On Saturday, conservative CNN host Michael Smerconish hosted Arthur Laffer — the father of modern supply-side economic theory who is slated to receive the Presidential Medal of Freedom from President Donald Trump — and challenged his tax cut mythology.
"Why, if the tax cuts will pay for themselves, are we having such problems with the debt and deficit?" said Smerconish, putting up figures from the Washington Post. "The deficit grew 77 percent in the first four months of fiscal 2019 compared with the same period one year before. It doesn't seem to be working out according to the napkin." (A reference to how Laffer originally scrawled his idea that tax cuts would pay for themselves on a napkin.)
"Yeah, that's just not true," said Laffer. "What they may be looking at are cash flow, cash payments. But since the tax bill was passed on December 22, 2017, revenues are way up. I mean that's what the curve talks to. We've had a very strong economic growth, good employment growth, way above what people expected and the revenues are doing just fine. I don't know what the Washington Post is talking about, but I wish they'd call me. I could take them through the actual numbers and straighten them out."
"But they're not alone," Smerconish pushed him. "The Congressional Research Service — this is from the L.A. Times — the CRS finds the cuts have had virtually no effect on wages, that's one. Haven't contributed to a surge in investment, two. And haven't even come close to paying for themselves, nor have they delivered a cut to the average taxpayer. Does the Congressional Research Service have it wrong?"
"Yes, they do," insisted Laffer. "They say the economic growth was going to be 3 plus percent in spite of the tax cuts which is just plain not true ... Michael, this tax bill has been extremely good for the economy and good especially for the poor, the minorities and the disenfranchised. It's nothing like what they said before the tax bill passed."
"How about the high school-educated white guys who are in those Midwestern Rust Beltish states that were largely responsible for the president's victory in the last cycle?" said Smerconish. "They haven't seen wages increased, they haven't gotten a piece of the tax cut, have they? Won't that be a problem for the president next cycle when they're looking for their piece?"
"It may be. And I can't judge the politics of it. That's not my gig," said Laffer. "But the median wage doesn't grow very much because you have all these low-income people coming back into the labor force, which is wonderful for them, wonderful for us."
Laffer then added that "when you showed that $22 trillion debt number, that's such a phony number ... from my standpoint I'm much happier when an economy goes pro-growth and the wealth of the country rises rather than lowering debt on the backs of the poor, unemployed and disenfranchised. That makes no sense yet they talk about it all the time." He finished by reiterating his conviction that the tax cuts would pay for themselves within three to four years.