Wednesday, September 30, 2009

Laffer's Four Prosperity Killers

Liberals have had a lot of fun with Arthur Laffer, author of the Laffer Curve. That's because the last thing they'd ever want to admit is that tax rates matter.

Never mind about that. The other day Larry Kudlow did a blog and listed Laffer's four prosperity killers. Let's take them one by one.

  1. Rising tax rates. That's the Laffer Curve. When you raise tax rates, as the Obama administration proposes to do, you discourage people from saving and investing. That means you kill prosperity.
  2. Inflationary money. The Fed is printing money like mad right now to soak up the $2 trillion deficit. The way that government does inflation is that it pays for government spending by printing money. As the value of money goes down, people start to avoid holding money. They start to buy real estate and jewelry and precious metals to try and hold onto their wealth. This is not what creates a healthy economy. We want people with savings to invest in businesses that will increase productivity and wealth. Inflation is a prosperity killer. As anyone from Zimbabwe.
  3. Trade protectionism. The Obama administration just slapped duties on cheap Chinese tire imports. That means that the US government is preventing US producers and consumers from buying low and selling high. High tariffs helped to deepen and prolong the Great Depression.
  4. Government control/re-regulation. The Obama administration is proposing to put about 15 percent of the economy under direct government control with its health care reform, and regulate CO2 as a pollutant. Government control always creates waste and crony capitalism. Government is a prosperity killer.

None of this is rocket science. On the contrary, it is common sense. The rocket science is this: Nobody can know how badly the Obama administration will damage the US economy with its prosperity killing policies.

But usually, in spite of the government, the economy manages to struggle through.

No comments:

Post a Comment