Laffer’s Opinion…

The famous economist has been derided and ridiculed in many circles, but I think anyone who reads his book “The End of Prosperity”, would find that he gives a very good, logical defense of why the Laffer Curve and supply side economics was the right thing for us to do in 1981.

With business taxes starting to be among the highest in the world here in the US, I would argue that Laffer’s ideas are right again. The frustration I have is liberals cannot admit that taxing anything is a deliberate DISINCENTIVE to produce more or undertake activities where profits might result.

Capital flows like water. It will ALWAYS seek the places where the highest return on investment is possible. That means if taxes are high in an area/region, capital won’t be invested in that region.

Add to this the fact that inflation could very well make a comeback, and I’m wondering whether anyone in Washington will admit that the rush and panic to judgement on TARP and the stimulus bills has unleashed demons that we can’t put back into the bottle.

Many of us are not old enough to remember what things were like in the late 1970s, but go ask your parents. They’ll tell you how bad it was. I feel and fear that we’re doomed to make the same mistakes as occurred in the late 1970s. High inflation, high interest rates and unemploymnent stuck above 10% for years.

So, ask yourselves this…

  1. Do liberals honestly believe these things will NOT happen? If they do, have they offered a clear, logical, fact-based rationale for how we get out of the current economic mess.
  2. Why do liberals believe that Keynes was right about deficit based stimulus spending, when every country that has lowered taxes in the last generation has had a following economic boom.  Any country that increases taxes gets a recession.
  3. With the government now owning large shares of both GM and Chrysler without any legal impediment (thanks to yesterday’s Supreme Court ruling), how are these two companies going to be run such that they are profitable??  Will that profit come at the expense of Ford simply because Ford did NOT opt for a government bailout.

These are questions we should be asking ourselves today.

Meantime, here is Laffer’s article for you. Get Ready for Inflation


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