

    But here we’d be talking about what; top 0.1% of earners?
    I was thinking more of the levels for the top 20%; region of $120,000 plus at a rough guess.
    The sort of range needed to fund overall budgets in the 40% to 50% GDP range at revenue efficient levels.
    Optimised taxes on top 1% can boost revenue quite a lot though.
    And on 0.1% can be sensible for “wealth efficiency” or purely equality reasons.

    Of course whether you WANT to run at that level of government spending is another issue, one of political (cultural?) decisions.
    I would say yes.
    Others would differ.
    Similar for issues of redistribution.

    If running at lower levels, you would vary tax areas and levels to maximise efficiency at a given level, and for other effects e.g. environmental, equality, commercial investment, etc.

    1
  82. DrDaveT says:

    @JohnSF:

    I was thinking more of the levels for the top 20%; region of $120,000 plus at a rough guess.

    The sort of range needed to fund overall budgets in the 40% to 50% GDP range at revenue efficient levels.

    Optimised taxes on top 1% can boost revenue quite a lot though.

    We do not disagree on any of this.

    The other issue, besides where the marginal top rate is set, is where the floor is set — what level of income should be exempt from taxation, because you want those people to building wealth and not just having to start over every year?

    It makes all the difference when you think of wealth as something governments enable and create, rather than as something people have in spite of governments.

    2
  83. michilines says:

    I admit i haven’t read any of the comments, but seriously, of course Trump will tilt toward Laffer. As Charley Pierce said, it’s all terrible.
    It’s all terrible and people are dying. People like me are faced with “help” with mortgages that will ultimately hurt us. It’s just all terrible.

    2
  84. Scott O says:

    Laffer said that people whose jobs are safe during this pandemic – such as taxpayer-funded workers like White House staffers, lawmakers, public employees and university professors – should share in the economic pain of the pandemic by taking a pay cut of 15%.

    Doctor and nurse jobs are immune to lay off right now. Guess we better ask them to take a Laffer pay cut too.

    3
  85. Just nutha ignint cracker says:

    @Kathy: The only reasons that I have ever consumed beer was because it was cold, wet, and carbonated. Corona, Dos Equis, Budwiser, Hite, Kirin Lager, doesn’t matter. They all taste like Olympia or Ranier (local beers from my Seattle childhood) to me.

    While I lived in Korea, on my vacations back to the States, I would go to a McMenamin’s pub in Portland and have lunch and a Raspberry Ale. I used to pick Raspberry Ale because it was cold and fizzy and didn’t taste at all like ale (or beer, as far as that goes). I also liked the pale pink color better than the darkish amber that regular beer is. For my taste, Mexican beer is as good as any other type.

  86. Just nutha ignint cracker says:

    because you want those people to building wealth…

    Wait… you want those people building wealth? What kind of a commie pinko are you? If those people start building wealth, the next thing is that they’re going to want an actual say in what the government does. What are you thinking?

    1
  87. Kathy says:

    @Just nutha ignint cracker:

    I used to drink beer when out with friends in high school, but never developed a taste for it. I don’t think I’ve even tried one in decades.

    One thing, I sometimes drive by the Modelo brewery (it’s huge!). At times there’s this scent coming off it, which I assume is of the beer being brewed. It smells kind of sweet and only distantly related to beer. I really like it.

    At times I’ve also driven past a Nestle plant in Toluca, which among other things makes instant coffee. At times it emits a very strong coffee aroma, which seems delicious and completely unrelated to instant coffee.

  88. gVOR08 says:

    @JohnSF: In the mid 80s I worked for a small company that had been bought from long time family ownership. The deal allowed them some office and record storage space. There were like ten four drawer file cabinets mostly full of their oil lease papers.

    Piketty, and Warren, pushed a wealth tax. The goal is not revenue, the goal is to prevent fortunes from growing faster than GDP, and thereby sucking up a larger portion of total wealth. It also cuts down on the number of billionaires in a position to ratfwck our politics.

    Long ago J. K. Galbraith proposed elimination of the personal income tax and replacement with a VAT. He had three reasons. One, we need the money. Two, economists prefer consumption taxes. And three, removing resentment over progressive income taxes would deprive the Republican party of a lot of donations. I’d love to see Ds run on genuine, thoroughgoing tax reform. But not this year.

    (Please spare me a raft of replies with all the problems of a VAT. They can mostly be dealt with. And an imperfect VAT is way better than what we’ve got.)

    1
  89. gVOR08 says:

    @Scott O: Oh boy. Government employees taking a 15% hit would very quickly spread to SS recipients taking a 15% cut. And with Rs in office, neither would ever be repealed.

    2
  90. Scott O says:

    @gVOR08: I wouldn’t be so sure about that. Government employees are mostly not part of the GOP base but the elderly are.