Art Laffer
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Supply-side economist Art Laffer, whose Laffer Associates was based in San Diego until 2007, was part of a California hate-fest yesterday (Nov. 18) in Austin at a meeting of the conservative Texas Public Policy Foundation.

Laffer's company did a study comparing California and Texas. "Texas wins," boasted Texas Gov. Rick Perry, who said, "I cannot say that there's anyone I respect more than Art Laffer."

Laffer said that Texas' "business-friendly" policies are behind the state's supposedly superior performance. In particular, Laffer complained that California "pays educators 20 percent more than Texas." Also, social workers in California "make over $56,000 a year. In Texas it's $37,000."

Perry bragged of Texas' "accountable public schools," but the Houston Chronicle noted that state school funding was cut back by billions of dollars two years ago and the public school finance system is embroiled in a lawsuit over adequacy and equity.

(To my knowledge, no Texas media mentioned that Perry's foot-in-mouth stumbling in the 2012 Republican presidential primary race may exemplify Texas education.)

Laffer Associates has caused a bit of a stir in Sarasota County, Florida. The firm was paid $90,000 to make recommendations on development planning. As summed up by the Sarasota Herald-Tribune, the Laffer message was "Eliminate most regulations on development. Make it easy to grow. And eliminate fiscal neutrality, which reequires developers to cover the cost of services like schools and sewers so county taxpayers do not have to pick up the tab."

(This is one of the problems with Laffer's economics; he wants to shift spending to taxpayers but also cut taxes.)

The Sarasota plan was anti-smart growth and opposed to attempts to minimize urban sprawl and encourage alternate forms of transportation. The report got Bronx cheers from such groups as the Sarasota County Council of Neighborhood Associations and the Sierra Club.

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Comments

Burwell Nov. 19, 2013 @ 11:58 p.m.

Laffer probably sold his Rancho Santa Fe estate to raise cash to pay his legal bills. He's plastered his name on some crazy investments and has been a lightning rod for lawsuits. I have not heard anything positive about Laffer. The Laffer curve is rubbish.

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Don Bauder Nov. 20, 2013 @ 7:20 a.m.

Burwell: As I have reported in stories and blogs, in the early 1990s, Laffer was paid $5,000 to tout a multi-level marketing scheme that Florida identified as an illegal pyramid. Laffer was sued for his role in a company that went bankrupt named Qualmag; a jury cleared him of charges, but the attorney who brought the suit disagreed with that.

Forbes magazine criticized Laffer for his role in Casmyn Corp., which mined gold in Zambia and Zimbabwe and collapsed in scandal. Laffer said he had gotten out of Casmyn. Laffer was sued last year for his role in an alleged Texas Ponzi scheme. Yesterday I could not find out what has happened to that suit from the lawyer who brought it.

Laffer is said to be the father of supply side economics, and that is his biggest problem. He preaches that tax cuts pay for themselves. The economic growth they supposedly generate is said to wipe away the resultant fiscal deficits. This has been shown to be false. Generally speaking, economists of both the right and left no longer accept supply side economics as legitimate theory. But, unfortunately, voters can still be appeased with promises of tax cuts AND continued government services.

Back in the 1970s, I was one of the early reporters following Laffer. I was intrigued with his theses but never was a supply sider. I continued to quote him even after I had concluded that supply side economics doesn't work. He deserves to be heard; he is not a crackpot. He is someone who put forward a theory that was put into practice and was found wanting.

Best, Don Bauder

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Visduh Nov. 20, 2013 @ 3:29 p.m.

I recall that Laffer, to get attention when he was just new to all this, would say some over-the-top things. So he's still bombastic, and still attracts attention. Sadly, California is easy to bash now. It is getting an unneeded reputation as a state to avoid if you want to do business. High income people are leaving for states, such as Texas, that have no state income tax. But all this talk of the Texas economic miracle is in part just hype. In a couple more years the stats may end up discredited, and the reality found to be much less than now claimed. And, who the heck wants to live there?

The term "supply side economics" bubbled up around thirty years ago when some economists began to complain that the mass of economic study of ways to fine-tune the cycles all seemed to involve manipulating demand. Whether they were fiscal tools or monetary tools, the emphasis was on accelerating demand or damping it down to keep inflation in check. Little attention was paid to why businesses expanded and why they cut back, etc., etc. Whether it was Laffer or some others who coined the "supply side" term, he jumped into the middle of it. So often today it seems to be equated with either tax cuts, or changes to social programs intended to get people to behave properly. For example, a supply-sider would tell us to make sure we didn't make teenage single motherhood look good to teenage girls. Sometimes the things that welfare provided made it VERY tempting, at a huge cost in social breakdown and misery. I still think that if all the so-called supply side concepts were looked at in total, many of us would find them compelling. Finally because Laffer utters something it doesn't become a supply side theory. He, like many others, is more complex than that.

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Don Bauder Nov. 20, 2013 @ 4:19 p.m.

Visduh: There are several economists that can be credited with launching so-called supply side economics. (Initially, they were called supply side fiscalists.) Laffer got the most attention. He is a good speaker and basically a very good entertainer.

But as I said, and you noted, he is not a crackpot. He did run into trouble at the University of Chicago and at USC. What I find troubling is that if there is any problem, Laffer thinks lower taxes will solve it, and conversely, if there is a problem, high taxes are to blame. He thinks everybody is intensely motivated by tax rates. It's not so. The silliest idea was that if taxes were lowered, the rich would bring their money back from offshore tax havens. Nonsense.

Unfortunately, "supply side economics" has become, in my mind, to a great extent a respectable way of saying "trickle down economics."

Best, Don Bauder

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Ponzi Nov. 20, 2013 @ 11:04 p.m.

In 1985, after shutting down the Apple Computer dealerships that Steve Job's terminated... I went to work for Andrew Kay at Kaypro Computers. I recall a parking space "Reserved for Arthur Laffer." Perhaps he was a board member, I don't recall. Andrew Kay's Non-Linear Systems was one a case study of Abraham Maslow for its unusual employee workgroup experiments. One benefit of relocating to Texas is that if you need to call hell, it's a local call.

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Don Bauder Nov. 21, 2013 @ 6:58 a.m.

Ponzi: As I recall, Andy Kay was a billionaire shortly after the company's IPO. But that vanished in a hurry as Kaypro computers were whipped quickly by competitors.

I remember visiting there and noting that computers were being stored outside -- seemingly, open to the elements. I don't remember whether Laffer was on the board. Those in the know considered the company egregiously mismanaged. Best, Don Bauder

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Ponzi Nov. 21, 2013 @ 9:04 a.m.

There was nepotism. The parts being stored outside were in a rented big-top tent. A new warehouse was built on the property and the tent was removed. They had a saying about Kaypro... "too many Kay's and not enough pro's"

Andrew Kay's son, David Kay was the president and ran the company. They failed to make the switch from CP/M to the MS-DOS operating system that made the IBM PC clones like Compaq, HP, Gateway and Dell become wildly successful. A near 20% out-of-box failure rate on the machines also did not help.

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Don Bauder Nov. 21, 2013 @ 10:47 a.m.

Ponzi: Initially, the Kaypro computer was getting rave reviews from some well-respected writers. But the descent was extremely rapid as competitors such as the ones you mentioned came to the forefront.

Later, Gateway's descent was dramatic, too. If memory serves me right, Gateway stock went from $85 to $7 in a hurry. The company was then sold for a low price. Best, Don Bauder

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