Word: laffer
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...credibility problem of Reaganomics is based, in part, on its origins. In a sense, it was born one evening in December 1974, in the Two Continents restaurant in Washington, D.C. Three men were sipping drinks: Arthur Laffer, a young economist with an early-Beatles haircut who was considered a maverick by many of his colleagues; Jude Wanniski, an editorial writer for the Wall Street Journal; and Richard Cheney, a White House aide under President Ford...
...Laffer argued that the fundamental problem with the American economy was that federal tax rates had got so high that they were beginning to discourage work and investment, and were thus holding down the supply of goods in the economy. Because the demand for goods raced ahead of their supply, inflation had become a chronic problem...
...rates were slashed, Laffer said, the result would be a boom in work, saving and investment. The "supply side" of the economy would be so stimulated that before long the Government would gain more revenue than it lost through cutting taxes. To illustrate his point, as legend now has it, Laffer sketched a crude diagram on a cocktail napkin on the table.* It showed that if taxes went too high, the Government would take in less revenue because people would be working less. That first Laffer curve landed in a wastebasket, but it was destined to become...
Wanniski became Laffer's most avid apostle and spread the gospel of tax cutting with all the fervor of a circuit-riding preacher. An important early convert was Jack Kemp, a New York Congressman and former quarterback with the Buffalo Bills. In 1977 Kemp, together with Senator William Roth Jr. of Delaware, introduced a bill in Congress to reduce personal income taxes by almost 33% over three years...
...employees clinging to, but increasingly sliding down the slippery slope of the Laffer curve. As the relentless logic of supply-side economics becomes clearer--that the rich will get richer while the poor grow pooer--strikes will increasingly come to be seen as a necessary tactic. And the "New Beginning" so carefully constructed by the forces of conservatism will crumble, buckling under the weight of the expectations it raised...