I often wonder how political “leaders” can look at a problem and see such divergent paths to remedy the situation. In my adult life, this period is the worst that I have encountered. I don’t care that pundits say that the “recession is over” because it doesn’t feel that way to me or my wallet. Author Arthur Laffer provides an in-depth look at the state of the economy and gives a pretty detailed prescription for bringing America out of the blackness (redness if you are an accountant). Return to Prosperity should have used this quote from one of our presidents very early in the book,
“Tax reduction thus sets off a process that can bring gains for everyone, gains won by marshaling resources that would otherwise stand idle – workers without jobs and farm and factory capacity without markets. Yet many taxpayers seemed prepared to deny the nation the fruits of tax reduction because they question the financial soundness of reducing taxes when the federal budget is already in deficit. Let me make clear why, in today’s economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarged the federal deficit – why reducing taxes is the best way open to us to increase revenues.”
You probably think that this statement was made by conservative hero Ronald Reagan, but you’d be wrong. These were made by President John F. Kennedy in 1963. My only wish is that he’d (and all politicians and pundits discussing tax cuts) would use the phrase “tax rate cuts” rather than just tax cuts. It would help sell the logic that when something is cheaper people do more of it and this includes investing and working/earning money. The tax rate cuts enacted by JFK took the federal government from a deficit to a $3 billion surplus in 1965.
The author’s format is to provide a detailed description of the problems followed by a recommended solution and a summary. If you have done any reading you’ll recognize many of the solutions…tax rate cuts, simplified tax code, flat tax, reduce/eliminate tariffs, free trade, union-neutral contract bidding, restrictions on government unions, etc. The first part of the book is a fairly simple primer on economics and the laws of supply and demand. A few quotes stuck with me and are a good way to consider Mr. Laffer’s proposals,
“The dream in America has always been to make the poor rich, not to make the rich poor.”
“by their very nature government unions should also be nonpartisan and uninvolved as unions in the political process.”
“the firm that can provide the best product with the lowest costs should be awarded the contract.”
And on spreading the wealth
“The increase in demand for goods and services of the transfer recipients will be exactly offset by the reduction in the demand for goods and services by the transfer payers.”
And finally when considering actions to take to fix the economy…
“primum non nocere (First, do no harm)”
I have to ask at what point did these common sense approaches to our way of life go from natural to remarkable statements? I shouldn’t be impressed by these thoughts expressed in a book.