Word: lafferism
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Voices and egos are reduced in such a setting. Thoughts are proffered with some reluctance. Yet the talk in this small place shows that the tax revolt is firmly rooted. Here is a clear vestige of the California-contrived Laffer Curve (the correlation between rising taxes and falling incentive). The ideas of Harvard's Samuel Beer are on many people's minds-not under Beer's label but as an outcropping of a deep vein of common sense. Beer believes that the Government is now so big and so oriented toward self-preservation that...
...says Wriston, business should be strong both in 1978 and 1979, which is as far as anybody can foresee. But he is bedeviled by many questions about modern America, including who killed Jack Armstrong and whether Abe Lincoln could be elected today and what's doing with the Laffer Curve. Let Wriston explain three of the problems that he senses worry the nation...
History's lesson, as University of Southern California Economist Arthur Laffer has shown in the so-called Laffer Curve, is that when taxes go up, economic activity goes down. Empires from Rome to Britain reached their fullest flower when their taxes were low, Wriston remarks, and started to self-destruct as taxes rose. Americans feel uneasy about their economy, partly because federal, state and local governments tax away 29% of the gross national product. Warns Wriston: "We are getting very close to the point where high taxes will cause the economy to deteriorate...
...woes underscore perhaps the most basic charge against floating rates: that they encourage nations to spend more than they earn, in the false hope that a cheaper currency will correct major economic weaknesses by encouraging exports and holding down imports. In reality, says University of Chicago Economist Arthur Laffer, currency fluctuations "never solve fundamental problems...
...Laffer's reasoning that businessmen and consumers will spend every cent they get their hands on [Feb. 22] works only in the 72° comfort of his classroom. After the worst inflation in 20 years, retail sales do riot indicate that consumers are spending every cent they get. Just as business is being given a tax decrease in the form of accelerated depreciation, so also should consumers get a tax cut. Then they will regain their confidence and start spending again...