[SARAH SILBIGER/THE NEW YORK TIMES]
Revenues fall when taxes increase and extended tax cuts lead to lower revenues. This delicate balance between the two tax extremes and the ideal tax rate that maximizes government revenue is described in the famous theorem known as the “Laffer curve” by Ronald Reagan’s chief economic adviser, Dr Arthur Laffer. Today, the 84-year-old Republican economist speaks to Kathimerini and declares himself a supporter of Donald Trump, whom he distinguishes as the best American president in economics. In an interview not limited to the new economic data, Dr Laffer, who drew his famous tax curve on a napkin to prove his claim, recalls the Reagan era and underlines that “weak presidents cause war, while with strong ones you have peace.”
You are a vocal supporter of President Donald Trump, while you recently characterized him as “the best president in economics.” Could you elaborate on that view?
Number one, Trump implemented the Tax Cuts and Jobs Act; second, he reduced the corporate tax rate to 21% from 34%; third, he reduced the personal income tax rate from 39.6% to 37%; and he implemented 100% expensing of capital purchases. It also dramatically reduced the death tax. He even created “The Right to Try” law, which means that if you are diagnosed with a terminal illness and are terminally ill then you can receive untested and unapproved drugs by bypassing the federal Food and Drug Administration (FDA). Most Democrats voted against this bill.
I should mention that Trump created medical transparency in the US. No one knew how much medical care cost and what the benefits were, not even your doctors. He required by executive order that transactions, prices, and all information about the quality of healthcare benefits be published that would allow people to make sound decisions about whether or not they need a benefit – i.e. what the benefits are and what the costs are. That is 20% of GDP. Life expectancy in the US relative to the OECD is falling dramatically and costs relative to the OECD are rising dramatically. I call it “La Croix de sante (the cross of health),” where the US has worse and worse outcomes at higher and higher costs.
In addition, Trump has made us energy-independent and is using trade as a threat to bring people to the table to negotiate freer trade deals and reciprocity.
In doing all of this he became the best first-term president in US history on economics, and I am not talking about social issues. If you like tax cuts, I like you, and I do nοt care if you αre tall, black or white. I care about economics and only economics, and he did a wonderful job in that area, better than anyone else. Now we will see his second term very soon.
Many analysts warn that Trump’s agenda to increase tariffs will only benefit corporations and the wealthy, while at the same time preventing the lower classes from accessing cheap products from Asian markets. What is your response?
In every deal Trump did, he lowered tariffs, non-tariff barriers and quotas, while making trade freer and more beneficial to the poor and creating better competition on the world stage. The whole comparative advantage of the US is what I have described.
Now, why would he say tariffs? Because when you look at the other major countries, for example, the EU, China, Japan and South Korea, the US is by far the freest trade-free nation of all the major countries. So, when you look at these other major countries, their leaders are “ignorant” about the benefits of trade. They are old-world mercantilists, and they like to increase exports, decrease imports, and hoard them. They do not realize that all their tariff barriers, all their quotas, and all their restrictions hurt them as much as they hurt us.
The only thing these countries care about, and forgive me for being a chauvinistic American, is access to our markets. So how do we bring them to the negotiating table? And what Trump is saying is: If you do not lower your tariffs, we will deny you access to the American market until you negotiate a free trade agreement with us. This man knows how to negotiate, but do not confuse words with actions.
How similar or different was President Ronald Reagan from Trump?
Similar in economics and very different in demeanor. Reagan never yelled or threatened, except for the Soviet Union, and he succeeded as we won the third world war because of his threats and negotiations. The nuclear threat was greatly reduced under Reagan and greatly reduced under Trump. We would never have had the invasion of Ukraine if Trump was president and we would never have had the attack on Gaza. Weak presidents cause war, while with strong ones you have peace through strength and power. That means a strong Department of Defense and a very strong defense – that is our real threat.
Then you have to have open borders, open trade, prosperity for as many people as possible and come with us, get rich with us, become our friends, and let’s all make money together and if you do not want to do that, we have the best Department of Defense in the world and we can blow you up if we have to [laughs]. So that is the question: How can the US ensure that there is no nuclear war? War is really awful and the only way we can have peace is if America is strong and has free trade and free markets. That is the rule and truth.
With the division and polarization in American society deepening, do you think that after the election there will be a point of convergence between the Democratic and Republican public or will the division remain?
I think you will see a huge convergence in the next two or three years where everyone will love the prosperity and peace that Donald Trump and the “good” economy will bring. I have never been happier – maybe with Reagan – than I am today. You know, I was depressed a year ago. I thought Trump would lose and we’d have Biden and Harris. The same was true in 1978-80 before Reagan won, and now I’m happy in exactly the same way I was in 1981. And I think Trump’s second term will be one of the greatest periods in history. And at 84, I just want to live long enough to see all that prosperity. I want to see the poor get rich, I want to see America prosper, I want to see peace in the world, and I want to see all these other countries follow our lead. So, I believe we will have one of the most peaceful and prosperous periods in world history, I expect that to happen and I want to be there to experience it with you, the young people.