you know kids do better when they go
home to parents who have jobs the
problem is that politicians aren’t
spending their own money the problem is
they’re spending your money you ask
yourself the question why don’t we tax
people who work and pay people who don’t
work so if you follow value Tim and you
will hear me talk about taxes a lot of
people ask me all the time Pat why are
we talking about this boring topic of
taxes because wealthy people sit down
and actually find out how to position
themselves without taxes work every time
it changes so I decided to not just go
to somebody who knows this stuff very
well I decided to go to the person that
you know has been doing this for decades
has a lot of experience in it and let me
kind of give you some of the things he’s
been a part of one March 29 1999 Time
magazine that had covers saying the
century’s greatest minds I think
Einstein was on the cover he was one of
the names listed in that magazine LA
Times in an article it was called the
dozens that changed the 80s and he was
one of the doesn’t as I was on the list
bachelor’s degree from Yale PhD from
Stanford and he was the advisor one of
the economic advisors to President
Reagan for two terms and he’s been
involved with a lot of different people
Arnold Schwarzenegger Jack Camp so many
different names and so today if you’ve
heard the name Laffer curve today we’re
meeting with the person Arthur Laffer so
Arthur thank you so much for making it
take the time to be here with us I don’t
know why I get so excited talking about
taxes and I want to get educated today I
know this is some boring stuff but we’re
gonna make it exciting so it’s not
boring can you tell the people out there
that are watching this you know the
entrepreneur the business owner that’s
watching this why is it so important for
me as the entrepreneur to take a couple
minutes or maybe an hour or two and
study how these taxes are gonna affect
me and my business moving forward a
couple of these taxes are a huge portion
of total output production incomes
I mean federal taxes is a shared GDP are
about 20% maybe 22% at certain times
also state local taxes are right in that
same range now this is just total taxes
but the key here for tax is that from my
standpoint is economics is all about
incentives
and taxes change incentives if you
attack something you’re gonna get less
of it if you subsidize something you’re
gonna get more of it so when you look at
taxes you say well you ask yourself the
question why do we tax people who work
and pay people who don’t work you know
you can understand that we tax speeders
to get them to stop speeding we tax
smokers to get them to stop smoking well
why then do we tax people who were an
income why did we tax people who employ
other people why do we tax businesses
that make wonderful products of very low
cost and we do that basically to get the
revenues to run government but don’t for
a second believe that those same effects
that they help in on smoking and
happening on speeders happen exactly the
same there so that’s why I entrepreneurs
look at this to see how they can align
their incentives because people work to
get paid after tax not pre-tax and I’ve
heard you say in a past before you said
you cannot tax an economy into
prosperity which i think is a very
powerful statement you a quote of yours
but Arthur before you become who you
become real quick background how did
Arthur Laffer become Arthur Laffer well
that’s my wonder good as what would six
kids in here well that I can send what
for great three three pretty good the
fun you know I went that my dad went to
Yale both my brothers went to Yale I
went to Yale at yeah like I didn’t do
really well through junior year and so I
took a year off I went to the University
of minute I was a math major and there I
encountered economics and I loved it and
I came back and that changed my life so
I became just a Munich minute yes got it
the University of Munich back then the
61-63 period came back graduated from
Yale then went to Stanford and it’s all
sort of history there my first job was
at the University of Chicago where I
went through all the ranks at Chicago
and then I came back to USC you know USC
there’s of course I would I was jumped
out of the charles b thornton professor
there and when that ended in a my
whatever happened so when you get a call
from the president especially you know
would reagan how did that i went well
with reagan it was it was very early my
i should tell him i tell everyone that
reagan picked me out of a whole lineup
of economists that’s not true the truth
is my godfather was his best friend
Justin it’s always nice to get something
through privilege with it’s calling for
you to say that because most people
probably wouldn’t say something like
that for you to say that well it’s true
but that’s how it happened with Reagan
but I was in the White House before
Reagan and I was in the White House
1972 72 I was George Shultz’s right-hand
person when he was made head of the OMB
I was the first chief economist at the
OMB so that was my first political
experience I was in Brookings before
that which is quasi government so you
know I’ve been involved with this stuff
for a long long time so let me ask you
this is it okay if we tell them what you
just told me who you voted for is it
okay okay that’s fine
so you vote at your Kennedy you’re a big
fan of what Kennedy was doing – the
union’s
two times you voted for Bill Clinton yes
I did that’s that’s a complete different
side and so politically you voted both
sides because your main focus has always
been
economics that’s it so we’re not talking
any pro-life pro-choice social issues
we’re not covering anything we’re purely
talking math today that’s it and I don’t
talk about these other topics because
obviously I’m not an expert if you want
the economy taken care of I’m your guy
perfect so you want abortions taking her
die around here somewhere no problem no
forgive me for that but I but I never
answer questions on other issues and I
appreciate that and I appreciate that so
for me a little background with you a
family side I grew up a mother side
communist and imperialists on my
father’s I said I was always curious to
know how these economics work lived in
Iran ten years two years Germany and
came out of here some always curious
where do you live in Germany I lived in
air long again of course oh yeah yeah I
let me tell you Germany to me was I had
a great time in German I did too I don’t
know why I just had a fun I love Germany
I got the award of being the alumni of
the year from the University of minute
oh four or five years ago the Miller
award and I had to give my lecture in
English because I’m I can’t do did you
change it cuz you got a sense I know I
used to be able to speak fluently I mean
it was like my mother tongue but that
without speaking up for 60 years it’s
you
okay so how about we get into it so
let’s start off with what’s that you
know right over there is something that
everybody talks about around the world
and by the way if you don’t know this I
was talking to a friend of mine Byron
Adele who’s a very very successful CEO
entrepreneur runs a big business out of
Chicago himself and we were talking I
said so tell me about what are your
thoughts about Arthur Laffer he says oh
my gosh I can’t believe you’re sitting
down with Arthur Laffer you know I had
one time an opportunity to meet with
Forbes and you know we talked about
what’s happening with business very much
involved in business and politics and he
says the thing that is I’m so curious
about is how come every time I bring up
the Laffer curve most people in a
middle-income and low-income families
know nothing about the Laffer curve they
know the concept but they’ve never heard
about the Laffer curve which is a big
part of what President Reagan took that
concept and said hey what if we did this
the whole meeting that you had with what
was a Donald Rumsfeld and Dick Cheney
and you took the napkin and you drew it
out to them and and that is now is it at
the Smithsonian so it’s insane to me
because it’s a unique place to go we
used to go every year 4th of July just
to go and it’s just wonderful it’s it’s
a unique place ok and I’m a big Milton
Friedman guy is also so big I like if if
I want to be I got a letter here from
Tom Sol that you will love we got a
letter here from John somebody’s about
I’ve known it forever
wonderful ok and such a fine man besides
yes I did you did you really he’s shy
he’s shy he’s not one is just waiting
for the the cameras and we make my stuff
no he’s a very shy self effacing
person he’s just a lovely lovely man
interesting well big great economist
yes and by the way his brain is still as
sharp as it was so it’s not like he
still has it he’s still it still
terrifies me yes you don’t get it an
argument with some soul so Arthur this
is what I like to do and I want to just
prepare what I like to do anything that
I study I like to study all opposite
sides so I don’t like to just go read
everything for instance I read
everything with you know
Communist Manifesto you know rules for
radicals I read everything good I want
to know opposing arguments and I push my
own arguments because that’s what helps
me either
find a kink in my argument or to find
helps me make my argument even stronger
okay sure so why don’t Shoom are you if
you can come around over here to try to
get this part and obviously we’ll put
the visual on there for you guys to see
as well once you take a second with this
pen and just kind of show us what is the
Laffer curve
well the Laffer curve really simply is a
relationship between tax rates and total
revenues okay now there are two effects
tax rates have on total revenues one is
if you raise tax rates you collect more
revenue per dollar of tax base but when
you raise tax rates you make that
activity less attractive and you shrink
the tax base so I call it the arithmetic
effect and the economic effect okay and
these two effects always work in
opposite directions now at a hundred
percent tax rate if every time you went
to the office instead of getting a check
you got a bill how long would you work
not very long sure so we start off here
let’s just do tax rates here and tax
revenues here okay at a hundred percent
there’ll be zero tax revenues zero here
guy to me so this is 100 percent tax
rate this is real percent tax no this is
zero revenues several revenue yeah and
now at zero percent tax regime a work
like mad okay but there’ll be no
revenues either obviously you’re not
there’s no tax rate on what your revenue
to the government or no revenue to the
government overall to the government
yeah I want a specific okay now when you
start off at a hundred percent tax let’s
say we start lowering the texture yeah
but what will happen is everything all
of a sudden couple people start making 1
percent two percent whatever yes and
you’ll see some of them starting to work
and the government will start collecting
revenues and as you keep lowering the
rate they go until you hit a point where
all of a sudden the arithmetic effect
starts to dominate the economic effect
this is the economic effect on here and
all of a sudden you come back down to
where the curve comes back to zero now
the shape of this curve can be anything
but it connects there this way this is a
pedagogic to really see that the two
effects
tax rates have on total revenues now
what you notice here which is sort of
cool is there two tax rates okay there
are two tax rates where you collect the
same
there’s a high tax rate in the
prohibitive range and there’s a low tax
rate which has a large base with a low
rate and this one has a small base with
a high rate and they’re the same why
would you ever want to be in this range
you never would mm-hmm okay you’re
hurting it do you actually know the
specific number here no no this is
pedagogic device this is a it loves it
yeah I do in the Econometrica sand we
find all sorts of shapes of curves
there’s a whole huge academics that lsah
but it’s a whole academic literature but
but just the point is here there are tax
rates that are so high that if you lorem
you actually collect more revenues or if
you don’t collect more revenues you get
maybe you get less revenues but you get
welfare payments go down and the budget
guy you know they’re just all sort of
and this is what it is and what I tried
to take this curve to show done Rumsfeld
and Dick Cheney who was my classmate
Yale I want to show them that the whip
inflation no no REM cell did not go to
college well he went to Princeton we
should consider that in college so what
but what it what I tried to show them
with a whip inflation now the 5% tax
surcharge you may get more revenues but
you’ll not get 5% more you may get 4%
more whatever but there will be some
base effect there and you might even
lose revenues so that’s where I went and
did that with them at the W Hotel in
Washington was called the Washington
hotel back in the olden days Oh once
again what is this revenues
this is revenues this is tax retiring my
handwriting here this is tax rates so if
tax rates of 50% hypothetically well
just in this illustration right it may
be way down here in fact I would believe
would you be okay if I get a little
specific with you sure let’s let’s get
specific here okay you read the paper
Mario yeah you read the paper of I think
was David and Christina Romer from UC
Berkeley I was in 2008 or 2007 was a 782
page paper that she wrote and in the
article was about finding out at what
rate that wasn’t a whole purpose of it
but at what rate does the motivation to
produce go away okay so I asked Jerry
Springer a few weeks ago for himself you
know he himself leans in Cincinnati of
these process it was a former mayor of
Cincinnati got one year
and so so so so when you when I asked
him we’re not as dumb as I look
so I asked him I said at what rate would
you lose motivation the way is the
question was not the 2018 Jerry Springer
I’m talking about the 1990 Jerry
Springer because his surgery started in
1990 once he hadn’t made a millions yet
what is too much taxers I don’t know I
mean 95% so Jerry you wouldn’t work for
95 I just don’t know so I want to know
and this is what I want to know I’m in
California and we’re having food on
Sunday at this restaurant and one of the
girls whose picture used to be on the
what he called those things the bench
but bench advertising yeah buses okay so
her picture is everywhere in San
Fernando Valley everywhere and so she’s
having lunch with her husband and I
asked her I said listen I don’t see her
face on the benches anymore and this is
what she said it’s her and her two kids
he says honestly this is what happened
so what happened she said one day my
husband and I made a decision I was
making $200,000 a year as a real term
okay and I was paying 57 percent in
taxes with everything that was going on
in the state of California my tongue she
wasn’t that 57 give or take somewhere
around there and she said my husband and
I made a decision and says I’m working
this hard to make 200 to keep 90 of it
or whatever the number was and we
decided what’s more important this or
maybe in a stay home mom we just decided
we downsize our life and I became a stay
home mom because I lost the motivation
to wanna make money right okay perfect
so but I want to be as close to specific
as possible no one’s been able to give
this answer to me I am sitting with PhD
of economics and I want to see how close
P you’re gonna get I see a little bit
but let me just tell you the the one guy
is an Australian economist but it for
the economy as a whole
not for this lady or you or me or but
when you take all of them the optimal
tax rates something in the range of ten
to twelve percent on a flat rate based
tax where you tax everything at the same
rate no deductions no exemptions no
excuse that sustainable oh yeah that is
sustainable that would be something that
would lasted if you go back to the MOOC
oedema with even call doing that you’ve
got that same type of number coming out
if you look at all the biblical
references
tithing it’s 10% you know that’s that
that’s what sort of historically has
been quote the optimal tax over the
thousands of ten or twelve percent you
know a very low number and what it does
allow for is the long-term effects now
just remember if I raise your taxes
tomorrow to 90 percent I’ll probably
collect a lot more money but two years
now I won’t because you’ll change your
behavior of course if I do the corporate
tax the thirty five percent you know
companies will shelter their income
they’ll they’ll be tax on or town off
short you got it there’s evasion
avoidance under bright economy the IRS
claims that something fifteen to
eighteen percent of all taxes owed are
not paid so if you count all of that in
there as well it’s a very low number and
it works in Christina and Paul Romer I
mean their paper probably was one of
these single best papers showing how tax
rates really changed the incentives to
produce that paper I don’t know how she
possibly did her job with Obama I just
don’t know I just don’t know how because
her whole economics was just the
opposite her paper was foundational on
how tax rates incentivize people and
create economic growth
she’s a Reagan Republican whether she
claims it or not she economically she
that’s all I’m talking yeah yeah yeah
yeah I’m not talking about anything else
no I’m with okay so so so here’s what
you’re saying I want to really
understand it so what you’re telling me
is an optimal tax rate that is
sustainable for the government to use to
provide me proper roads proper a
milliner not talking just federal okay
if you do state local you’re probably
getting a seventeen percent something
like that oh so you’re saying 10 or 12
federal and you’re saying another seven
to seven yes local taxes are about
seventy percent of federal taxes so
you’d say you know maybe twenty percent
total for all of it now when I did it
with Jerry Brown I did his flat tax when
he ran for president in 92 we took the
low rate broad-based flat tax of
personal on adjusted gross income and
value add and we had a thirteen percent
rate is that what he pitched yeah he
almost won Jerry Brown pitch to thirteen
Jerry Bradish
Jerry Brown my guy I mean he’s a great
great change to you know he really did
he’s in a very tough position as
governor of California he doesn’t
control the state I mean the California
Teachers Association as you know is you
sound like you’ve been talking right now
you sound like you’re favored and your
friends I am giving a plan so let me let
me is economically was losing to without
without him without him we would not gun
prop 13 passed without him we would have
not gotten again spending limit without
him we would not have indexed the
personal income tax got rid of the
business inventory tax you know he was
amazing and I worked with him very
closely what I think to him yeah he’s an
older man now yeah so much you’re saying
on the flat tax the 13.3% is
outrageously I don’t think that was what
he had dreamed about then fair enough
then I mean I’m okay with that so no
because fifty seven and a half I mean
would mean fifty seven percent in the
city California making seven figures out
send papers on well but then why Silicon
Valley doing so well of California is
because it’s not becomes so so the Apple
gains so then if this is what you say is
sustainable for a government to sustain
a number like at 20 percent why hasn’t
it happened well because there are a lot
of other things going on while it’s
sustainable for government in totality
to do it one guy may find a separate tax
rate better for him let’s say we have
the 20% it’s perfect but now I can
negotiate with you as a politician to
put in a bill that lowers my tax rate to
15% everyone else pays 20 and I get a
little bit of advantage and then someone
else does it and they do a political
process and what you have is a political
process that literally with all the
favor grabbers lobbyists all the
deductions exemptions exclusions you get
all these people that put all this
garbage inside the tax bills and no
longer does someone sit and say this is
the best for society they’re all trying
to nibble out their own pieces and this
is called the the tragedy of the Commons
each person is better off by lowering
his tax rate and not paying the same as
everyone else but the system gets
destroyed in the process and the problem
is if I may say and just here just the
problem is that politicians aren’t
spending their own money
the problem is they’re spending your
money and they don’t have the
constraints that you know so my solution
to that is I think we ought to put
politicians on commission you know if
GDP grows at 3% you get your salary mr.
politician if it grows at 4% you could
double your salary 5% you get triple
your salary 2% you don’t get any salary
and 1% you always the money back if they
had to bear the consequences of their
own actions we could get that 20% well
that can’t happen because even
corporations gets like saying well if we
do that why don’t we do that with
corporations who do that and they’re
getting a salary when the market tanked
so that argument would come back with it
because unfortunately they’re voting
their own salary so they obviously don’t
want it actually I agree with you but I
like you know what I agree when I talked
to me romaso frisco the city grew from
five thousand people in nineteen ninety
two population 247 172 thousand people
today and I say what’s your salary he
said I was making five hundred dollars a
month as a mayor of frisco three terms
and that market grew into attracting all
these companies there so yeah I don’t
know about politicians making it as a
salary thing but yeah it’s a whole
difference but you got to make them be
responsible for their actions in a very
direct way so let me I’m with you
because of course it’s like the tenure
with teachers a teacher can get teacher
should not have tenure good teachers
should be paid more than bad teacher
hungry and they said not paid that way I
think they are underpaid I think the
greatest teacher should have the ability
to make $150,000 what they’re doing some
of them are way overpaid some of them
are underpaid you know there’s a lot of
lousy teachers on the system comp plan
is not an efficient complan to produce
competition for one teacher but you
don’t have one salary see that’s the
problem I mean everyone is attracted to
a high salary good people and bad people
yeah all right so high salaries aren’t
the action rather the thing what you
want to do is make sure good ones get a
high salary and poor ones don’t okay so
let me ask you and and we still haven’t
asked this one have you done the
research and the study I know you read
everything anything that has to do with
this topic you have to read because
you’re in the world right so so let me
ask you have you done your studies to
see this person said this that person
said this this person said this at what
rate have you done your research to say
I think that this tax rate people lose
motivation
federal and state come by I have done it
a lot on States I’ve done huge amount of
prop 13 as you may know I did the
economists up there and I’ve probably
done 20 state tax reform so I’ve looked
at these data I’ve got the book the only
one the wealth of states which is the
compilation of all state and local taxes
and incentives and growth and you know
you can see all these things I think
what I can tell you honestly is that for
total taxes we’re way above and we’re up
in the upper range of that Laffer curve
for total taxes okay we need to bring
total tax in the state pretty much every
state maybe not Tennessee I mean we have
the lowest taxes here in the nation as
you probably know and we probably have
the largest surplus in the nation we
have the best improvement in education
and teach at schools we have wonderful
public services we have the fastest
growth in the nation I mean we have the
best credit rating in the nation where
our pension funds are fully funded here
and we have the lowest tax rate you
cannot balance a budget on the backs of
the poor the unemployed or people who
leave your jurisdiction so that’s why I
came to that phrase that you liked you
can’t tax an economy into prosperity nor
can a poor person spend himself into
wealth that’s not the way it works and
this state is a classic example of the
counter example of Illinois the counter
example of of Wisconsin the Michigan of
Massachusetts of Connecticut of New
Jersey I mean West Virginia Kentucky the
this is the exact opposite of those
states so so you said the number that we
have today is pretty close to being
above the Laffer curve where the
motivation goes away so what it
diminishes diminishes short so would use
diminishes it goes lower and lower yeah
so let me ask you this is that 40% is
that 39 percent is that 38 or seeing
higher 30s upper 30s you know when
you’re talking right now you’re talking
about total state and local taxes are
probably 37 no excuse me about 45 46
percent something like 3 43 the marginal
rates you’ve got so many different
little taxes all over the place you’re
looking at total revenues the taxes do a
lot more damage than just the revenues
they collect they cause people to change
their portfolios judge their work habits
they hire lawyers accountants deferred
income specialists favor grabbers
lobbyists
this is wasted resources in the system
so when you look at those rates they’re
way above what I think the society could
have and be far more productive and so I
would like to see that 43 44 whatever
the rate is you think a full employment
should be about 46 percent something at
45 percent any state federal no that’s
data and federal that’s that’s both
together you’re saying it should be
around that number no that’s where it is
now at full employment that’s where the
number so we get it standard but we can
lower that rate quite substantially
because a lot of the benefits and the
tax rate reductions won’t be in Luth
lost revenues most of the benefits will
be people no longer a result of their
income so so and all that they’ll pay
their taxes fair and square and work so
here’s here’s a question to ask you what
is the best argument you’ve heard
against your argument well all the
arguments against my argument assume
that if you raise tax rates you increase
revenues now all the arguments for
raising tax rates have all been we need
better schools we need better roads
we’ve and I’ve done all the work on that
as well on States and if you look at
states those states that raise their
taxes don’t get better services I mean
they just plain don’t Texas has much
better educational system than
California Florida is a much better
educational system than Illinois or New
York and there are zero income tax
states and the reason is you know kids
do better when they go home to parents
who have jobs you know there there’s so
much more to education than just the
teachers pay and the teacher California
is but this is five years ago date a bit
I don’t know the latest but California
teachers were the second highest paid
teachers in the nation and the student
test scores on the nape scores were
third lowest in the nation go figure
Wow I mean you know you got like
California Teachers Association is a
failed experiment it’s horrible
California of the five large states is
the worst performing state with the best
benefits and everything for the teachers
but who’s the governor there in that
Duke Meijin guy no I’m just joking
bad trick you know these Armenians you
know that’s half of California by the
way it’s it’s about it’s a large large
they’re also good at making babies so
you know Armenians you keep making
babies Assyrians you kind of need to
make a little bit more babies because we
don’t have too many too serious okay
so fair enough all right so let me let
me take it a different side now let me
take over for all of you by the way just
so you know six six in it so it keeps us
young what’s the difference age from the
yellow it’s large its large the youngest
thirty-four the oldest is Patricia was
born in 1963 so that she’s what that’s
3755 1837 fifty-five okay that’s the
difference 55 to 34 55 – do you want to
yes Bret I think we’re gonna see have a
six-year-old kid you know around here
like Trump and I was gonna say why you
know really impressed by these stats
that you have here but that’s go okay so
so let’s let’s go to this let’s go to
this so today okay you know you look at
some people’s arguments say well look of
course our Arthur’s gonna say this and
of course Trump is gonna support the
Laffer curve and of course you know you
know that with that tweet that our Trump
came out and what did he say says Arthur
Laffer said today that he doesn’t
understand why Democrats wouldn’t
support a tax reform like this I don’t
know the exact very said I would not
because I our tax bills were all
Democrats back and then the same people
I mean I can’t biden voted for Reagan’s
tax cut 86 taxes so did Al Gore so did
Allen Krantz and so did Teddy Kennedy so
that Bill Bradley they all voted for
lowering the rates of 28% what’s with
that yeah so he know it’s politics so
here’s a follow up you know yes politics
and sometimes I think the biggest
challenge is what you and I were talking
about when I said you know Arnold got
elected and then he changed and he said
you know we’re doing this or you know
senior got elected we will not tax
another raise taxes and then boom
taxes goes up 5% would so you see some
of these changes happen and you lose
your loyal following that you have but
this my question to you and I’m really
curious to know what your answer is
gonna be I poured all of them I’ve heard
many of them I’m Kirsten what you guys I
think I have to yeah I’m curious on what
you’re gonna say so okay
fair enough dr. arse
laughs or PhD Stanford Yale all these
things that you’ve done excellent how
about the poor people in America that
don’t have the money that need help that
need some welfare that need some you
know a Social Security that right to
have direct question how do you how do
you how do you address that money just
give me the Kennedy quote on this
because Kennedy was a supplies we’re
we’ve got taxes the best form of welfare
is still a good high paying job and what
you want to do is create that economic
growth that brings people back into the
labor force they get the skills I look
at the inner cities today and and I’m
just I want to cry
it’s just tragedy beyond belief I mean
you look at Ferguson you look at watts
you look at some of these other areas
the southside of Chicago where I lived
most of my life and you said didn’t see
how do you help them so I wrote
something in early 70s called Enterprise
Zones which I took these areas that were
exceptionally and made it zero income
taxes made it no payroll taxes for
anyone who was resident of that area who
is employed in the firm in that area
there’s no payroll tax up and there’s no
income tax lay up of $50,000 we get rid
of the minimum wage which I called I’ve
been called out on this but it is it’s
the black teenage unemployment act for
god sakes
these kids don’t have the skills to make
15 bucks an hour after being unemployed
for a year or two they become they they
don’t ever get those skills after being
unemployed they then become hostile and
then you got to protect yourself from
them this is a spiral that’s a dense mix
that door I mean just like what I’m
telling you everybody get skills in
those enterprises you’re getting you
know you don’t get skilled unless you
get paid for having those skills the
reason these high schools these things
and teachers don’t work is if these kids
came out and could get jobs with their
skills they’d get the skills immediately
but if they come out with all these
skills they have nothing they don’t have
any problems you can get back to
basketball skills none of that because
there’s a job waiting right there for
them they get all these things the thing
is you need to attract them and the way
you attract them is if you do your
mechanical engineering or machine shop
stuff work you get a good job when you
leave high school believe me they’ll do
it but if they walk out with all these
machine things skills they still are
unemployed and they sit there in the
ghetto forever they’re not gonna do it
and what we need to do is get us a
a cycle of success and prosperity I
worked with rosey Grier and how to do
that he did the micro hands on how you
dress how you talk how you don’t have
the chain taken and I did the other
trying to get the public policies that
would bring these people back into the
mainstream and you know don’t I could
get two guys to go along with me Jack
Kemp who wanted to be black he was a
football player he just me and Robin
Reagan who never met a black and they
both went I tried with Jerry Brown I
tried with all the Democrats doing the
Enterprise Zones I couldn’t get any
headway there but with Reagan and with
Jack Kemp I did we proposed Enterprise
Zones and then we got some minor minor
Enterprise Zones
legislation put in but we were the
results the results are always good I
mean come on if you have two locations a
and B if you raise taxes in B and you
lower M&A producers and manufacturers
are gonna move from – I’m not going for
your head I’m teasing you that’s you
make it so it’s a tax-free zone
and people will bring their businesses
in there and it’ll lift that area out of
the of the doldrums you have to have two
criteria though primary residence a city
sustained job police and security and
safety but no income these guys aren’t
working now there’s no tax revenues
coming out they’ve got to be able cuz
you’ve got to be able to also attract
the business owner to say I want to move
my family and kids in this area remember
I’m using this al us to do you may not
make it to zero you lower the the
payroll tax 50% you lower the income tax
rate the 50% of what it is now so you
bring these businesses so they find it
attractive to return their businesses to
hire these kids to get these kids on a
path the way I got the skills to earn
above the minimum wage I went to prep
school I went to an Ivy League college
so my MBA that with you they got my PSA
everyone in your family went to Yale so
that argument can come back and say come
on Arthur I’m not like I don’t have a
four-year degree I don’t have a – you
got a one-point a GPA so what I’m what
I’m try I need to make it so these kids
can get the same opportunity is look at
least good well I’m just trying to
question to see if this is something
that is if there’s a formula for it out
there why are we not putting the heads
together and figure out a way to figure
this becomes so darn political I don’t
know why that’s just as if it’s
necessary to have that in place to have
a rally cry to helps get some people
elected because if that goes away what’s
the rally cry
rather talk about bathrooms and gender
than they would about good economics
they’d rather talk about you know all
this I had the worst time with Reagan
not with Reagan but with the Reagan team
a night when we won yeah they didn’t
want them the all the Reagan people
wanted not to do the tax cuts they said
I was the biggest problem Reagan ever
had we were gonna destroy the defense
budget Israel’s gonna go under all these
other things we had to do but Baba I
mean because of my 10 George will wrote
column after column against me and you
know we did it I had one guy but I had
two guys in my side George salts and
when he’s on your side you know you’re
right
and then Ronald Reagan and he when he’s
on your side you know you win and he put
and it worked you know a George will
apologized a decade later for all the
stuff he said about me but the truth of
the matter is is that you know there’s a
lot of forces against this and they just
haven’t studied their economics they
don’t understand incentives so so you
and I talked about earlier we said very
rarely do people change of politics at a
later age right you rarely tell me you
saw on Trumbo to a city state and the
governor said effective tomorrow I’m no
longer gonna be your governor as the
demoted Democrat I’m gonna be remember
that that wasn’t justice did do that in
West Virginia one example in a million
yeah so that rarely happened yes right
so what happened to Bruce Bartlett is it
Bartlett Heartland Bartlett who was part
of your team part of the group and he
switches and he says I don’t know about
this trickle-down he could know it down
now it’s docile to it yeah the point is
the Bruce part was one of the best team
players ever in that if you read his
book Reaganomics if you look at the
stuff he did world-class good research
solid and especially for someone who’s
not credentialed like I am I mean he did
it all on his own it was spectacular my
guess is that then he he didn’t get the
credit he deserved and he deserved a lot
and he didn’t get it and it embittered
him and he was angry then for not having
done that you know personal feelings and
emotions I got way more credit than I
deserve Patrick I mean you know the
Laffer curve and I’m on every magazine
though and I don’t deserve all that
credit but I get it because that laugher
but you know a lot of people who did a
lot of work did not get the credit and
they become embittered I mean look at
Paul Crutzen
I mean Paul Krugman is a bitter guy he’s
a nasty person I mean can you imagine
him in his high school prom
we enter he’s got but he but he does
he’s got a chip on his shoulder and he’s
he has a good economist I like him quite
a bit personally but you can tell he’s
he’s angry all the time he’s angry and
this is not a world to be angry this is
a world to love your fellow economist to
love your fellow citizens and all of us
together trying to find the right
solutions and 50 years from now I’m sure
laugher and supply said economics will
be supplanted by something better yeah I
mean that that’s that’s been around for
a while right Socrates Plato you know
all these debates of that whose
philosophy is better and who got more
limelight and who got more attention one
poet what about all what is it see you
know so it’s okay so now let’s let’s go
to let’s go to the other part so right
now tax cuts that were announced right
and you’re looking at tax cuts for us
the day the tax cuts were announced the
following day I gave cash bonuses to
every single one of my employees and
here’s how I did it it was $100 per
month you had been with the company and
I just give me and I explained to them
why the reason why I can give it as cash
bonus is because of what happened right
now with the tax cuts to the company and
I’m willing to pass that down to you
here’s $100 per the number of months you
beam it up so you have a month’s get I
100 bucks you mean what does five months
500 bucks and that happened right and so
we’re gonna get a taste of that next
year you’re not gonna get it this year
because you’re still paying whatever the
seventy numbers are okay so if you are
watching this okay this sum was watching
it right now he wants to become an
entrepreneur okay she wants to start her
own business or I right now I’m an
executive I’m an employee and I don’t
really know what’s going on cuz you know
a lot of time when it comes down to
taxes people think they kind of know but
someday technical they don’t really know
and it gets technical really quick very
quickly right and confusing and very
confusing if if I know that these things
are about to happen and I have the
opportunity to go take advantage of this
the next three years possibly seven
years six and a half years whatever this
timeline is gonna be if I were to do
that what what feedback would you give
to me knowing this is the current market
place go take advantage of it go create
some well for your own family what
advice would you give now remember I’m
not an entrepreneur man I have my own
business here as you can see and I was
forced into it but I’m basically an
academic so I’m not one of you from that
perspective yeah well let me just tell
you what I would do is that first place
be very selective on what state
there are nine states with no earned
income tax that makes a huge difference
believe me Texas Florida Nevada
Washington State Alaska Wyoming South
Dakota and New Hampshire Tennessee and
Florida I mean these are the ones where
you where booming you see the
skyscrapers all over here go to a place
that’s in a boom
don’t go to Illinois don’t go to these
other places that you’re gonna be
drowned right at the beginning and then
get in the business where you know what
your paint gonna pay what you can do
with it and so you aren’t making all
your money like a rich person does
through shelters and through all of that
but where you get it through a real
production and that’s the way I’d focus
to really align myself with the tax
structure and the government spent but
don’t live off government grants and
government Hospital reimbursements get
into a place where you’re really selling
a product that people want not where
you’re trying to market it to a
government employee that’s just my view
of the world I got it okay here’s the
other question for you so what about you
know the person that’s living in France
okay they have access to you to pick and
why they don’t study you know I go over
there and and you have a lot of
undercover people in the Middle East i
watch value tainment and so I do it
Jazeera a lot yeah there you go
so for somebody that’s in France for
somebody that’s in Spain for somebody
that’s seen you know some countries in
Europe that are considered socialistic
Society etc I’m not even talking
communist in Cuba I’m just talking pure
socialism what feedback can you give to
me the person that’s watching the same I
really want to implement some of these
concepts in business but I’m living in
this kind of a society what feedback
would you give okay I gave the talk at
in Bratislava okay and the thing I said
that the students there the government
spendings 50% it’s a very small country
it’s not doing well I said get the hell
out of here if you’re young and want to
start a career go to a place where the
careers are can happen if you hang here
you’re just going to become the slave
the fodder for the system that’s here
and the only way you can really do well
in those places and be part of the
political system that exploits everyone
else that’s why I hate the EU not
because I love the Europeans but I’m so
happy with brexit and I wish all of them
would break because cop
titian is as important among governments
as it is amongst companies it is and
whenever you have governments colluding
with each other they are doing it to
explore you rip off the citizenry so I
just like politicians cooperating with
each other because once they cooperate
all they’re doing is cooperating to new
methods to exploit the citizen so you
would leave I would say leave or vote
your country out of out of the EU but
you know it’s really terrifying they’re
trying to get Ireland to raise its taxes
why Ireland is the one place that doing
so well I I tell everyone do you know
why everyone’s investing in Ireland
because the capital is always Dublin but
it’s true the 12 and a percent corporate
tax makes Ireland do well look at their
recovery from the Great Recession it’s
some magnificent and they want them to
raise the corporate tax so it’s okay if
for the same audience that’s living in
Spain France Europe or Spain and it’s
tragic what’s happening in Spain and
Greece and former president left and
he’s living in a whole different place
yeah so what’s happening with taxes so
what books would you recommend me
reading to learn these concepts in the
simplest way pile
and I sort of like it doing is a there’s
one by Jude witness he called the way
the world works it’s an old book he’s
been dead for quite a while but that’s
pretty good Bob Bartley the the seven
fat years which describes the Reagan
Revolution all of the seven fat years
yeah my son didn’t like the book back
then he said why I said something why
don’t you like the book he said well
you’re you’re prominently displayed at
that book aren’t you and I said well yes
I am and but why wouldn’t say it’s a
dead what did he mean with that because
you’re a little overweight and I should
don’t have the oldest summers no that
was a younger one guy I have two sons
daughters they but those two books say
they’re great there’s wealth and poverty
bye-bye George Gilder there are a bunch
of other ones that are really really
good any characters to study online any
interviews any videos anybody to watch
there are a number that I’ve done online
there are a number that Steve Forbes has
done online that are really good they’re
a bunch of people who were really really
good I
I really don’t want to mention because
frankly then I’ll be everything somebody
drop so less so what’s your take what
was your experience working with Milton
Friedman I love it I mean he was great
now he and I were sufficiently different
in age that we had very I mean many
times we’d have debates or discussions
that in fact were really we differ
because of our agents that did what did
he think about what’s the best thing for
professors and he thought you know hi he
thought graduate students were the
greatest things for professors because
they they employ them and do all that
and I said no graduate students are
awful now the reason we disagreed was he
was older and I was younger and the
graduate students were my competitors
next year and they weren’t his good yeah
so it’s really funny Milton was just
great and playing with ideas and doing
things I got a bunch of stuff here with
Milton and I just loved him and we had a
lot of fun we had one episode that you
may find fun
bill and Pat Buckley Milton and Rose
Friedman and my wife and I did a
five-day tour a cruise around on the
Baja California just the three couples
and you know it probably was two days
too long but it was really what it was
straight debating tact and were you guys
like having a conversation was it record
it was not any party chord I don’t think
so got it but it was fun there are two
wonderful people Bill Buckley is just
one of the dearest friends and Milton
Friedman as well and yeah it was too
rich in all sorts of discussions and I
like those sometimes those are the best
would yeah and then after the first hour
when you’ve a little bit redundant yeah
stand off then he goes now come on yeah
I see your point lamented you know and
then it becomes a nice good discussion
that’s great but Milton and Rose were
just lovely lovely people and it just
was terrific and and of course Bill and
Pat Buckley I’ve known my daughter was
the publisher of the Yale Daily News
that the in there and of course that’s
where Bill Buckley started and so he
goes in there and he sees my daughter
there he says Rachel laughs Rachel lavra
you aren’t by any chance related to
Arthur Laffer are you
she said yes he’s my daddy you know what
just it’s just fun and
Bill Buckley was when I ran for the
Senate was the first person to endorse
me and you know it he wrote a book
called the Reagan I knew is that what he
wrote the book a phenomenal book about I
really enjoyed reading it and I loved
his debates with is a vidal him and
vidal go at it that the movie of the the
best of enemies was it was called was
biased bill buckley did a lot better
with gore Vidal than that movie praise
because the people who put it on head of
you can go watch the actual interview
and see how it was and how the movie was
the real and it also showed Buckley a
little bit yeah anyway remember I love
the one the firing line now I was on
firing line a number of times and with
Bill and but we had one he was on with
Ronald Reagan and they were great
friends as you know and I was very close
with his wife very close well Pat went
and dancing well yes he was a a
different type of person but he loved me
yeah oh my god I mean to have like a
very good friendship together
yeah don’t did you know he’s bill
Buckland was just entertaining us all a
very good friend but that if you look at
the interplay with Reagan and Buckley on
the Panama Canal you know he said of
course Reagan wanted to keep the Panama
Canal and Bill Buxton want to get rid of
it and go bucs I said you know everyone
has a right to be wrong we all have a
right to be wrong sometime and it’s
perfectly understand your this is Ronald
Reagan’s chance to be wrong I said I’m
still anticipating the pleasure of
and he said you know what did you what
what did what did you expect with Bill
Buckley today mr. Reagan and he said
well I expect him to walk onto the State
pote podium here and come over here and
say you know come right up next to me
and say you know I’ve been wrong you’re
right Ronald and he said maybe he didn’t
come close he said oh no I didn’t
because I’m afraid you’d be blinded by
my illumination it goes on and on and on
as I see the personality side of him in
a complete different way I don’t think
I’ve seen anybody like him on television
I don’t think I’ve ever seen anybody
like true
and what Reagan was also extremely good
in that area and people don’t of course
well of course what we you and I save of
course but Outsiders don’t realize what
an intellect Reagan was Reagan wrote
huge vibes every single day right
thousands of words just letters and
calculator Roger there’s actually book
of all the letters he and his wife that
was Marty Anderson’s book Reagan in his
own hand yeah fantastic book there’s
more pictures of him writing letters
than any other pictures like there’s one
day there was a stat about if you look
up pictures of Reagan online there’s
more pictures of writing letters than
anything else
that’s right it’s a man what you’ve got
I’ve got tons of them over here yeah and
she’s just loads of I got some that he
was brief and furious with if it’s with
you that’s great hey is it is it up that
we can see it or you can see some of
them yes I didn’t but you know let me
just say that’s why I never took a job
with Reagan because once you become
employee then you serve the employer but
as long as I was never an employee he
couldn’t fire me
I thought I like what Milton Friedman
one time said when they asked him they
said host oh man mr. Friedman how come
you never run for office you remember
his answer yeah he said because I love
being irresponsible
he says if I run for office all of you
are gonna hold me accountable to
everything I say and I don’t want that
life I like being irresponsible every
day which I thought was pretty
interesting class well but one last one
can I do one Buckley when he ran for
mayor of New York they asked him sir
what is the first thing you do if
elected he said demand a recount
that’s what I loved him so last question
sir
historically we go Republican we go
Democrat we go Republican we go Democrat
we go Republican for the last 40 50 I
can’t say historical because the first
Republican was what you know again and
prior to that we have Federals we have
all these but let’s just say the last 50
years okay you know a JFK then you go
the other side and you go this side and
you go senior then you go Clinton then
you go W then you go you know Obama then
you go Trump so if I’m studying trends
and I’m a stockbroker which is I’m you
know series 7 license so if I’m looking
at numbers and I’m saying you know what
when I
look at this and typically every eight
years or four years this is what happens
to the market you know I’m gonna try to
put some kind of a formula together you
cannot predict the future but sometimes
when you look at data from the past you
can say there’s some things here that
last your Foreman says no gear
indicative of future results yeah so but
if you look at that and you see what’s
going on let’s just say if these trends
are right in the next six and a half
years or in the next two and a half
years we’re gonna have a Democrat
president okay let’s just say if this is
right and let’s just say if that happens
a few candidates that are out there
obviously we have the celebrity names
they keep hearing about which is great
marketing you know Oprah or rock or some
of these names that come up which is
great but let’s look at some of the
other names Joe Biden you know he went
out if he would have ran he could
actually had a shot of beating some boy
we voted for reagan’s bill in 86 that’s
that’s right so let’s just say we have
Chris Dodd but there’s another one
that’s creating a lot of momentum
Elizabeth Warren and if Elizabeth Warren
was to get elected odds are taxes are
gonna go probably the highest it’s been
in a long time well it will be in the
60s right if that were to happen how
dramatically if an Elizabeth Warren gets
elected how dramatically do you think
taxes would change if she were to get
along if she were and if she is the same
as issue were to become the same as she
is now then it’d be a real problem I
would not want to invest in the u.s. me
that’s my yeah by the way no guarantee
my statements but what I think you’re
missing in the question is when the next
president comes in what will that
president let’s say it’s a Democrat but
Bill Clinton wasn’t very different from
Ronald Reagan he wasn’t so what you find
is that once you get a a game changer
like Trump is or like Reagan was or like
Jack Kennedy you’ll find other people
emulating them even if it’s the other
party so I would say the best
combination of all is Reagan Clinton or
Margaret Thatcher and Tony Blair I mean
they’re the same even though they’re
opposite parties the policies were the
same and that’s what I’m expecting
happening that Trump I believe will
change the way we look at politics we we
look at economics for maybe the next
decade or two so I am very enthusiastic
about the long term because yeah I think
Trump has taught the Democrats not to be
the old Democrats of redistribution slow
growth high taxes silly stuff
doesn’t mean that the Bernie Sanders and
the Elizabeth Warren’s aren’t hanging
around but I would be very surprised if
the next nominee out of the Democratic
Party isn’t a pro-growth Democrat you’d
be very surprised I think it’s gonna be
I don’t think it’s another
redistribution I think Asics gonna run
as an independent next two and a half
years and this leads me to the last
question that’s part of this is do you
think we’re getting closer to a time
where we may have an independent
president somebody in the middle get or
like though we’re not there yet you
could but you don’t want someone in the
middle yeah let me it’s and again please
it’s an economics now remember I’m not
reckon AMA come here I’m not talking
social adult you can do anything you
want there but when you add two column
in numbers doesn’t one answer you don’t
have a left-wing answer a right-wing
answer oh let’s do an average in the
middle no there’s one answer everything
else is wrong economics is math and what
you need is math to recognize that
people respond to incentives and it’s a
democrat or republican it can be Kennedy
or Clinton I voted for both of them I
thought they were terrific presidents I
never let my daughter intern in that
White House let me tell you but we’re
terrific presidents but Reagan was too
and Trump is doing a damn good job out
economics now everything else you can
say about Trump that’s not my turf but
economists that bill is probably the
best bill in the first term of any
president I’ve ever seen really it’s
amazing now the 86 tax act was the best
act ever do you know what the vote was
in the Senate on the 86 act we dropped
the highest rate from 50 percent to 28
cut the corporate rate from 46 to 34
went from 14 tax brackets a two-bit tax
brackets covered of all the deductions
exemptions exclusions that’s what we did
cut them all okay vote in the Senate 97
to 3
you got Teddy Kennedy voted for it Bill
Bradley voted for it Joe Biden voted for
it they all did why because it’s the
right thing to do
my next-door neighbor is one of my dear
friends I did the blurb on his new book
called the future he lives right on
Linwood with me a guy named Al Gore he
told me that he voted for that bill and
it was the best bill in economics ever
if you go back and read what schumer
said about the 86 act or what what harry
reid said or what all dick durbin said I
could have written their press release
because they know it’s math
know that you don’t if you tax rich
people and give them money to poor
people you’re gonna get lots and lots of
poor people in know rich people it’s as
simple it’s not as larry gatlin says it
ain’t rocket surgery it’s math now it’s
just trying to figure out a way to get
that message in the simplest way
possible to get to the people that need
to hear it that’s the biggest challenge
that is that’s what I spent my life
doing yeah and they don’t have a lot of
time for you if you can’t do it and you
know five minutes that you you know you
can’t sit there and do the math I mean
you got the attention span right now is
what according to Time magazine dropped
from 12 seconds to eight seconds okay
about to be five seconds is what they
were saying by 2029 or some number like
that
we went from 12 seconds to 8 seconds to
5 seconds if you don’t get my attention
you lose it so a dr. Arthur Laffer this
has been a pleasure thank you so much
for opening your office for us to come
and spend some time with you and kind of
get clear on what your thoughts are
about the economic system we have today
taxes the Laffer curve all of it thanks
so much for you are always welcome to my offer any pension it thank you so much
home to parents who have jobs the
problem is that politicians aren’t
spending their own money the problem is
they’re spending your money you ask
yourself the question why don’t we tax
people who work and pay people who don’t
work so if you follow value Tim and you
will hear me talk about taxes a lot of
people ask me all the time Pat why are
we talking about this boring topic of
taxes because wealthy people sit down
and actually find out how to position
themselves without taxes work every time
it changes so I decided to not just go
to somebody who knows this stuff very
well I decided to go to the person that
you know has been doing this for decades
has a lot of experience in it and let me
kind of give you some of the things he’s
been a part of one March 29 1999 Time
magazine that had covers saying the
century’s greatest minds I think
Einstein was on the cover he was one of
the names listed in that magazine LA
Times in an article it was called the
dozens that changed the 80s and he was
one of the doesn’t as I was on the list
bachelor’s degree from Yale PhD from
Stanford and he was the advisor one of
the economic advisors to President
Reagan for two terms and he’s been
involved with a lot of different people
Arnold Schwarzenegger Jack Camp so many
different names and so today if you’ve
heard the name Laffer curve today we’re
meeting with the person Arthur Laffer so
Arthur thank you so much for making it
take the time to be here with us I don’t
know why I get so excited talking about
taxes and I want to get educated today I
know this is some boring stuff but we’re
gonna make it exciting so it’s not
boring can you tell the people out there
that are watching this you know the
entrepreneur the business owner that’s
watching this why is it so important for
me as the entrepreneur to take a couple
minutes or maybe an hour or two and
study how these taxes are gonna affect
me and my business moving forward a
couple of these taxes are a huge portion
of total output production incomes
I mean federal taxes is a shared GDP are
about 20% maybe 22% at certain times
also state local taxes are right in that
same range now this is just total taxes
but the key here for tax is that from my
standpoint is economics is all about
incentives
and taxes change incentives if you
attack something you’re gonna get less
of it if you subsidize something you’re
gonna get more of it so when you look at
taxes you say well you ask yourself the
question why do we tax people who work
and pay people who don’t work you know
you can understand that we tax speeders
to get them to stop speeding we tax
smokers to get them to stop smoking well
why then do we tax people who were an
income why did we tax people who employ
other people why do we tax businesses
that make wonderful products of very low
cost and we do that basically to get the
revenues to run government but don’t for
a second believe that those same effects
that they help in on smoking and
happening on speeders happen exactly the
same there so that’s why I entrepreneurs
look at this to see how they can align
their incentives because people work to
get paid after tax not pre-tax and I’ve
heard you say in a past before you said
you cannot tax an economy into
prosperity which i think is a very
powerful statement you a quote of yours
but Arthur before you become who you
become real quick background how did
Arthur Laffer become Arthur Laffer well
that’s my wonder good as what would six
kids in here well that I can send what
for great three three pretty good the
fun you know I went that my dad went to
Yale both my brothers went to Yale I
went to Yale at yeah like I didn’t do
really well through junior year and so I
took a year off I went to the University
of minute I was a math major and there I
encountered economics and I loved it and
I came back and that changed my life so
I became just a Munich minute yes got it
the University of Munich back then the
61-63 period came back graduated from
Yale then went to Stanford and it’s all
sort of history there my first job was
at the University of Chicago where I
went through all the ranks at Chicago
and then I came back to USC you know USC
there’s of course I would I was jumped
out of the charles b thornton professor
there and when that ended in a my
whatever happened so when you get a call
from the president especially you know
would reagan how did that i went well
with reagan it was it was very early my
i should tell him i tell everyone that
reagan picked me out of a whole lineup
of economists that’s not true the truth
is my godfather was his best friend
Justin it’s always nice to get something
through privilege with it’s calling for
you to say that because most people
probably wouldn’t say something like
that for you to say that well it’s true
but that’s how it happened with Reagan
but I was in the White House before
Reagan and I was in the White House
1972 72 I was George Shultz’s right-hand
person when he was made head of the OMB
I was the first chief economist at the
OMB so that was my first political
experience I was in Brookings before
that which is quasi government so you
know I’ve been involved with this stuff
for a long long time so let me ask you
this is it okay if we tell them what you
just told me who you voted for is it
okay okay that’s fine
so you vote at your Kennedy you’re a big
fan of what Kennedy was doing – the
union’s
two times you voted for Bill Clinton yes
I did that’s that’s a complete different
side and so politically you voted both
sides because your main focus has always
been
economics that’s it so we’re not talking
any pro-life pro-choice social issues
we’re not covering anything we’re purely
talking math today that’s it and I don’t
talk about these other topics because
obviously I’m not an expert if you want
the economy taken care of I’m your guy
perfect so you want abortions taking her
die around here somewhere no problem no
forgive me for that but I but I never
answer questions on other issues and I
appreciate that and I appreciate that so
for me a little background with you a
family side I grew up a mother side
communist and imperialists on my
father’s I said I was always curious to
know how these economics work lived in
Iran ten years two years Germany and
came out of here some always curious
where do you live in Germany I lived in
air long again of course oh yeah yeah I
let me tell you Germany to me was I had
a great time in German I did too I don’t
know why I just had a fun I love Germany
I got the award of being the alumni of
the year from the University of minute
oh four or five years ago the Miller
award and I had to give my lecture in
English because I’m I can’t do did you
change it cuz you got a sense I know I
used to be able to speak fluently I mean
it was like my mother tongue but that
without speaking up for 60 years it’s
you
okay so how about we get into it so
let’s start off with what’s that you
know right over there is something that
everybody talks about around the world
and by the way if you don’t know this I
was talking to a friend of mine Byron
Adele who’s a very very successful CEO
entrepreneur runs a big business out of
Chicago himself and we were talking I
said so tell me about what are your
thoughts about Arthur Laffer he says oh
my gosh I can’t believe you’re sitting
down with Arthur Laffer you know I had
one time an opportunity to meet with
Forbes and you know we talked about
what’s happening with business very much
involved in business and politics and he
says the thing that is I’m so curious
about is how come every time I bring up
the Laffer curve most people in a
middle-income and low-income families
know nothing about the Laffer curve they
know the concept but they’ve never heard
about the Laffer curve which is a big
part of what President Reagan took that
concept and said hey what if we did this
the whole meeting that you had with what
was a Donald Rumsfeld and Dick Cheney
and you took the napkin and you drew it
out to them and and that is now is it at
the Smithsonian so it’s insane to me
because it’s a unique place to go we
used to go every year 4th of July just
to go and it’s just wonderful it’s it’s
a unique place ok and I’m a big Milton
Friedman guy is also so big I like if if
I want to be I got a letter here from
Tom Sol that you will love we got a
letter here from John somebody’s about
I’ve known it forever
wonderful ok and such a fine man besides
yes I did you did you really he’s shy
he’s shy he’s not one is just waiting
for the the cameras and we make my stuff
no he’s a very shy self effacing
person he’s just a lovely lovely man
interesting well big great economist
yes and by the way his brain is still as
sharp as it was so it’s not like he
still has it he’s still it still
terrifies me yes you don’t get it an
argument with some soul so Arthur this
is what I like to do and I want to just
prepare what I like to do anything that
I study I like to study all opposite
sides so I don’t like to just go read
everything for instance I read
everything with you know
Communist Manifesto you know rules for
radicals I read everything good I want
to know opposing arguments and I push my
own arguments because that’s what helps
me either
find a kink in my argument or to find
helps me make my argument even stronger
okay sure so why don’t Shoom are you if
you can come around over here to try to
get this part and obviously we’ll put
the visual on there for you guys to see
as well once you take a second with this
pen and just kind of show us what is the
Laffer curve
well the Laffer curve really simply is a
relationship between tax rates and total
revenues okay now there are two effects
tax rates have on total revenues one is
if you raise tax rates you collect more
revenue per dollar of tax base but when
you raise tax rates you make that
activity less attractive and you shrink
the tax base so I call it the arithmetic
effect and the economic effect okay and
these two effects always work in
opposite directions now at a hundred
percent tax rate if every time you went
to the office instead of getting a check
you got a bill how long would you work
not very long sure so we start off here
let’s just do tax rates here and tax
revenues here okay at a hundred percent
there’ll be zero tax revenues zero here
guy to me so this is 100 percent tax
rate this is real percent tax no this is
zero revenues several revenue yeah and
now at zero percent tax regime a work
like mad okay but there’ll be no
revenues either obviously you’re not
there’s no tax rate on what your revenue
to the government or no revenue to the
government overall to the government
yeah I want a specific okay now when you
start off at a hundred percent tax let’s
say we start lowering the texture yeah
but what will happen is everything all
of a sudden couple people start making 1
percent two percent whatever yes and
you’ll see some of them starting to work
and the government will start collecting
revenues and as you keep lowering the
rate they go until you hit a point where
all of a sudden the arithmetic effect
starts to dominate the economic effect
this is the economic effect on here and
all of a sudden you come back down to
where the curve comes back to zero now
the shape of this curve can be anything
but it connects there this way this is a
pedagogic to really see that the two
effects
tax rates have on total revenues now
what you notice here which is sort of
cool is there two tax rates okay there
are two tax rates where you collect the
same
there’s a high tax rate in the
prohibitive range and there’s a low tax
rate which has a large base with a low
rate and this one has a small base with
a high rate and they’re the same why
would you ever want to be in this range
you never would mm-hmm okay you’re
hurting it do you actually know the
specific number here no no this is
pedagogic device this is a it loves it
yeah I do in the Econometrica sand we
find all sorts of shapes of curves
there’s a whole huge academics that lsah
but it’s a whole academic literature but
but just the point is here there are tax
rates that are so high that if you lorem
you actually collect more revenues or if
you don’t collect more revenues you get
maybe you get less revenues but you get
welfare payments go down and the budget
guy you know they’re just all sort of
and this is what it is and what I tried
to take this curve to show done Rumsfeld
and Dick Cheney who was my classmate
Yale I want to show them that the whip
inflation no no REM cell did not go to
college well he went to Princeton we
should consider that in college so what
but what it what I tried to show them
with a whip inflation now the 5% tax
surcharge you may get more revenues but
you’ll not get 5% more you may get 4%
more whatever but there will be some
base effect there and you might even
lose revenues so that’s where I went and
did that with them at the W Hotel in
Washington was called the Washington
hotel back in the olden days Oh once
again what is this revenues
this is revenues this is tax retiring my
handwriting here this is tax rates so if
tax rates of 50% hypothetically well
just in this illustration right it may
be way down here in fact I would believe
would you be okay if I get a little
specific with you sure let’s let’s get
specific here okay you read the paper
Mario yeah you read the paper of I think
was David and Christina Romer from UC
Berkeley I was in 2008 or 2007 was a 782
page paper that she wrote and in the
article was about finding out at what
rate that wasn’t a whole purpose of it
but at what rate does the motivation to
produce go away okay so I asked Jerry
Springer a few weeks ago for himself you
know he himself leans in Cincinnati of
these process it was a former mayor of
Cincinnati got one year
and so so so so when you when I asked
him we’re not as dumb as I look
so I asked him I said at what rate would
you lose motivation the way is the
question was not the 2018 Jerry Springer
I’m talking about the 1990 Jerry
Springer because his surgery started in
1990 once he hadn’t made a millions yet
what is too much taxers I don’t know I
mean 95% so Jerry you wouldn’t work for
95 I just don’t know so I want to know
and this is what I want to know I’m in
California and we’re having food on
Sunday at this restaurant and one of the
girls whose picture used to be on the
what he called those things the bench
but bench advertising yeah buses okay so
her picture is everywhere in San
Fernando Valley everywhere and so she’s
having lunch with her husband and I
asked her I said listen I don’t see her
face on the benches anymore and this is
what she said it’s her and her two kids
he says honestly this is what happened
so what happened she said one day my
husband and I made a decision I was
making $200,000 a year as a real term
okay and I was paying 57 percent in
taxes with everything that was going on
in the state of California my tongue she
wasn’t that 57 give or take somewhere
around there and she said my husband and
I made a decision and says I’m working
this hard to make 200 to keep 90 of it
or whatever the number was and we
decided what’s more important this or
maybe in a stay home mom we just decided
we downsize our life and I became a stay
home mom because I lost the motivation
to wanna make money right okay perfect
so but I want to be as close to specific
as possible no one’s been able to give
this answer to me I am sitting with PhD
of economics and I want to see how close
P you’re gonna get I see a little bit
but let me just tell you the the one guy
is an Australian economist but it for
the economy as a whole
not for this lady or you or me or but
when you take all of them the optimal
tax rates something in the range of ten
to twelve percent on a flat rate based
tax where you tax everything at the same
rate no deductions no exemptions no
excuse that sustainable oh yeah that is
sustainable that would be something that
would lasted if you go back to the MOOC
oedema with even call doing that you’ve
got that same type of number coming out
if you look at all the biblical
references
tithing it’s 10% you know that’s that
that’s what sort of historically has
been quote the optimal tax over the
thousands of ten or twelve percent you
know a very low number and what it does
allow for is the long-term effects now
just remember if I raise your taxes
tomorrow to 90 percent I’ll probably
collect a lot more money but two years
now I won’t because you’ll change your
behavior of course if I do the corporate
tax the thirty five percent you know
companies will shelter their income
they’ll they’ll be tax on or town off
short you got it there’s evasion
avoidance under bright economy the IRS
claims that something fifteen to
eighteen percent of all taxes owed are
not paid so if you count all of that in
there as well it’s a very low number and
it works in Christina and Paul Romer I
mean their paper probably was one of
these single best papers showing how tax
rates really changed the incentives to
produce that paper I don’t know how she
possibly did her job with Obama I just
don’t know I just don’t know how because
her whole economics was just the
opposite her paper was foundational on
how tax rates incentivize people and
create economic growth
she’s a Reagan Republican whether she
claims it or not she economically she
that’s all I’m talking yeah yeah yeah
yeah I’m not talking about anything else
no I’m with okay so so so here’s what
you’re saying I want to really
understand it so what you’re telling me
is an optimal tax rate that is
sustainable for the government to use to
provide me proper roads proper a
milliner not talking just federal okay
if you do state local you’re probably
getting a seventeen percent something
like that oh so you’re saying 10 or 12
federal and you’re saying another seven
to seven yes local taxes are about
seventy percent of federal taxes so
you’d say you know maybe twenty percent
total for all of it now when I did it
with Jerry Brown I did his flat tax when
he ran for president in 92 we took the
low rate broad-based flat tax of
personal on adjusted gross income and
value add and we had a thirteen percent
rate is that what he pitched yeah he
almost won Jerry Brown pitch to thirteen
Jerry Bradish
Jerry Brown my guy I mean he’s a great
great change to you know he really did
he’s in a very tough position as
governor of California he doesn’t
control the state I mean the California
Teachers Association as you know is you
sound like you’ve been talking right now
you sound like you’re favored and your
friends I am giving a plan so let me let
me is economically was losing to without
without him without him we would not gun
prop 13 passed without him we would have
not gotten again spending limit without
him we would not have indexed the
personal income tax got rid of the
business inventory tax you know he was
amazing and I worked with him very
closely what I think to him yeah he’s an
older man now yeah so much you’re saying
on the flat tax the 13.3% is
outrageously I don’t think that was what
he had dreamed about then fair enough
then I mean I’m okay with that so no
because fifty seven and a half I mean
would mean fifty seven percent in the
city California making seven figures out
send papers on well but then why Silicon
Valley doing so well of California is
because it’s not becomes so so the Apple
gains so then if this is what you say is
sustainable for a government to sustain
a number like at 20 percent why hasn’t
it happened well because there are a lot
of other things going on while it’s
sustainable for government in totality
to do it one guy may find a separate tax
rate better for him let’s say we have
the 20% it’s perfect but now I can
negotiate with you as a politician to
put in a bill that lowers my tax rate to
15% everyone else pays 20 and I get a
little bit of advantage and then someone
else does it and they do a political
process and what you have is a political
process that literally with all the
favor grabbers lobbyists all the
deductions exemptions exclusions you get
all these people that put all this
garbage inside the tax bills and no
longer does someone sit and say this is
the best for society they’re all trying
to nibble out their own pieces and this
is called the the tragedy of the Commons
each person is better off by lowering
his tax rate and not paying the same as
everyone else but the system gets
destroyed in the process and the problem
is if I may say and just here just the
problem is that politicians aren’t
spending their own money
the problem is they’re spending your
money and they don’t have the
constraints that you know so my solution
to that is I think we ought to put
politicians on commission you know if
GDP grows at 3% you get your salary mr.
politician if it grows at 4% you could
double your salary 5% you get triple
your salary 2% you don’t get any salary
and 1% you always the money back if they
had to bear the consequences of their
own actions we could get that 20% well
that can’t happen because even
corporations gets like saying well if we
do that why don’t we do that with
corporations who do that and they’re
getting a salary when the market tanked
so that argument would come back with it
because unfortunately they’re voting
their own salary so they obviously don’t
want it actually I agree with you but I
like you know what I agree when I talked
to me romaso frisco the city grew from
five thousand people in nineteen ninety
two population 247 172 thousand people
today and I say what’s your salary he
said I was making five hundred dollars a
month as a mayor of frisco three terms
and that market grew into attracting all
these companies there so yeah I don’t
know about politicians making it as a
salary thing but yeah it’s a whole
difference but you got to make them be
responsible for their actions in a very
direct way so let me I’m with you
because of course it’s like the tenure
with teachers a teacher can get teacher
should not have tenure good teachers
should be paid more than bad teacher
hungry and they said not paid that way I
think they are underpaid I think the
greatest teacher should have the ability
to make $150,000 what they’re doing some
of them are way overpaid some of them
are underpaid you know there’s a lot of
lousy teachers on the system comp plan
is not an efficient complan to produce
competition for one teacher but you
don’t have one salary see that’s the
problem I mean everyone is attracted to
a high salary good people and bad people
yeah all right so high salaries aren’t
the action rather the thing what you
want to do is make sure good ones get a
high salary and poor ones don’t okay so
let me ask you and and we still haven’t
asked this one have you done the
research and the study I know you read
everything anything that has to do with
this topic you have to read because
you’re in the world right so so let me
ask you have you done your studies to
see this person said this that person
said this this person said this at what
rate have you done your research to say
I think that this tax rate people lose
motivation
federal and state come by I have done it
a lot on States I’ve done huge amount of
prop 13 as you may know I did the
economists up there and I’ve probably
done 20 state tax reform so I’ve looked
at these data I’ve got the book the only
one the wealth of states which is the
compilation of all state and local taxes
and incentives and growth and you know
you can see all these things I think
what I can tell you honestly is that for
total taxes we’re way above and we’re up
in the upper range of that Laffer curve
for total taxes okay we need to bring
total tax in the state pretty much every
state maybe not Tennessee I mean we have
the lowest taxes here in the nation as
you probably know and we probably have
the largest surplus in the nation we
have the best improvement in education
and teach at schools we have wonderful
public services we have the fastest
growth in the nation I mean we have the
best credit rating in the nation where
our pension funds are fully funded here
and we have the lowest tax rate you
cannot balance a budget on the backs of
the poor the unemployed or people who
leave your jurisdiction so that’s why I
came to that phrase that you liked you
can’t tax an economy into prosperity nor
can a poor person spend himself into
wealth that’s not the way it works and
this state is a classic example of the
counter example of Illinois the counter
example of of Wisconsin the Michigan of
Massachusetts of Connecticut of New
Jersey I mean West Virginia Kentucky the
this is the exact opposite of those
states so so you said the number that we
have today is pretty close to being
above the Laffer curve where the
motivation goes away so what it
diminishes diminishes short so would use
diminishes it goes lower and lower yeah
so let me ask you this is that 40% is
that 39 percent is that 38 or seeing
higher 30s upper 30s you know when
you’re talking right now you’re talking
about total state and local taxes are
probably 37 no excuse me about 45 46
percent something like 3 43 the marginal
rates you’ve got so many different
little taxes all over the place you’re
looking at total revenues the taxes do a
lot more damage than just the revenues
they collect they cause people to change
their portfolios judge their work habits
they hire lawyers accountants deferred
income specialists favor grabbers
lobbyists
this is wasted resources in the system
so when you look at those rates they’re
way above what I think the society could
have and be far more productive and so I
would like to see that 43 44 whatever
the rate is you think a full employment
should be about 46 percent something at
45 percent any state federal no that’s
data and federal that’s that’s both
together you’re saying it should be
around that number no that’s where it is
now at full employment that’s where the
number so we get it standard but we can
lower that rate quite substantially
because a lot of the benefits and the
tax rate reductions won’t be in Luth
lost revenues most of the benefits will
be people no longer a result of their
income so so and all that they’ll pay
their taxes fair and square and work so
here’s here’s a question to ask you what
is the best argument you’ve heard
against your argument well all the
arguments against my argument assume
that if you raise tax rates you increase
revenues now all the arguments for
raising tax rates have all been we need
better schools we need better roads
we’ve and I’ve done all the work on that
as well on States and if you look at
states those states that raise their
taxes don’t get better services I mean
they just plain don’t Texas has much
better educational system than
California Florida is a much better
educational system than Illinois or New
York and there are zero income tax
states and the reason is you know kids
do better when they go home to parents
who have jobs you know there there’s so
much more to education than just the
teachers pay and the teacher California
is but this is five years ago date a bit
I don’t know the latest but California
teachers were the second highest paid
teachers in the nation and the student
test scores on the nape scores were
third lowest in the nation go figure
Wow I mean you know you got like
California Teachers Association is a
failed experiment it’s horrible
California of the five large states is
the worst performing state with the best
benefits and everything for the teachers
but who’s the governor there in that
Duke Meijin guy no I’m just joking
bad trick you know these Armenians you
know that’s half of California by the
way it’s it’s about it’s a large large
they’re also good at making babies so
you know Armenians you keep making
babies Assyrians you kind of need to
make a little bit more babies because we
don’t have too many too serious okay
so fair enough all right so let me let
me take it a different side now let me
take over for all of you by the way just
so you know six six in it so it keeps us
young what’s the difference age from the
yellow it’s large its large the youngest
thirty-four the oldest is Patricia was
born in 1963 so that she’s what that’s
3755 1837 fifty-five okay that’s the
difference 55 to 34 55 – do you want to
yes Bret I think we’re gonna see have a
six-year-old kid you know around here
like Trump and I was gonna say why you
know really impressed by these stats
that you have here but that’s go okay so
so let’s let’s go to this let’s go to
this so today okay you know you look at
some people’s arguments say well look of
course our Arthur’s gonna say this and
of course Trump is gonna support the
Laffer curve and of course you know you
know that with that tweet that our Trump
came out and what did he say says Arthur
Laffer said today that he doesn’t
understand why Democrats wouldn’t
support a tax reform like this I don’t
know the exact very said I would not
because I our tax bills were all
Democrats back and then the same people
I mean I can’t biden voted for Reagan’s
tax cut 86 taxes so did Al Gore so did
Allen Krantz and so did Teddy Kennedy so
that Bill Bradley they all voted for
lowering the rates of 28% what’s with
that yeah so he know it’s politics so
here’s a follow up you know yes politics
and sometimes I think the biggest
challenge is what you and I were talking
about when I said you know Arnold got
elected and then he changed and he said
you know we’re doing this or you know
senior got elected we will not tax
another raise taxes and then boom
taxes goes up 5% would so you see some
of these changes happen and you lose
your loyal following that you have but
this my question to you and I’m really
curious to know what your answer is
gonna be I poured all of them I’ve heard
many of them I’m Kirsten what you guys I
think I have to yeah I’m curious on what
you’re gonna say so okay
fair enough dr. arse
laughs or PhD Stanford Yale all these
things that you’ve done excellent how
about the poor people in America that
don’t have the money that need help that
need some welfare that need some you
know a Social Security that right to
have direct question how do you how do
you how do you address that money just
give me the Kennedy quote on this
because Kennedy was a supplies we’re
we’ve got taxes the best form of welfare
is still a good high paying job and what
you want to do is create that economic
growth that brings people back into the
labor force they get the skills I look
at the inner cities today and and I’m
just I want to cry
it’s just tragedy beyond belief I mean
you look at Ferguson you look at watts
you look at some of these other areas
the southside of Chicago where I lived
most of my life and you said didn’t see
how do you help them so I wrote
something in early 70s called Enterprise
Zones which I took these areas that were
exceptionally and made it zero income
taxes made it no payroll taxes for
anyone who was resident of that area who
is employed in the firm in that area
there’s no payroll tax up and there’s no
income tax lay up of $50,000 we get rid
of the minimum wage which I called I’ve
been called out on this but it is it’s
the black teenage unemployment act for
god sakes
these kids don’t have the skills to make
15 bucks an hour after being unemployed
for a year or two they become they they
don’t ever get those skills after being
unemployed they then become hostile and
then you got to protect yourself from
them this is a spiral that’s a dense mix
that door I mean just like what I’m
telling you everybody get skills in
those enterprises you’re getting you
know you don’t get skilled unless you
get paid for having those skills the
reason these high schools these things
and teachers don’t work is if these kids
came out and could get jobs with their
skills they’d get the skills immediately
but if they come out with all these
skills they have nothing they don’t have
any problems you can get back to
basketball skills none of that because
there’s a job waiting right there for
them they get all these things the thing
is you need to attract them and the way
you attract them is if you do your
mechanical engineering or machine shop
stuff work you get a good job when you
leave high school believe me they’ll do
it but if they walk out with all these
machine things skills they still are
unemployed and they sit there in the
ghetto forever they’re not gonna do it
and what we need to do is get us a
a cycle of success and prosperity I
worked with rosey Grier and how to do
that he did the micro hands on how you
dress how you talk how you don’t have
the chain taken and I did the other
trying to get the public policies that
would bring these people back into the
mainstream and you know don’t I could
get two guys to go along with me Jack
Kemp who wanted to be black he was a
football player he just me and Robin
Reagan who never met a black and they
both went I tried with Jerry Brown I
tried with all the Democrats doing the
Enterprise Zones I couldn’t get any
headway there but with Reagan and with
Jack Kemp I did we proposed Enterprise
Zones and then we got some minor minor
Enterprise Zones
legislation put in but we were the
results the results are always good I
mean come on if you have two locations a
and B if you raise taxes in B and you
lower M&A producers and manufacturers
are gonna move from – I’m not going for
your head I’m teasing you that’s you
make it so it’s a tax-free zone
and people will bring their businesses
in there and it’ll lift that area out of
the of the doldrums you have to have two
criteria though primary residence a city
sustained job police and security and
safety but no income these guys aren’t
working now there’s no tax revenues
coming out they’ve got to be able cuz
you’ve got to be able to also attract
the business owner to say I want to move
my family and kids in this area remember
I’m using this al us to do you may not
make it to zero you lower the the
payroll tax 50% you lower the income tax
rate the 50% of what it is now so you
bring these businesses so they find it
attractive to return their businesses to
hire these kids to get these kids on a
path the way I got the skills to earn
above the minimum wage I went to prep
school I went to an Ivy League college
so my MBA that with you they got my PSA
everyone in your family went to Yale so
that argument can come back and say come
on Arthur I’m not like I don’t have a
four-year degree I don’t have a – you
got a one-point a GPA so what I’m what
I’m try I need to make it so these kids
can get the same opportunity is look at
least good well I’m just trying to
question to see if this is something
that is if there’s a formula for it out
there why are we not putting the heads
together and figure out a way to figure
this becomes so darn political I don’t
know why that’s just as if it’s
necessary to have that in place to have
a rally cry to helps get some people
elected because if that goes away what’s
the rally cry
rather talk about bathrooms and gender
than they would about good economics
they’d rather talk about you know all
this I had the worst time with Reagan
not with Reagan but with the Reagan team
a night when we won yeah they didn’t
want them the all the Reagan people
wanted not to do the tax cuts they said
I was the biggest problem Reagan ever
had we were gonna destroy the defense
budget Israel’s gonna go under all these
other things we had to do but Baba I
mean because of my 10 George will wrote
column after column against me and you
know we did it I had one guy but I had
two guys in my side George salts and
when he’s on your side you know you’re
right
and then Ronald Reagan and he when he’s
on your side you know you win and he put
and it worked you know a George will
apologized a decade later for all the
stuff he said about me but the truth of
the matter is is that you know there’s a
lot of forces against this and they just
haven’t studied their economics they
don’t understand incentives so so you
and I talked about earlier we said very
rarely do people change of politics at a
later age right you rarely tell me you
saw on Trumbo to a city state and the
governor said effective tomorrow I’m no
longer gonna be your governor as the
demoted Democrat I’m gonna be remember
that that wasn’t justice did do that in
West Virginia one example in a million
yeah so that rarely happened yes right
so what happened to Bruce Bartlett is it
Bartlett Heartland Bartlett who was part
of your team part of the group and he
switches and he says I don’t know about
this trickle-down he could know it down
now it’s docile to it yeah the point is
the Bruce part was one of the best team
players ever in that if you read his
book Reaganomics if you look at the
stuff he did world-class good research
solid and especially for someone who’s
not credentialed like I am I mean he did
it all on his own it was spectacular my
guess is that then he he didn’t get the
credit he deserved and he deserved a lot
and he didn’t get it and it embittered
him and he was angry then for not having
done that you know personal feelings and
emotions I got way more credit than I
deserve Patrick I mean you know the
Laffer curve and I’m on every magazine
though and I don’t deserve all that
credit but I get it because that laugher
but you know a lot of people who did a
lot of work did not get the credit and
they become embittered I mean look at
Paul Crutzen
I mean Paul Krugman is a bitter guy he’s
a nasty person I mean can you imagine
him in his high school prom
we enter he’s got but he but he does
he’s got a chip on his shoulder and he’s
he has a good economist I like him quite
a bit personally but you can tell he’s
he’s angry all the time he’s angry and
this is not a world to be angry this is
a world to love your fellow economist to
love your fellow citizens and all of us
together trying to find the right
solutions and 50 years from now I’m sure
laugher and supply said economics will
be supplanted by something better yeah I
mean that that’s that’s been around for
a while right Socrates Plato you know
all these debates of that whose
philosophy is better and who got more
limelight and who got more attention one
poet what about all what is it see you
know so it’s okay so now let’s let’s go
to let’s go to the other part so right
now tax cuts that were announced right
and you’re looking at tax cuts for us
the day the tax cuts were announced the
following day I gave cash bonuses to
every single one of my employees and
here’s how I did it it was $100 per
month you had been with the company and
I just give me and I explained to them
why the reason why I can give it as cash
bonus is because of what happened right
now with the tax cuts to the company and
I’m willing to pass that down to you
here’s $100 per the number of months you
beam it up so you have a month’s get I
100 bucks you mean what does five months
500 bucks and that happened right and so
we’re gonna get a taste of that next
year you’re not gonna get it this year
because you’re still paying whatever the
seventy numbers are okay so if you are
watching this okay this sum was watching
it right now he wants to become an
entrepreneur okay she wants to start her
own business or I right now I’m an
executive I’m an employee and I don’t
really know what’s going on cuz you know
a lot of time when it comes down to
taxes people think they kind of know but
someday technical they don’t really know
and it gets technical really quick very
quickly right and confusing and very
confusing if if I know that these things
are about to happen and I have the
opportunity to go take advantage of this
the next three years possibly seven
years six and a half years whatever this
timeline is gonna be if I were to do
that what what feedback would you give
to me knowing this is the current market
place go take advantage of it go create
some well for your own family what
advice would you give now remember I’m
not an entrepreneur man I have my own
business here as you can see and I was
forced into it but I’m basically an
academic so I’m not one of you from that
perspective yeah well let me just tell
you what I would do is that first place
be very selective on what state
there are nine states with no earned
income tax that makes a huge difference
believe me Texas Florida Nevada
Washington State Alaska Wyoming South
Dakota and New Hampshire Tennessee and
Florida I mean these are the ones where
you where booming you see the
skyscrapers all over here go to a place
that’s in a boom
don’t go to Illinois don’t go to these
other places that you’re gonna be
drowned right at the beginning and then
get in the business where you know what
your paint gonna pay what you can do
with it and so you aren’t making all
your money like a rich person does
through shelters and through all of that
but where you get it through a real
production and that’s the way I’d focus
to really align myself with the tax
structure and the government spent but
don’t live off government grants and
government Hospital reimbursements get
into a place where you’re really selling
a product that people want not where
you’re trying to market it to a
government employee that’s just my view
of the world I got it okay here’s the
other question for you so what about you
know the person that’s living in France
okay they have access to you to pick and
why they don’t study you know I go over
there and and you have a lot of
undercover people in the Middle East i
watch value tainment and so I do it
Jazeera a lot yeah there you go
so for somebody that’s in France for
somebody that’s in Spain for somebody
that’s seen you know some countries in
Europe that are considered socialistic
Society etc I’m not even talking
communist in Cuba I’m just talking pure
socialism what feedback can you give to
me the person that’s watching the same I
really want to implement some of these
concepts in business but I’m living in
this kind of a society what feedback
would you give okay I gave the talk at
in Bratislava okay and the thing I said
that the students there the government
spendings 50% it’s a very small country
it’s not doing well I said get the hell
out of here if you’re young and want to
start a career go to a place where the
careers are can happen if you hang here
you’re just going to become the slave
the fodder for the system that’s here
and the only way you can really do well
in those places and be part of the
political system that exploits everyone
else that’s why I hate the EU not
because I love the Europeans but I’m so
happy with brexit and I wish all of them
would break because cop
titian is as important among governments
as it is amongst companies it is and
whenever you have governments colluding
with each other they are doing it to
explore you rip off the citizenry so I
just like politicians cooperating with
each other because once they cooperate
all they’re doing is cooperating to new
methods to exploit the citizen so you
would leave I would say leave or vote
your country out of out of the EU but
you know it’s really terrifying they’re
trying to get Ireland to raise its taxes
why Ireland is the one place that doing
so well I I tell everyone do you know
why everyone’s investing in Ireland
because the capital is always Dublin but
it’s true the 12 and a percent corporate
tax makes Ireland do well look at their
recovery from the Great Recession it’s
some magnificent and they want them to
raise the corporate tax so it’s okay if
for the same audience that’s living in
Spain France Europe or Spain and it’s
tragic what’s happening in Spain and
Greece and former president left and
he’s living in a whole different place
yeah so what’s happening with taxes so
what books would you recommend me
reading to learn these concepts in the
simplest way pile
and I sort of like it doing is a there’s
one by Jude witness he called the way
the world works it’s an old book he’s
been dead for quite a while but that’s
pretty good Bob Bartley the the seven
fat years which describes the Reagan
Revolution all of the seven fat years
yeah my son didn’t like the book back
then he said why I said something why
don’t you like the book he said well
you’re you’re prominently displayed at
that book aren’t you and I said well yes
I am and but why wouldn’t say it’s a
dead what did he mean with that because
you’re a little overweight and I should
don’t have the oldest summers no that
was a younger one guy I have two sons
daughters they but those two books say
they’re great there’s wealth and poverty
bye-bye George Gilder there are a bunch
of other ones that are really really
good any characters to study online any
interviews any videos anybody to watch
there are a number that I’ve done online
there are a number that Steve Forbes has
done online that are really good they’re
a bunch of people who were really really
good I
I really don’t want to mention because
frankly then I’ll be everything somebody
drop so less so what’s your take what
was your experience working with Milton
Friedman I love it I mean he was great
now he and I were sufficiently different
in age that we had very I mean many
times we’d have debates or discussions
that in fact were really we differ
because of our agents that did what did
he think about what’s the best thing for
professors and he thought you know hi he
thought graduate students were the
greatest things for professors because
they they employ them and do all that
and I said no graduate students are
awful now the reason we disagreed was he
was older and I was younger and the
graduate students were my competitors
next year and they weren’t his good yeah
so it’s really funny Milton was just
great and playing with ideas and doing
things I got a bunch of stuff here with
Milton and I just loved him and we had a
lot of fun we had one episode that you
may find fun
bill and Pat Buckley Milton and Rose
Friedman and my wife and I did a
five-day tour a cruise around on the
Baja California just the three couples
and you know it probably was two days
too long but it was really what it was
straight debating tact and were you guys
like having a conversation was it record
it was not any party chord I don’t think
so got it but it was fun there are two
wonderful people Bill Buckley is just
one of the dearest friends and Milton
Friedman as well and yeah it was too
rich in all sorts of discussions and I
like those sometimes those are the best
would yeah and then after the first hour
when you’ve a little bit redundant yeah
stand off then he goes now come on yeah
I see your point lamented you know and
then it becomes a nice good discussion
that’s great but Milton and Rose were
just lovely lovely people and it just
was terrific and and of course Bill and
Pat Buckley I’ve known my daughter was
the publisher of the Yale Daily News
that the in there and of course that’s
where Bill Buckley started and so he
goes in there and he sees my daughter
there he says Rachel laughs Rachel lavra
you aren’t by any chance related to
Arthur Laffer are you
she said yes he’s my daddy you know what
just it’s just fun and
Bill Buckley was when I ran for the
Senate was the first person to endorse
me and you know it he wrote a book
called the Reagan I knew is that what he
wrote the book a phenomenal book about I
really enjoyed reading it and I loved
his debates with is a vidal him and
vidal go at it that the movie of the the
best of enemies was it was called was
biased bill buckley did a lot better
with gore Vidal than that movie praise
because the people who put it on head of
you can go watch the actual interview
and see how it was and how the movie was
the real and it also showed Buckley a
little bit yeah anyway remember I love
the one the firing line now I was on
firing line a number of times and with
Bill and but we had one he was on with
Ronald Reagan and they were great
friends as you know and I was very close
with his wife very close well Pat went
and dancing well yes he was a a
different type of person but he loved me
yeah oh my god I mean to have like a
very good friendship together
yeah don’t did you know he’s bill
Buckland was just entertaining us all a
very good friend but that if you look at
the interplay with Reagan and Buckley on
the Panama Canal you know he said of
course Reagan wanted to keep the Panama
Canal and Bill Buxton want to get rid of
it and go bucs I said you know everyone
has a right to be wrong we all have a
right to be wrong sometime and it’s
perfectly understand your this is Ronald
Reagan’s chance to be wrong I said I’m
still anticipating the pleasure of
and he said you know what did you what
what did what did you expect with Bill
Buckley today mr. Reagan and he said
well I expect him to walk onto the State
pote podium here and come over here and
say you know come right up next to me
and say you know I’ve been wrong you’re
right Ronald and he said maybe he didn’t
come close he said oh no I didn’t
because I’m afraid you’d be blinded by
my illumination it goes on and on and on
as I see the personality side of him in
a complete different way I don’t think
I’ve seen anybody like him on television
I don’t think I’ve ever seen anybody
like true
and what Reagan was also extremely good
in that area and people don’t of course
well of course what we you and I save of
course but Outsiders don’t realize what
an intellect Reagan was Reagan wrote
huge vibes every single day right
thousands of words just letters and
calculator Roger there’s actually book
of all the letters he and his wife that
was Marty Anderson’s book Reagan in his
own hand yeah fantastic book there’s
more pictures of him writing letters
than any other pictures like there’s one
day there was a stat about if you look
up pictures of Reagan online there’s
more pictures of writing letters than
anything else
that’s right it’s a man what you’ve got
I’ve got tons of them over here yeah and
she’s just loads of I got some that he
was brief and furious with if it’s with
you that’s great hey is it is it up that
we can see it or you can see some of
them yes I didn’t but you know let me
just say that’s why I never took a job
with Reagan because once you become
employee then you serve the employer but
as long as I was never an employee he
couldn’t fire me
I thought I like what Milton Friedman
one time said when they asked him they
said host oh man mr. Friedman how come
you never run for office you remember
his answer yeah he said because I love
being irresponsible
he says if I run for office all of you
are gonna hold me accountable to
everything I say and I don’t want that
life I like being irresponsible every
day which I thought was pretty
interesting class well but one last one
can I do one Buckley when he ran for
mayor of New York they asked him sir
what is the first thing you do if
elected he said demand a recount
that’s what I loved him so last question
sir
historically we go Republican we go
Democrat we go Republican we go Democrat
we go Republican for the last 40 50 I
can’t say historical because the first
Republican was what you know again and
prior to that we have Federals we have
all these but let’s just say the last 50
years okay you know a JFK then you go
the other side and you go this side and
you go senior then you go Clinton then
you go W then you go you know Obama then
you go Trump so if I’m studying trends
and I’m a stockbroker which is I’m you
know series 7 license so if I’m looking
at numbers and I’m saying you know what
when I
look at this and typically every eight
years or four years this is what happens
to the market you know I’m gonna try to
put some kind of a formula together you
cannot predict the future but sometimes
when you look at data from the past you
can say there’s some things here that
last your Foreman says no gear
indicative of future results yeah so but
if you look at that and you see what’s
going on let’s just say if these trends
are right in the next six and a half
years or in the next two and a half
years we’re gonna have a Democrat
president okay let’s just say if this is
right and let’s just say if that happens
a few candidates that are out there
obviously we have the celebrity names
they keep hearing about which is great
marketing you know Oprah or rock or some
of these names that come up which is
great but let’s look at some of the
other names Joe Biden you know he went
out if he would have ran he could
actually had a shot of beating some boy
we voted for reagan’s bill in 86 that’s
that’s right so let’s just say we have
Chris Dodd but there’s another one
that’s creating a lot of momentum
Elizabeth Warren and if Elizabeth Warren
was to get elected odds are taxes are
gonna go probably the highest it’s been
in a long time well it will be in the
60s right if that were to happen how
dramatically if an Elizabeth Warren gets
elected how dramatically do you think
taxes would change if she were to get
along if she were and if she is the same
as issue were to become the same as she
is now then it’d be a real problem I
would not want to invest in the u.s. me
that’s my yeah by the way no guarantee
my statements but what I think you’re
missing in the question is when the next
president comes in what will that
president let’s say it’s a Democrat but
Bill Clinton wasn’t very different from
Ronald Reagan he wasn’t so what you find
is that once you get a a game changer
like Trump is or like Reagan was or like
Jack Kennedy you’ll find other people
emulating them even if it’s the other
party so I would say the best
combination of all is Reagan Clinton or
Margaret Thatcher and Tony Blair I mean
they’re the same even though they’re
opposite parties the policies were the
same and that’s what I’m expecting
happening that Trump I believe will
change the way we look at politics we we
look at economics for maybe the next
decade or two so I am very enthusiastic
about the long term because yeah I think
Trump has taught the Democrats not to be
the old Democrats of redistribution slow
growth high taxes silly stuff
doesn’t mean that the Bernie Sanders and
the Elizabeth Warren’s aren’t hanging
around but I would be very surprised if
the next nominee out of the Democratic
Party isn’t a pro-growth Democrat you’d
be very surprised I think it’s gonna be
I don’t think it’s another
redistribution I think Asics gonna run
as an independent next two and a half
years and this leads me to the last
question that’s part of this is do you
think we’re getting closer to a time
where we may have an independent
president somebody in the middle get or
like though we’re not there yet you
could but you don’t want someone in the
middle yeah let me it’s and again please
it’s an economics now remember I’m not
reckon AMA come here I’m not talking
social adult you can do anything you
want there but when you add two column
in numbers doesn’t one answer you don’t
have a left-wing answer a right-wing
answer oh let’s do an average in the
middle no there’s one answer everything
else is wrong economics is math and what
you need is math to recognize that
people respond to incentives and it’s a
democrat or republican it can be Kennedy
or Clinton I voted for both of them I
thought they were terrific presidents I
never let my daughter intern in that
White House let me tell you but we’re
terrific presidents but Reagan was too
and Trump is doing a damn good job out
economics now everything else you can
say about Trump that’s not my turf but
economists that bill is probably the
best bill in the first term of any
president I’ve ever seen really it’s
amazing now the 86 tax act was the best
act ever do you know what the vote was
in the Senate on the 86 act we dropped
the highest rate from 50 percent to 28
cut the corporate rate from 46 to 34
went from 14 tax brackets a two-bit tax
brackets covered of all the deductions
exemptions exclusions that’s what we did
cut them all okay vote in the Senate 97
to 3
you got Teddy Kennedy voted for it Bill
Bradley voted for it Joe Biden voted for
it they all did why because it’s the
right thing to do
my next-door neighbor is one of my dear
friends I did the blurb on his new book
called the future he lives right on
Linwood with me a guy named Al Gore he
told me that he voted for that bill and
it was the best bill in economics ever
if you go back and read what schumer
said about the 86 act or what what harry
reid said or what all dick durbin said I
could have written their press release
because they know it’s math
know that you don’t if you tax rich
people and give them money to poor
people you’re gonna get lots and lots of
poor people in know rich people it’s as
simple it’s not as larry gatlin says it
ain’t rocket surgery it’s math now it’s
just trying to figure out a way to get
that message in the simplest way
possible to get to the people that need
to hear it that’s the biggest challenge
that is that’s what I spent my life
doing yeah and they don’t have a lot of
time for you if you can’t do it and you
know five minutes that you you know you
can’t sit there and do the math I mean
you got the attention span right now is
what according to Time magazine dropped
from 12 seconds to eight seconds okay
about to be five seconds is what they
were saying by 2029 or some number like
that
we went from 12 seconds to 8 seconds to
5 seconds if you don’t get my attention
you lose it so a dr. Arthur Laffer this
has been a pleasure thank you so much
for opening your office for us to come
and spend some time with you and kind of
get clear on what your thoughts are
about the economic system we have today
taxes the Laffer curve all of it thanks
so much for you are always welcome to my offer any pension it thank you so much
Please follow and like us: