Legendary economist Art Laffer, famous for illustrating the perils of over-taxation with the “Laffer Curve,” is optimistic about the Trump Administration’s economic plans. With the stock market hitting record highs, business leaders echo Laffer’s optimism that Republicans in Washington could usher in lower taxes and more business-friendly policies.
Laffer emphasizes that Trump has the ability to usher in sweeping economic improvements while appealing to a middle ground.
“I believe that President Trump can and should win over lots of Democrats without sacrificing good economics just as we did under President Reagan,” Laffer told Opportunity Lives. Reagan negotiated the Tax Reform Act of 1986, which won overwhelming support in the U.S. Senate, passing with by a vote of 97-3.
The economist said that the essential characteristics of the successful Trump campaign last year and the Reagan campaign of 1980 are surprisingly similar. The poor state of the current economy, the ratio of employment-to-adult-population and new home sales, among other measures, strongly indicated a Republican victory.
Laffer was a key Trump adviser during the 2016 campaign. He currently lives in Tennessee, in part for its tax policy, and doesn’t have an official role in the new administration. But, he joked, “I know most of the players well and I’m not shy.”
Indeed, leading up to the election, Laffer was critical of the protectionist trade policies Trump advocated on the campaign trail. Yet he offered a qualified defense of Trump on the issue.
“I know of no politician who understands a single word of the benefits of trade or even how to think about trade,” Laffer wrote in a research brief ahead of the election, which he shared with Opportunity Lives. He continued:
Trade and taxation are the two fields of the political economy where politicians can blather nonstop without having the slightest idea of just how ignorant they are or how much damage their words cause. In my lifetime, Ross Perot personified the absence of knowledge of international trade when he coined the phrase, ‘the giant sucking sound coming out of Mexico,’ by which he meant the loss of U.S. jobs to Mexico’s cheap labor market. While Perot’s turn of phrase was unique and catchy, his content was no different than the content of Bernie Sanders’ rants, or Hillary Clinton’s tirades.
Laffer said that for a politician, trade means jobs: jobs in manufacturing, jobs in Ohio, jobs in agriculture, jobs for America’s downtrodden, jobs in mining, jobs for college graduates, and jobs in energy. And to the politician, tariffs, quotas, embargoes, sanctions, non-tariff barriers, and currency manipulations are all instruments governments use against trade to take an unfair advantage over other countries’ economies.
Yet for Laffer and his colleagues, trade is not about jobs at all or even about total employment, but instead, trade is about the value of income.
While too often politicians like Clinton make foreign countries the boogeyman (even though Clinton was more than happy to accept foreign money for her family’s foundation), Laffer points out that without China, there is no Wal-Mart, and without Wal-Mart, there is no middle-class or working-class prosperity.
“If you’ve never been in a Wal-Mart, you have to go,” Laffer said. “There are vast numbers of wonderful products that are incredibly inexpensive. I only have to imagine how difficult it would be for me to produce a simple shovel that is imported from China and I break out in a cold sweat. And yet, I can buy any number of different shovels at Wal-Mart for $19.99. How’s that for an amazing use of a $20 bill?”
The real question, Laffer says, is how America should respond to inappropriate protectionist measures by Japan, China, Mexico and others. The answer is far from obvious, he said.
“While no system is perfect, our overriding goal should be to make sure that we don’t make an already imperfect system even less perfect,” Laffer wrote. “What I hope is obvious to the reader is that we shouldn’t respond by retaliating with protectionist measures of our own. Retaliation with countervailing duties only makes the problems worse.”
Yet even though Trump has now opted out of the Trans-Pacific Partnership with Asia and South America and has spoken out against NAFTA, Laffer said he believes Trump was best positioned in November to represent America’s interests. He called Trump “the least dangerous candidate when it comes to international trade and protectionist measures.”
“Donald Trump, being America’s biggest promoter, is willing to talk about issues like trade,” Laffer said. “He is also one of the few people who, on a personal level, understands trade. He has investments all over the world and has experience in doing business across the world as well. And, even in his domestic businesses, he relies heavily on foreign products, foreign labor and foreign customers.”
Laffer said Trump’s win is part of a broader global phenomenon.
“There’s a lot of similarity between Brexit, Matteo Renzi’s resignation in Italy, the vote in Austria, the politics in France, Greece, and the election of Donald Trump in the U.S.,” Laffer said. “The best description for what is happening in America—one that went viral during the election, but is certainly true—is that the mainstream press and politicians take Trump literally but not seriously, while the electorate takes Trump seriously but not literally. It’s going to be a fun ride.”
This article was originally published at OpportunityLives.com.