Word: laffer
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...theories. Joining the tales of Archimedes jumping up and down in his bathtub yelling "Eureka" and a prim and patrician Isaac Newton cursing the apple that hit him on the head is the fable of three men in business suits having dinner at a posh Washington restaurant. Arthur B. Laffer, an upstart economics professor from California, Louis Lehrman, and Wall Street Journal editorialist Jude Wanniski were finishing their drinks, as the story goes, when conversation shifted to one of their favorite topics, conservative economics. Wanniski (or was that Lehrman?), asked if it was possible for the federal government...
Supply-side theorists argue that a return to gold is an essential precondition for restoring economic stability. Says Economist Arthur Laffer: "We should make money stable by making a dollar bill as good as gold." They maintain that a gold standard would restrict the Federal Reserve's ability to create credit because the long-term growth of money would be determined by increases in the world's stock of gold, which is expanding by only about 2% annually. Thus limiting money growth would create confidence in the value of the dollar, be a blow to inflation expectations...
Economists concerned about fixing the right price for gold have been discussing in recent weeks the problems of "re-entry," the space-age term to describe a return to the medieval metal. Laffer says the White House should announce that the U.S. will be going on the gold standard in say, three months. When G-day arrived, the Treasury would begin buying gold at the market price, and the Federal Reserve would partially back its obligations with gold, up to perhaps 40%. Economist Greenspan has another, milder proposal for testing the waters. He suggests issuing Treasury notes whose value...
...Kemp-Roth bill gained a loyal supporter: Ronald Reagan. As the 1980 presidential campaign began, the tax-cut proposal was the centerpiece of his economic policy. But when Reagan wrapped up the Republican nomination, the G.O.P.'s mainstream economists flocked to his fold, and the influence of Laffer, Wanniski and Kemp waned as old-line conservatives began having an impact. Among the most prominent: Alan Greenspan, Gerald Ford's chief
...traditional economists gradually began to shift Reagan's program away from the original supply-side doctrine. Laffer assumed that large tax cuts would not be inflationary because they would stimulate enough business to compensate for the lost revenues by significantly increasing the Government's total tax take. But Reagan's more conservative advisers convinced him that tax cuts-and the inevitable, initially huge budget deficits-would fuel inflation unless accompanied by measures to restrain demand. Thus Reaganomics now includes not only a supply-side tax reduction but also calls for less Government spending and strict control over...