Art Laffer receives Presidential Medal of Freedom

Both of the following links were found at Powerline: Trump Gives World’s Worst Economist the Presidential Medal of Freedom and Trump is giving Arthur Laffer the Presidential Medal of Freedom. Economists aren’t smiling.

These sour economic vandals. It’s not even that they are incapable of understanding what he says, but they are even unwilling to listen. The belief that economies are driven from the demand side is so inane that I find it hard to see how anyone with any sense can take it seriously. Everything about how an economy is driven forward and jobs created is dependent on individuals making decisions to do things, then working out what needs to be done and then doing it. No economy in history has ever slowed because there was an unwillingness to buy things. The idea is so stupid it is hard to imagine how it could ever happen in the world as we know it.

The core issue is Say’s Law. If you don’t understand Say’s Law, let me impress on you that you are incapable of understanding how an economy works. If you are interested, however, you can find out from my Free Market Economics, Third Edition, An Introduction for the General Reader. This is what Art Laffer himself wrote about the book, which you can find on the back cover of the text:

‘This book presents the very embodiment of supply-side economics. At its very core is the entrepreneur trying to work out what to do in a world of deep uncertainty in which the future cannot be known. Crucially, the book is entirely un-Keynesian, restoring Say’s Law to the centre of economic theory, with its focus on value-adding production as the source of demand. If you would like to understand how an economy actually works, this is one of the few places I know of where you can find out.’

The American economy is the only economy that has fully recovered from the effects of the stimulus which followed the GFC. It is also the only economy in the world that is managed largely by the supply-side principles, which is why PDT is giving Art Laffer this award.

Art Laffer in Australia

At the end of Art Laffer’s presentation at the IPA tonight, John Roskam said there may never have been a presentation as good as the one we had just heard. And if I have misquoted John, let me apologise but whatever it was that John did say, I have never heard a presentation as good as the one I heard tonight. Lunching with Dick Chaney and Don Rumsfeld must have been the most fun group anyone has ever been part of. What a bunch they must have been [and for evidence, see the video above]!

Naturally, I think all of this because Professor Laffer said only things I could agree with instantly. And he said one thing in particular that I could not have agreed with more, and if you see what he is saying, you have to appreciate just how badly our economies have been managed. And what he said was this: “The Great Recession was caused by the stimulus package.” Imagine, my friends, what that means, not just about economic policy, but about economic theory, if that is true.

He then gave his six-point plan, not just for economic recovery but for maintaining strong rates of growth ever after:

  • introduce a low-rate broad-based flat tax
  • bring in genuine spending restraint
  • base monetary policy on a sound-money imperative
  • ensure free trade is the basis for international trade
  • keep regulation of industry to an absolute minimum
  • leave the market to itself to solve the problems businesses find themselves in.

And then at the end of the evening, there was one question that stood out only because it is has an answer that is still not easy for everyone to understand in our days of low grade macroeconomic knowledge: “Why”, he was asked, “didn’t the stimulus work?” His answer: “if you want production, you must reward production. It’s not consumption that does it, it’s production”. Seems clear enough to me, although, I fear, not to those who do not see the point.

And let me finally thank the ACCI for having had the good sense to bring Arthur Laffer to Australia.

Mostly about Scott Walker

This is mostly about Scott Walker but also a bit about Art Laffer and the economy.

First, to say that Obama doesn’t love America is as weak a truth as ever I have heard in politics. To leave as an open question whether he is a Christian is an absolute pussycat of a position. Because whatever is in his heart of hearts, the actions he takes help Islamists and harm both Israel and the United States. That is what matters. The rest is dross.

For Scott Walker, the nomination is now his to lose. Early early days, but he is a Republican from a Democrat state, his policies are being shaped along Tea Party lines and he is, so far, fearless in the face of the media.

He also has friends in the right places. This is an article by Lawrence Kudrow which notes the following which comes under the title, What Scott Walker Actually Said:

Yes, believe it or not, Wisconsin governor Scott Walker actually spoke at some length at the dinner this past week where Rudy Giuliani charged that President Obama doesn’t love America. All the hullabaloo went to Giuliani, but in terms of the Republican presidential race, a number of Scott Walker’s pointed comments about policy and politicians are not to be missed.

First a word about the dinner itself, which was generously backed by John Catsimatidis. It was the second event sponsored by the Committee to Unleash American Prosperity, a new group founded by Arthur Laffer, Steve Moore, Steve Forbes and myself.

And this is what they are seeking:

To maximize growth, jobs, opportunity and upward mobility, the U.S. must recapture the first principles of economic growth that were so successful in the 1960s, ‘80s and ’90s. Namely, pro-growth policies should seek a low-rate, broad-based flat tax, limited government spending, the lightest possible economic regulations, sound money and free trade.

The Reagan Revolution was not just about lower taxes. To restrict Reagan’s message to tax alone is to miss most of what was important. It is the entire matrix that is crucial. To focus on any one aspect is to miss the point. And I will emphasise that when Art Laffer led the supply-side revolution in the 1980s, he did it under the banner of Say’s Law, properly understood. Say’s Law is not about tax although it does help to explain why diverting spending away from governments is the key to growth.

As for Walker, he is first to rise above the crowd so will be taking most of the shots in these early days before the election in November 2016! These next two years will be an endurance test. But here is the final question.

Can Walker win? Arthur Laffer has known him for years and says he has matured enormously from his days as Milwaukee county executive. Others say he is the only Republican candidate with a record of winning many different elections, from local office, to state assemblyman, to three gubernatorial races in four years.

Walker is a superb retail politician, a trait that will serve him well in the early primaries. He has an uncanny knack of maintaining direct eye contact. At the dinner, rather than rushing out for an early-morning TV call, he insisted on talking to every person in the large crowd surrounding him.

The question now is whether he can develop from a tough state-union buster to a national politician who can modernize Reagan’s policies while maintaining the Gipper’s upbeat message of optimism and growth.

The Republicans need a strong message and a messenger to clarify the issues. This final bit is naturally what I find myself attracted to most of all:

Walker was also highly critical of President Obama’s conduct in the war against radical Islamism, and said the U.S. must wage a stronger battle in the air and on the ground against ISIS.

Meantime, one must simply endure and hope things can be held together until then.