At some point in the future, when Americans are struggling to contain a spiraling debt crisis, one seemingly minor event of 2019 could well take on added meaning. That event is Donald Trump’s plan to award the Presidential Medal of Freedom, on June 19, to economist Arthur Laffer.
Yes, the award has gone to far less credentialed people than Laffer, a Ph.D. economist with a long list of published papers and stints advising Republican presidents. But more than anyone else, Laffer gave intellectual cover to the proposition that politicians can have their cake and eat it, too.
Put simply, Laffer argued — on a cocktail napkin, according to economic lore, and elsewhere — that tax reductions would pay for themselves. These “supply side” cuts would stimulate growth so much, revenue would rise even as tax rates declined.
This is, of course, rubbish. In the wake of the massive 2017 tax cuts, the federal government spent $234 billion more than it collected in February, its largest one-month deficit ever.
OPPOSING VIEW: Blame spending, not tax cuts, for the national debt
This year, the budget deficit is projected to run a little shy of $1 trillion (according to the Congressional Budget Office) or a little over $1 trillion (according to the Office of Management and Budget).
While the trillion dollar threshold was breached during President Barack Obama’s first term, that was during a punishing recession. To run such large deficits a decade into a record economy recovery, is a massive problem because they will soar to dangerous heights the next time a recession strikes.
That makes giving Laffer the award now a bit of an obscene gesture. It is as if Trump were saying to the American people: You were dumb enough to believe all that mumbo-jumbo about tax cuts paying for themselves, and even though that has been shown on multiple occasions to be wrong, I am going to honor the guy who co-wrote “Trumponomics: Inside the America First Plan to Revive Our Economy.”
To be sure, neither party is pure when it comes to fiscal prudence. One president from each party — George H.W. Bush and Bill Clinton — deserves high marks for budget balancing efforts. The others, not so much.
For the most part, however, Democrats have been more responsible, or at least less irresponsible, than Republicans. Regrettably, that seems to be changing.
Unable to occupy anything resembling a high ground on fiscal matters, some left-wing Democrats lately have begun pitching their own voodoo economics known as “modern monetary theory.” This holds that deficits don’t matter because currencies — particularly reserve currencies like the dollar — are monopolies, and therefore institutional investors will have no choice but to keep lending money to the governments that issue them.
It’s the same snake oil that Laffer peddles. The only difference is liberals want to borrow from our nation’s future to hand benefits, not tax cuts, to today’s voters.
Government borrowing matters. A lot. No one knows precisely how much debt a government can reasonably take on, or how much that figure might change during a moment of global crisis. Testing the limit is not a good idea. But that is exactly what the United States — $22 trillion in the red and counting — is doing.
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