Art Laffer Attacks Alan Greenspan: "He's Old...What Does He Care?"
With the Bush tax cuts set to expire at the end of the year, Democratic leaders in the House and Senate are considering legislation to make permament provisions that help the middle-class. The people who benefited most from the cuts, however — the very wealthy — will not be as fortunate. Most likely, they will see their federal income taxes go up by as much as 4.8%. Republicans aren't having any of that and are standing up for their primary constituents by desperately trying to frame the expiration of favorable tax treatment they gave to the wealthy as President Obama's plan to implement the "biggest tax hike in history."
But conservatives aren't all on board with this approach. Former Federal Reserve Chairman Alan Greenspan (a protégé of Ayn Rand and a longtime champion of unfettered capitalism until he confessed in 2008 that there was a "flaw" in such thinking) has said that he'd like to see the cuts expire in order to reduce the deficit. Greenspan, one of the key architects of the 2001 and 2003 cuts, supported a tax increase during the Clinton administration for the same reason that he supports one now: to reduce the deficit.
This morning, Fox Business brought on Art Laffer, who served on President Reagan's Economic Policy Advisory Board and who is arguably the most discredited figure in the economic policy landscape, to discuss the issue. Laffer's claim to fame (and infamy) is his simplified Laffer curve, which supply-siders have used to argue that tax cuts actually increase government revenue. During the interview, Laffer made the claim that the tax cuts will actually decrease the deficit. When the friendly Fox host mentioned Greenspan's position on the expiration of the tax cuts, Laffer responded by saying that he, unlike Greenspan, had children and therefore, actually cared about the future of this country.
Host: Hey, Alan Greenspan says let them all expire. The former Fed Chairman. Let 'em all expire.
Laffer: (Laughs) Good for him. I mean there he goes. Well, I guess he's out of power. He's a little old. I don't think he has any kids. Heck, what does he care? You know, I have six kids. I have eleven grandchildren. You know, I really care about the future of this country and I really don't want to be taxed into poverty. I really don't think it's smart in this day and age, with this type of unemployment, to tax people who work more and to pay people who don't work more. That just is silly. It's bad economics.
No serious economist on the left, center or right actually believes this stuff. It's quackonomics. It resonates well with the Tea Party crowd, but is without a foundation. As N. Greg Mankiw, head of President Bush's Council of Economic Advisers, put it, "Some supply-siders like to claim that the distortionary effect of taxes is so large that increasing tax rates reduces tax revenue. Like most economists, I don't find that conclusion credible for most tax hikes." Similarly, Edward Lazear, another member of Bush's Council of Economic Advisers told lawmakers in 2006 that, "As a general rule, we do not think tax cuts pay for themselves. Certainly, the data presented above do not support this claim."
Laffer's predictive abilities are pathetic: for instance, he bet in 2006 that the concerns about a recession were overblown. Decades earlier, while serving as chief economist at the Office of Management and Budget, a calculation he used to estimate the GNP was so wrong (both in its conclusion and methodology) that, as Jonathan Chait notes, "he became a Washington laughingstock."
Art Laffer's past suggests he has never been a serious economist. His willingness to attack Alan Greenspan's motivations and question his patriotism proves it.