by NICK BEAMS
Trump awards Laffer the Presidential Medal of Freedom in the White House on June 19 PHOTO/White House, Joyce N. Boghosian
For almost the past four decades the central policy of successive US administrations, starting with Reagan, has been the transfer of untold wealth to the heights of society, raising social inequality to levels never seen in economic history.
Last week, the present incarnation of this program, President Donald Trump, conferred the highest US civilian honour, the Presidential Medal of Freedom, on its ideological godfather, the originator of so-called supply-side economics, Arthur Laffer.
The birth of the theory is reputed to be a meeting over dinner in 1974 between Laffer, White House Chief of Staff Donald Rumsfeld, his deputy Dick Cheney, a former classmate of Laffer at Yale, and Wall Street Journal writer Jude Wanniski. Outlining his new theory, Laffer drew on a napkin what became known as the Laffer curve.
The curve purported to show that if taxes on the ultra-wealthy and corporations were reduced this would unleash economic growth that would then bring increased revenue to the government and pay for itself. This late 20th century version of economic snake oil became the basis for the tax cuts initiated under Reagan and forms a key ideological foundation for the massive corporate and personal income tax cuts enacted by the Trump administration at the end of 2017.
Accordingly, Trump paid tribute to Laffer in presenting the medal declaring that he had studied the curve “for many years” and that “few people have revolutionized economic thought and policy” as he did.
Responding to the book entitled “Trumponomics,” published by Laffer late last year, co-authored with Stephen Moore, whom Trump had intended should take a position on the Fed’s governing council, Trump tweeted that the authors had “done a really great job in capturing my long-held views and ideas.”
However, they were not only Trump’s ideas. Despite the fact that Laffer’s theories were exposed as economic nonsense from the outset, this did not in any way lessen their influence. This is because they encapsulated the unrelenting drive for increased wealth that has dominated financial circles.
One of the most egregious expressions of this outlook was the electricity giant Enron which, before its collapse in 2001, fixed its profit figures in accordance with what was considered necessary to enhance its share values and then “backed in” the other figures in its balance sheet to give the desired result.
But Enron was only a foretaste of what was to come. In 2008, the entire financial system, based on the same kind of fictions that formed the basis of the Laffer curve, came to the point of collapse as countless billions of dollars of financial assets were found to be essentially worthless. This did not, however, bring about any kind of “course correction” but has seen the pumping of trillions of dollars into the financial system in the period since.
Laffer’s curve was denounced as economic nonsense from the outset–a verdict that has been verified by the course of economic history. The tax cuts carried out by Reagan did not bring about increases in revenue as a result in economic growth and so pay for themselves but led to massive budget deficits.
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