I suppose I should start this by saying that it’s hard not to like Art Laffer. He’s affable and sincere.
His extreme supply-side ideas are kind of quaint and even entertaining. Last night he was on Fast Money, but his comments weren’t so funny anymore.
The segment was on the proposed Obama tax cuts. Laffer didn’t think much of them. Instead, he wondered aloud, what if the government proposed a 6-month income tax moratorium: how great a stimulus would that be? After all, Laffer reasoned, freeing citizens from the undue burden of taxes would get them all out working harder and spending money.
Really? Did anyone on the panel believe that Americans of all income levels are sitting on the couch–or lounging out by the pool–instead of working because they’re unhappy with their income tax? They’re knocking off early because the marginal rates are too high and they’d prefer the leisure time to the minimal extra money? Fascinating. Unemployment moving toward double digits and the greatest white-collar restructuring in 15 years all because of onerous income taxes?
Sure, he’s a guest on the show–they’re being polite, right?–but not one of the traders said a word about this preposterous idea. They just nodded their heads in agreement and kept the bobbing up as Laffer launched into his idea that capital gains should not be taxed at all.
The slam against the Obama cuts was that the money would go into the mattress, not stimulate the economy. After all, that’s what happened with the Bush stimulus checks. Fair enough. But why would the wealthy be any different? Cut their income tax or capital gains and they’ll put the money in the mattress right now too.
Not that cutting the capital gains tax would do anything to move money off the sidelines. Where would it go? What productive use would it be put to?
I’d share the segment with you but there’s no clip of his appearance on the CNBC site and the short post on the segment on Fast Money’s page is covered by an instrusive pop up. Maybe they’ve finally gotten a sense of shame for promoting this voodoo.