On Tuesday, the St. Louis Post-Dispatch editorial board shredded Republicans for clinging to a pro-tax cut political theory of economics pushed by former President Ronald Reagan decades ago — despite it having repeatedly failed.
The "Laffer curve," famously first scrawled on the back of a napkin at a restaurant by right-wing economist and GOP adviser Arthur Laffer, is the notion that tax cuts actually raise revenue for the government because the investment spurred by more money in the hands of businesses and millionaires grows the tax base more than the marginal revenue lost.
The ideology has a kernel of truth to it in that taxation generally reduces economic activity; however, there has never been any evidence U.S. taxes were high enough to begin with to depress economic activity beyond the returns to government revenue.
"Today’s stubborn Republican mythology that treats tax cuts as a magical economic elixir is largely traceable to Laffer’s theory, which arose in the late 1970s," wrote the board. "His famous 'Laffer curve' presumes to prove that tax cuts for the rich will spur economic investment, causing such strong economic growth that the government’s tax revenue would actually rise instead of falling. Even 1980 Republican presidential candidate George H.W. Bush derided the notion as 'voodoo economics.' That is, until he became vice president to Ronald Reagan, who embraced it."
"And how did Laffer’s theory, recast as 'Reaganomics,' turn out in practice?" wrote the board. "Yes, the economy was robust in the 1980s after Reagan’s historic tax cuts. But that’s also when the era of big budget deficits began, to the point that Reagan himself had to implement a series of later tax hikes to address it. Republicans today always seem to forget that part of the story. They certainly forgot it in Kansas in 2012, when they went full-Laffer with massive tax cuts. This deliberate test of Laffer’s theory, known as 'The Kansas Experiment,' was a debacle. The state’s economy didn’t skyrocket, but the deficit did, forcing deep cuts to education before the legislature finally acknowledged defeat and reversed the tax cuts."
Republicans then went on to try the same thing at a national scale under Donald Trump, noted the board, passing enormous tax cuts for corporations in 2017 — which did not deliver the sweeping economic growth Republicans promised. In fact, some experts believe, those tax cuts made the post-COVID inflation spell worse than it would have been otherwise. But still, House Republicans want to use their new majority to force President Joe Biden to do another round of tax cuts — when what is really needed to reduce inflation is targeted tax increases.
"You’d think after blaming the Biden administration (with some justification) for making inflation worse by pumping more money into the economy, they would at least see the irony of what they’re proposing, if not its damning precedent," concluded the board.