Art Laffer's Inside Track to Trump's Economic Recovery Team
It took three phone calls the night of March 19 before President Trump reached Arthur Laffer, the renowned economist whose career has spanned five decades, nine presidents and at least four major economic crises, including the current coronavirus-induced freefall.
At that time last month, the world was still coming to grips with COVID-19’s grim toll. Some 500 people died in Italy that day, the deadliest toll thus far, and the Trump administration had unveiled a $1 trillion relief plan to try to stabilize the cratering economy.
A week later, the daily death record in Italy was up to 969 and New York state’s deaths were climbing to Italy’s previous levels. By then, Congress had passed a $2.2 trillion stimulus bill. Laffer, who made his name in the 1980s as President Reagan’s supply-side economics guru, had gone to bed and missed the first calls from Trump. But he jolted to attention when he realized it was the president who was trying to reach him. The two ended up talking for 20 minutes.
Larry Kudlow, the director of Trump’s National Economic Council and a close friend of Laffer’s, and Treasury Secretary Steve Mnuchin each followed up with calls to Laffer in subsequent days.
Trump has said balancing the pros and cons of re-opening the economy against the possibility of more coronavirus deaths is the most difficult decision of his life, not just his presidency. The president and Kudlow have suggested a soft goal of beginning to re-open in May, but Trump has promised to weigh the advice of his team of health scientists, as well as economic experts, whose opinions are already clashing.
It wasn’t Laffer’s first late-night presidential call – or economic crisis— so he only shares his side of the conversation and his ideas for stabilizing a cratering economy, not how Trump received them.
“I’m going to let the president talk for himself on whether he was receptive or not – because that’s not my job, but I’ll take you through what I told him,” Laffer told RealClearPolitics.
Energetic at 80 years of age and affable even while taking his shots, Laffer has made no secret of his public criticism of Washington’s economic response to the virus thus far. While he supports the $4 trillion in Federal Reserve loans to businesses crushed by COVID-forced worker lock-downs, he doesn’t believe the U.S. government should be bailing out big businesses with their own prior financial troubles, such as Boeing and American Airlines.
“Why should we bail out their investors and debtors – why should we lend money to losing companies? Let them re-structure and come back out swinging,” he told RCP. “It’s the same company — it’s only different owners. American Airlines – they go through bankruptcy every 10 years, and they’re still American Airlines. When people say you can’t let Boeing go under, I say, what the hell? The building’s gonna be there, all the people are gonna be there. It’s just going to be different owners.”
Laffer’s even less charitable when it comes to Mnuchin’s push to have the U.S. government hold an equity stake in airlines and other businesses: “That’s really what you want now? We can become Venezuela – whoooaaa!”
Little wonder why Laffer has yet to receive an invitation to serve on Trump’s White House economic recovery task force, an entity designed to guide the country out of an impending coronavirus-prompted depression. Fox News’ Sean Hannity, during an interview with Trump on his show last week, not so subtly urged the president to tap Laffer to head the new group of advisers.
Trump has dubbed it the Council to Reopen America, and fiscal hawks and other conservatives hope it will balance the advice of Trump’s high-profile team of medical and health care scientists, such as Dr. Anthony Fauci and others, who first urged him to lock-down the nation in response to the virus.
Responding to Hannity last week, Trump was noncommittal about Laffer, referring to him as a “great man, great economist.”
On Monday, Laffer was not among the names being circulated for the task force amid reports that council members would include newly minted White House Chief of Staff Mark Meadows, Jared Kushner, Ivanka Trump, Mnuchin, Kudlow, U.S. Trade Representative Robert Lighthizer, Commerce Secretary Wilbur Ross, and several others.
After “Javanka” and “nepotism” trended on Twitter Monday, Trump put the kibosh on his daughter and her husband playing official roles. But the absence of Laffer’s name from those media reports hasn’t quelled the backlash from the left that Hannity’s mere mention of him sparked late last week. Democratic Sen. Brian Schatz of Hawaii said Laffer has “bad ideas that are even worse in a pandemic. … It is a very crazy time to put someone like this in charge of economic policy.”
Schatz was referring to a Reuters report last week that summed up Laffer’s prescription for economic recovery as “cutting salaries and taxing nonprofits.” GQ ran a piece on Monday with the headline “Art Laffer’s Trickle-Down Economics Would Be Disastrous for a Recovery.”
Laffer says his actual positions are much more nuanced, arguing that those usually immune from economic downturns -- government workers, for example, and tenured university professors -- should voluntarily give up part of their salaries, especially if they advocate a months-long lock-down nationwide.
As of Monday morning, Laffer has said he hasn’t been contacted by the Trump administration about serving on the recovery council. Laffer said he would serve, if asked, but also readily admits that participating in group guidance really isn’t his forte.
“I’m not really good on task forces. I’m not very pliable,” he readily concedes. Friends and allies say the Democrats slamming him now really don’t understand his work or know his true non-partisan nature.
“Laffer has never hesitated to praise the policies that are good for the economy, whether they were supported by Democrats, independents or Martians,” Steve Forbes, the business publishing titan and onetime GOP presidential candidate, told RCP. “He is a longtime fan of the Kennedy tax cuts and an architect of the Reagan tax cuts of the 1980s. He liked the fact that Bill Clinton understood the importance of a stable U.S. dollar.”
“If somebody does something right, he would applaud it, and he would be delighted. He just wants to get the job done,” Forbes added.
Serving on or leading a task force also would require the type of cordial bipartisan diplomacy Laffer says could stand in the way of the best solutions. The economic health of the country is too important right now for him to mince words or forge compromises he doesn’t believe in.
“Whenever people make decisions when they are either panicked or drunk, the consequences are really rarely attractive,” he said. “And right now Washington is in a panic.”
Laffer also has had no qualms about slamming Trump’s inner circle of advisers and their lack of experience dealing with an economic crisis of this magnitude. “There is no one whom I know in the Trump inner circle who has any experience with or has any idea what it is like in being a decision maker in times of crisis,” he said in a piece he penned late last month after his phone call with Trump. “This in no way is meant to be a put-down of President Trump’s wonderful team.”
“His people, who I believe are world class professionals, are in way over their heads, and, like previous crisis participants, are either too ashamed or too proud to ask for help,” he wrote. Having Mnuchin sell his plan, for instance, is “painful, pitiable and scary.”
“It takes only five days of bad decisions to ruin a lifetime of success,” Laffer warned. “Calling helicopter money stimulus is like calling a nuclear bomb ‘the peacemaker.’”
Laffer was referring to the current stimulus policy of trying to dump money into a struggling economy with the goal of preventing a deeper slump – what he considers a disaster that will undoubtedly slow any rebound, similar to what Presidents George W. Bush and Barack Obama engineered in 2008 and 2009.
Laffer supports the $4 trillion in Federal Reserve loans to businesses, but he also is pushing for a payroll tax holiday until the end of the year, which he says is a much simpler and far more cost-effective way to help jump-start the economy.
“Every job has a payroll tax — every single one does — little businesses, big businesses, fat businesses, skinny businesses, tall ones, short ones,” he says. “What you want to make sure you do and make sure you don’t miss doing is to create an incentive structure to bounce back as quickly as possible. And that’s why I support the payroll tax [holiday]. Dollar for dollar, it’s the most efficient program there is around.”
Laffer’s not going to mince his words or alter his economic advice just to win a spot on the economic task force. He’s already earned his place in the history books and a Presidential Medal of Freedom, which Trump awarded him last year.
“Few people in history have revolutionized economic theory like Arthur Laffer,” Trump declared during the awards ceremony.
For more than half a century, Laffer has had the ear of several presidents and top policymakers, both Republicans and Democrats. He started out serving as chief economist in Richard Nixon’s Office of Management and Budget, working under then-Treasury Secretary George Shultz.
His namesake Laffer curve was coined during a meeting in the Washington Hotel with Dick Cheney and Donald Rumsfeld, in which he sketched a curve during an argument against President Ford’s tax increases. The curve illustrates Laffer’s argument that there’s a taxation rate between 0% and 100% that maximizes tax revenue. Laffer readily admits he didn’t come up with the curve – but the name has stuck anyway.
Though he would go on to advise Democratic Sen. Gary Hart when he ran for president and California Gov. Jerry Brown, it was his work with Reagan, helping engineer that president’s signature tax cuts, that brought him the most acclaim. (Derision, too, as the architect of what Bush 41 had called “voodoo economics.”)
Laffer and his supporters say the proof is in the pudding – the late 1980s were a time of great prosperity with low unemployment and economic growth rates higher than 6%. Laffer was a member of Reagan’s economic policy advisory board for all eight years, and also advised U.K. Prime Minister Margaret Thatcher on fiscal policy in the 1980s.
“Mr. Laffer is close to 80 and this is not his first rodeo,” Steve Moore, a longtime Washington supply-sider, said in an interview. “He’s lived through these many crises – massive inflation of the 1970s, stagflation of the early 1980s and helping steer the nation out of the crisis as Reagan’s chief economist. He’s advised presidents and very few of these others have.”
If Laffer isn’t appointed to the Council to Re-Open America, that’s okay, Moore contends, because he’s better suited for offering the president policy advice rather than how-to logistical instructions.
Whether his role is official or private, Laffer enjoys a direct White House channel through his longtime friendships with both Kudlow and Moore. Moore and Laffer co-wrote a 2018 book titled “Trumponomics: Inside the America First Plan to Revive Our Economy,” but Laffer is perhaps even closer to Kudlow, whom he’s known for more than 30 years.
Kudlow surprised some people with a serious moment of reflection at a party last summer just hours after Trump awarded Laffer the Presidential Medal of Freedom. He choked up when recalling how Laffer took him into his San Diego home in the mid-1990s and helped revitalize his career after Kudlow admitted to a cocaine addiction and went through rehab. After Bear Stearns had fired him over the addiction, Laffer offered Kudlow a job and a place to live.
“He did so at a time when nobody was very sure whether I could work for anybody or do the job I had done for many years,” Kudlow said. “But he gave me that chance and opened his home. And I spent a year, year and a half there, and my own recovery continued and laid the foundation for the last 24 years. And, really, to have the position I have now could never have happened if Arthur had not laid that bridge.”
“Arthur is not a fair-weather friend – he’s the opposite,” Forbes adds.
In 2015, all three founded the Committee to Unleash Prosperity, a repository for supply-side news and analysis. Late last week, the group held a private conference call with GOP insiders to press their case that policymakers start giving the economic challenges posed by the coronavirus equal weight as the health concerns. Laffer and Moore led the call, with Forbes and GOP businessman John Catsimatidis making cameos.
Moore is now upping the ante, leading a group of conservatives pressing Trump and GOP lawmakers to re-open the economy as soon as possible. Too many people are out of work and on edge, he told the Washington Post this week.
“People are at a boiling point,” he said, predicting protests in the streets in some states if lock-downs aren’t lifted.
Laffer is on board 100%. When it comes to the country’s economic future, the stakes could not be higher, he argues, especially after Bernie Sanders, during his concession speak to Joe Biden last week, declared an ideological victory in pushing his party toward socialism.
As both parties look to bigger government solutions for the economy, Laffer says he hopes Trump continues to make his own executive decisions on re-opening the economy after carefully weighing the advice of health experts and economic advisers.
“Trump’s been, I think, a wonderful president, and just hope he doesn’t get misled,” he says. “And I’m going to do all I can to make sure he isn’t.”