Wednesday, February 23, 2011

Laffer at IUS last night: Bush/Obama and "stimulus"-- very bad; Clinton-- very good; Reagan-- great

A good summary of Laffer's speech from Harold Adams in the C-J...

Some of his thoughts and my thoughts:

1a.) He said that all of the "stimulus" since 2007 adds up to about $3.5 trillion. I'd like to see how he gets that, but it sounds reasonable.

1b.) He noted that you could have ended all federal taxation for 21 months with the same money-- and to imagine what this would have done for the economy. (Alternatively, you could have cut all federal taxation by half for 3.5 years-- and even ignoring the truly stimulative effects of this and the subsequent boost to tax revenues-- it would have cost the same.)

2a.) He was apt at explaining the "income effects" of income transfers-- and that these must sum to zero. Although it is proper to talk about the stimulative income effects of stimulus, the full story includes the de-stimulative income effects of stimulus (where the money comes from) and the substitution effects of distorting (and disincentivizing productive) behavior.

2b.) He was effective in explaining that to get more employment, you need some combination of making workers more attractive to employers-- and making work more attractive to workers. Consumption-based stimulus cannot accomplish these goals, overall, within an economy.

3a.) Laffer exhibited the freedom I feel as a Libertarian. I don't have any need to defend politicians from either major political party. Laffer was very critical of Bush, equating him (properly) with Obama in terms of economics and, especially macroeconomics. Laffer talked about Reagan as a great president, but also Clinton as a very good president.

3b.) For Clinton, he listed seven major accomplishments:
  1. NAFTA
  2. getting rid of taxes on Social Security income
  3. appointing Greenspan twice
  4. welfare reform
  5. balanced budget
  6. reduced govt spending as a % of GDP more than any other president (3.5%)
  7. biggest capital gains tax cut in history (mostly eliminating cap gains on homes)

2 Comments:

At March 2, 2011 at 4:48 PM , Blogger Greg said...

How did Laffer justify praising Reagan as great? Didn't Reagan set the record for federal spending as %GDP (which Obama is trying to break)? Alan Greenspan and Reagan Budget Director, David Stockman, both argued against extending the "Bush Tax Cuts" in 2010 because they are being financed with borrowed money: http://money.cnn.com/2010/08/09/news/economy/elders_economy/index.htm

By the way, great job on WFIU Noon Edition last week!

 
At March 3, 2011 at 10:21 PM , Blogger Eric Schansberg said...

I'm not familiar with those numbers. Reagan's was higher than Clinton's, but a lot of that can be ascribed-- for better/worse-- as military spending in the Cold War.

Laffer did not support Bush II on anything substantive in his talk.

 

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