Arthur B. Laffer (1941- )

Arthur Laffer received a B.A. in economics from Yale University in 1963. He received a MBA and a Ph.D. in economics from Stanford University in 1965 and 1971 respectively.

Arthur Laffer’s economic acumen and influence in triggering a world-wide tax-cutting movement in the 1980s have earned him the distinction in many publications as ‘The Father of Supply-Side Economics’. One of his earliest successes in shaping public policy was his involvement in Proposition 13, the groundbreaking California initiative that drastically cut property taxes in the state in 1978.

Arthur Laffer was a member of President Ronald Reagan’s Economic Policy Advisory Board for both of his two terms (1981-1989). He was a member of the Executive Committee of the Reagan/Bush Finance Committee in 1984 and was a founding member of the Reagan Executive Advisory Committee for the presidential race of 1980.

He was formerly the Distinguished University Professor at Pepperdine University and a member of the Pepperdine Board of Directors. He also held the status as the Charles B. Thornton Professor of Business Economics at the University of Southern California from 1976 to 1984. He was an Associate Professor of Business Economics at the University of Chicago from 1970 to 1976 and a member of the Chicago faculty from 1967 through 1976.

During the years 1972 to 1977, Dr. Laffer was a consultant to Secretary of the Treasury William Simon, Secretary of Defense Don Rumsfeld and Secretary of the Treasury George Shultz. He was the first to hold the title of Chief Economist at the Office of Management and Budget (OMB) under Mr. Shultz from October 1970 to July 1972.

Arthur Laffer has been widely acknowledged for his economic achievements. He was noted in Time Magazine’s March 29, 1999, cover story “The Century’s Greatest Minds” for inventing the Laffer Curve, which it deemed one of “a few of the advances that powered this extraordinary century”. He was listed in “A Dozen Who Shaped the ’80s,” in the Los Angeles Times on Jan. 1, 1990, and in “A Gallery of the Greatest People Who Influenced Our Daily Business,” in the Wall Street Journal on June 23, 1989. His creation of the Laffer Curve was deemed a “memorable event” in financial history by Institutional Investor in its July 1992 Silver Anniversary issue, “The Heroes, Villains, Triumphs, Failures and Other Memorable Events.”

The awards that Dr. Laffer has received for his economic work include: two Graham and Dodd Awards from the Financial Analyst Federation for outstanding feature articles published in the Financial Analysts Journal; the Distinguished Service Award by the National Association of Investment Clubs; the Adam Smith Award for his insights and contributions to the Wealth of Nations; and the Daniel Webster Award for public speaking by the International Platform Association. Dr. Laffer also earned the Father of the Year award from the West Coast Father’s Day Committee in 1983.

Early life and education
Laffer was born in Youngstown, Ohio, the son of Marian Amelia “Molly” (née Betz), a homemaker and politician, and William Gillespie Laffer, president of the Clevite Corporation. He was raised in the Cleveland, Ohio area. He is a Presbyterian, and graduated from Cleveland’s University School high school in 1958. Laffer earned a B.A. in economics from Yale University (1963) and an M.B.A. (1965) and a Ph.D. in economics (1972) from Stanford University.

Academia
Laffer was an Associate Professor of Business Economics at the University of Chicago from 1970 to 1976 and a member of the Chicago faculty from 1967 through 1976. From 1976 to 1984 Laffer held the status as the Charles B. Thornton Professor of Business Economics at the University of Southern California School of Business. During this time Laffer helped pass Proposition 13, the California initiative that drastically cut property taxes in the state in 1978. In the mid-1980s, Laffer was the Distinguished University Professor at Pepperdine University in Malibu, and a member of the Pepperdine Board of Directors.

Politics
Laffer was the first to hold the title of Chief Economist at the Office of Management and Budget (OMB) under George Shultz from October 1970 to July 1972. During the years 1972 to 1977, Laffer was a consultant to Secretary of the Treasury William Simon, Secretary of Defense Donald Rumsfeld and Secretary of the Treasury George Shultz.

Laffer was a member of President Reagan’s Economic Policy Advisory Board for both of his terms (1981–1989) and was a founding member of the Reagan Executive Advisory Committee for the presidential race of 1980. Laffer served as a member of the Executive Committee of the Reagan/Bush Finance Committee in 1984. He also advised Prime Minister Margaret Thatcher on fiscal policy in the UK during the 1980s.

In 1986, Laffer was a candidate for the Republican nomination for the U.S. Senate—which he lost in the California primary to U.S. Congressman Ed Zschau, who lost in the general election to the incumbent, Democrat Alan Cranston. Laffer served as an economic adviser to Gary Hart during the 1988 democratic primary. He helped with Hart’s proposed tax plan. Laffer also advised former Governor of California Jerry Brown when he sought the Democratic nomination for the presidential election of 1992 against George H.W. Bush. Laffer identifies himself as a staunch fiscal conservative. However, he has stated publicly that he voted for President Bill Clinton in 1992 and 1996. Laffer references President Clinton’s conservative fiscal and unregulated market policies as cornerstones of his support.

In 2018, Laffer wrote the book Trumponomics with conservative economic commentator Stephen Moore, wherein they lauded the Trump administration’s economic policies. In the book, Moore and Laffer argue that the Trump administration’s 2017 tax plan would raise growth rates to as much as 6% and not increase budget deficits. In a 2019 review of the book, Greg Mankiw, a conservative economics professor at Harvard University said the authors “do not build their analysis on the foundation of professional consensus or serious studies from peer-reviewed journals. . . . The Laffer curve is undeniable as a matter of economic theory. There is certainly some level of taxation at which cutting tax rates would be win-win. But few economists believe that tax rates in the United States have reached such heights in recent years; to the contrary, they are likely below the revenue-maximizing level.” The one issue where Moore and Laffer disagree with Trump is on the issue of free trade, which the duo supports. Previously, in 2016, Laffer said that he believed that then-candidate Trump was “going to be okay on trade” and lauded Trump’s understanding of trade.

On April 15, 2019, Laffer blamed the Great Recession on Barack Obama, “who I believe was the reason why we had the Great Recession. As he got closer and closer to winning the markets collapsed.”

Laffer curve
Main article: Laffer curve
Although he does not claim to have invented the Laffer curve concept (Laffer, 2004), it was popularized with policy-makers following an afternoon meeting with Nixon/Ford Administration officials Dick Cheney and Donald Rumsfeld in 1974 in which he reportedly sketched the curve on a napkin to illustrate his argument. The term “Laffer curve” was coined by Jude Wanniski, who was also present. The basic concept was not new; Laffer himself says he learned it from Ibn Khaldun and John Maynard Keynes.

The Laffer Curve is an economic theory that shows the relationship between tax rates and the amount of tax revenue collected by governments. The Laffer Curve shows that there is a certain point between 0% and 100% where tax revenues are maximized. The curve suggests that starting from zero, an increase in tax rates will increase the government’s tax revenue; after a certain point, however, continuing to increase tax rates will cause a decrease in tax revenue. This decrease in tax revenue can be explained by decreased incentives for work, production, etc. Laffer’s postulate was that the tax rate that maximizes revenue was at a much lower level than previously believed: so low that current tax rates were above the level where revenue is maximized. While many economists believe that government spending to stimulate demand for products should be the solution for a poorly performing economy, Laffer argues that heavy taxes and regulation impede production, and therefore, government revenue.

Numerous leading economists have rejected the view that a tax rate cut of current federal US income taxes can lead to increased tax revenue. When asked whether a “cut in federal income tax rates in the US right now would raise taxable income enough so that the annual total tax revenue would be higher within five years than without the tax cut,” 96% of economists surveyed in 2012 disagreed.[28] According to Greg Mankiw, most economists have been very skeptical of Laffer’s contention that decreases in tax rates could increase tax revenue, at least in the United States. In his textbook, Mankiw states, “there was little evidence for Laffer’s view that U.S. tax rates had in fact reached such extreme levels.” Under the direction of conservative economist Douglas Holtz-Eakin, the Congressional Budget Office conducted a 2005 study on the fiscal effects of a 10% cut in federal income tax rates, finding that it resulted in a significant net revenue loss.

Laffer was an economic adviser to Kansas Governor Sam Brownback, who in 2012 zeroed out state tax liability for approximately 330,000 of the top wage earners in the state, contending it would be a “shot of adrenaline into the heart of the Kansas economy.” The state, which had previously had a budget surplus, experienced a budget deficit of about $200 million in 2012. Drastic cuts to state funding for education and infrastructure were implemented to close budget deficits and the Kansas economy underperformed relative to neighboring states. Brownback’s tax overhaul was described in a June 2017 article in The Atlantic as the United States’ “most aggressive experiment in conservative economic policy”. The drastic tax cuts had “threatened the viability of schools and infrastructure” in Kansas. The Kansas legislature repealed the tax cut in June 2017, overriding the veto of governor Brownback.

Professional activities
Laffer is the founder and Chairman of Laffer Associates in Nashville, Tennessee, a consulting firm that provides investment advice.

Laffer sits on the board of directors of several public and private companies, including BelHealth Investment Partners, GEE Group, EVO Transportation & Energy Services, Tenth Avenue Holdings,ARK Investment Management, Preverity, Armour Concepts, and NexPoint Residential Trust.

Laffer has written two children’s books with Michelle A. Balconi: “Let’s Chat About Economics” (2014) and “Let’s Chat About Democracy” (2017).

Laffer regularly writes opinion articles in The Wall Street Journal and The Washington Times.

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