Influential economic advisers to Donald Trump presented the former president with a shortlist of potential candidates to lead the Federal Reserve during a meeting at his Mar-a-Lago club in Florida last week, according to people familiar with the matter.
In the Thursday meeting, Steve Moore and Arthur Laffer, who have long advised Trump on economic issues, recommended three candidates: Kevin Warsh, an economic-policy adviser to President George W. Bush who later served on the Fed’s board of governors; Kevin Hassett, a former chairman of the Council of Economic Advisers during the Trump administration, and Laffer himself. Laffer, an economic adviser to former President Ronald Reagan, is one of the founding theorists of supply-side economics and a champion of the 2017 tax cuts Trump signed into law.
I’m not familiar with Warsh but he sounds like the most normal of the three. Hasset is a Trump loyalist and Laffer is a full-blown crank.
I wrote about his so-called economic success for Salon a bit ago. Laffer and Moore are heavily involved in the conomic side of Project 2025. It’s not good:
Trump’s determination to lower taxes for the rich is a given. Everything he does is first and foremost for himself and he won’t even try to rationalize it. It’s unlikely that the rest of the party can get away with that, so they’ll no doubt return to their perennial excuse — the federal budget deficit as a reason to lower taxes, even though that makes no sense.
That tired old saw goes back to the Reagan administration which popularized a quack theory called “supply side economics” championed by economist Arthur Laffer. He claimed that the more you cut taxes the greater the revenue to the government. Even then everyone knew it was ridiculous. Reagan’s budget director, David Stockman, actually spilled the beans to journalist William Greider, telling him, “It’s kind of hard to sell ‘trickle down, so the supply-side formula was the only way to get a tax policy that was really ‘trickle down.’ Supply-side is ‘trickle-down’ theory.” Trump gave Arthur Laffer the Presidential Medal of Freedom in 2019.
Today another supply side guru, Stephen Moore, formerly of the Club for Growth, has co-authored the Project 2025 economic plan to completely “reform” the U.S. Treasury. He’s pushing to privatize Social Security which Trump has never explicitly ruled out and told The Guardian, “Yes, I am strongly in favor of cutting tax rates to make [the] American economy No 1.” And this would presumably be in addition to extending the Trump tax cuts from 2017 which are up for renewal next year.
Just this week, we’ve received some important data on the effect of those tax cuts and I’m sure you won’t be surprised to learn that they did not pay for themselves or deliver the thousands of dollars in increased wages to workers as promised. The New York Times reports:
Instead, they are adding more than $100 billion a year to America’s $34 trillion-and-growing national debt, according to the quartet of researchers from Princeton University, the University of Chicago, Harvard University and the Treasury Department.
The researchers found the cuts delivered wage gains that were “an order of magnitude below” what Trump officials predicted: about $750 per worker per year on average over the long run, compared to promises of $4,000 to $9,000 per worker.
The new paper, by David Hope of the London School of Economics and Julian Limberg of King’s College London, examines 18 developed countries — from Australia to the United States — over a 50-year period from 1965 to 2015. The study compared countries that passed tax cuts in a specific year, such as the U.S. in 1982 when President Ronald Reagan slashed taxes on the wealthy, with those that didn’t, and then examined their economic outcomes.
Per capita gross domestic product and unemployment rates were nearly identical after five years in countries that slashed taxes on the rich and in those that didn’t, the study found.
But the analysis discovered one major change: The incomes of the rich grew much faster in countries where tax rates were lowered. Instead of trickling down to the middle class, tax cuts for the rich may not accomplish much more than help the rich keep more of their riches and exacerbate income inequality, the research indicates.
This is nothing but a giveaway to their rich benefactors. It’s a con that’s been working beautifully for 50 years.
Don the Con will surely keep that going. It’s what he does.