GOP economics still reveres the disproven 'Laffer curve'
Arthur Laffer, the Reagan-era guru of trickle-down economics, was unchastened by the deficit explosion back then, which effectively disproved his theory that cutting taxes on the rich would increase government tax revenue. According to a recent Washington Post writeup, Laffer continues to be unchastened now, even as Britain reels from a leadership shuffle caused by the catastrophic application of his very theories.
Hand it to Laffer: Seldom does someone who is so often proven wrong have the gumption to maintain he’s right — yet most congressional Republicans still buy into his theory. Einstein allegedly said that doing the same thing repeatedly and expecting different results is the definition of insanity. Which is what seems certain to reign in the House when the GOP takes over next year.
Today’s stubborn Republican mythology that treats tax cuts as a magical economic elixir is largely traceable to Laffer’s theory, which arose in the late 1970s. His famous “Laffer curve” presumes to prove that tax cuts for the rich will spur economic investment, causing such strong economic growth that the government’s tax revenue would actually rise instead of falling. Even 1980 Republican presidential candidate George H.W. Bush derided the notion as “voodoo economics.” That is, until he became vice president to Ronald Reagan, who embraced it.
And how did Laffer’s theory, recast as “Reaganomics,” turn out in practice? Yes, the economy was robust in the 1980s after Reagan’s historic tax cuts. But that’s also when the era of big budget deficits began, to the point that Reagan himself had to implement a series of later tax hikes to address it. Republicans today always seem to forget that part of the story.
They certainly forgot it in Kansas in 2012, when they went full-Laffer with massive tax cuts. This deliberate test of Laffer’s theory, known as “The Kansas Experiment,” was a debacle. The state’s economy didn’t skyrocket, but the deficit did, forcing deep cuts to education before the legislature finally acknowledged defeat and reversed the tax cuts.
Unfazed, congressional Republicans and President Donald Trump in 2017 slashed corporate taxes in what they claimed was a necessary economy-booster, even though the Obama economic recovery was already well underway. Rather than reinvest that largess, corporations put much of it into self-serving stock buy-backs. Then-Treasury Secretary Stephen Mnuchin’s famous vow that the tax-cut plan would “pay for itself” in growth — the very definition of Laffer’s theory — has since been exposed as the voodoo it always was. The cuts are now expected to add more than $2 trillion to the deficit over 10 years.
Yet congressional Republicans are already testing the waters for more tax-cutting. You’d think after blaming the Biden administration (with some justification) for making inflation worse by pumping more money into the economy, they would at least see the irony of what they’re proposing, if not its damning precedent.
— From the St. Louis Post-Dispatch editorial board (TNS).