The Laffer curve and the revenue question
David Henderson describes the Laffer curve as a proposition that “has to be correct,” with the only open question being where on the curve a given economy sits. At a zero tax rate, he says, the government raises zero revenue; at a 100% tax rate, perfectly enforced, it also raises zero revenue, so there must be a middle region where revenue rises and then falls. He attributes to Art Laffer the narrower claim that a cut in tax rates will not reduce revenues by the full static amount, and says Laffer was “absolutely right” about that. Henderson distinguishes the “prohibitive region” — where any rate increase reduces revenue and any cut increases it — from the current American position, and concludes that skeptics are right that the United States is not in that region: a cut in tax rates will reduce revenue, though by substantially less than a static analysis would predict. David Henderson on Trumponomics, Deficits, and Immigration (2019)
Henderson supports the historical claim with Larry Lindsay’s dissertation work, done while both were at the Council of Economic Advisers under President Reagan. Lindsay examined revenue from the top 1% after their marginal rates were cut from 70% to 50%, correcting for confounding factors, and found the federal government got more revenue than otherwise from people making over $200,000 in those years’ dollars. Henderson also cites a Canadian cigarette-tax increase of roughly three to five dollars a pack, after which revenues from cigarette taxes fell as Canadians shipped cigarettes across Lake Ontario, Lake Erie and the St. Lawrence River to avoid the taxes. David Henderson on Trumponomics, Deficits, and Immigration (2019)
Trumponomics as supply-side test
Stephen Moore presents the Trump program as supply-side economics put to the test: give businesses and workers more incentives to work, create businesses, innovate and become entrepreneurs. He contrasts it with what he calls the failure of Keynesian economics, which he says was tried “on steroids” under Obama through massive federal borrowing, an $800 billion fiscal stimulus bill, Obamacare, minimum wage increases, tax increases on the rich and cheap dollars from the Fed. The result, in his account, was the weakest recovery from a recession since the Great Depression. Stephen Moore on Trumponomics (2018)
Moore reports 4% growth, the lowest unemployment rate in 50 years, a stock market up over 42% since Trump was elected, and seven million more jobs than people to fill them. He says the biggest wage and income gains in the previous 18 months went to the lowest-income Americans, including adults without a high school education. He attributes the change to replacing a community organizer with a pro-business businessman, and quotes an auto mechanics shop owner in Cleveland saying business was like a light switch flicked from off to on the day after the election. Stephen Moore on Trumponomics (2018)
Bob Zadek frames the discussion by asking why economists disagree after a couple of hundred years of scholarship, comparing the question to the discovery of gravity. Moore answers that roughly 75% of economists, especially those trained at Ivy League schools, have been taught Keynesian economics, and that government is a net destroyer of jobs while all jobs and wealth come from the private sector. Stephen Moore on Trumponomics (2018)
Supply-side as GOP dogma
Will Wilkinson describes the Republicans as caught in a bind: they hold the White House, both houses of Congress and a majority in the Supreme Court, yet cannot pass significant legislation. Donald Trump, he says, ran directly against the Reagan formula of smaller government and free markets, promising not to cut Medicare or Social Security and praising single-payer healthcare, and Republican voters loved it. Once in office, Wilkinson argues, Trump had no think tanks, policy journals or pool of talent behind him and was left with a GOP status quo still committed to a certain kind of supply-side economics and to cutting government spending and tax rates to rev the economy up. Will Wilkinson: G.O.P. Should Embrace the Welfare State (2017)
Wilkinson says Republican voters’ standards of living depend on transfer programs, that they are older, white, non-urban, and that many depend on Medicare and Medicaid. He describes the Senate healthcare reform bill as the most unpopular bill in the history of bills, less popular than the bill it was meant to replace even among Republicans, and says it was being pushed through to create room for a bigger tax cut. He calls the current policy package self-destructive and self-undermining, and says the party’s attitude toward the welfare state undermines political demand for free-market reform. Will Wilkinson: G.O.P. Should Embrace the Welfare State (2017)
Bob Zadek introduces Wilkinson as a libertarian rather than a Republican operative, invoking Matt Kibbe’s formulation “Don’t hurt me and don’t take my stuff,” and asks why a libertarian should care about GOP electoral success. Wilkinson answers that both major parties should operate according to reasonable ideas, and that Republicans misunderstand what free markets are and how they raise living standards. Will Wilkinson: G.O.P. Should Embrace the Welfare State (2017)
Tax rates, deductions and the deficit
In a 2011 episode, caller Jeff asks whether Bill Clinton paid down the deficit and raised the top rate to 39%. Peter Suderman replies that the numbers are wrong: ending the Bush tax cuts would save two and a half trillion over 10 years, not a trillion, and that Democrats have repeatedly said they do not want to raise taxes on people making less than $250,000 a year. He argues that solving the problem through taxes alone would require raising taxes on the middle class, which is politically difficult. Is the US the Next Enron? (2011)
Jeff says the top 1% paid about 90% in the 1950s and 1960s and blames trade policy, then says the rates “started going up with the supply-side that doesn’t work.” Bob Zadek responds that the high nominal marginal rates of that era came with many deductions and exceptions, so the code resembled today’s in effective terms, and that there is agreement between progressives and fiscal conservatives on lowering marginal rates and eliminating deductions — with the fight being over whose deduction is lost. Suderman names the employer health insurance deduction and the mortgage tax deduction as the biggest and hardest to remove, describing them as middle-class benefits, and says a substantial overhaul of the tax system will eventually be necessary. Is the US the Next Enron? (2011)
Suderman also says that even letting the entire Bush tax cuts expire would bring in $2.1 trillion, while the best projections for the next decade still show a seven-trillion-dollar deficit, and that the biggest long-term drivers are the entitlements. Is the US the Next Enron? (2011)
Across episodes: the same claim, argued differently
The Laffer-curve question runs through the 2018 Moore episode and the 2019 Henderson episode, but the two guests give it different weight: Moore treats supply-side tax cuts as a demonstrated success after 18 months of the Trump program, while Henderson, asked directly whether the Reagan-era rate cuts produced the promised revenues, insists the curve is correct in principle but that current rates are not in the prohibitive region, so a cut would reduce revenue by less than a static estimate rather than raise it. The 2017 Wilkinson episode treats supply-side economics not as an empirical question but as a party dogma that Trump’s voters rejected, and the 2011 episode shows the same tax-rate debate conducted through a caller’s challenge about the Clinton surplus and 1950s and 1960s rates.
What the sources do not cover
The excerpts do not state the name or outcome of any tax bill, the amendment or holding in any case, or the founding date of any school of thought. They do not give a full account of the Reagan tax cuts beyond Henderson’s reference to rates falling from 70% to 50%, and the 2011 excerpt breaks off at a section heading with no further text. No excerpt states what became of the Senate healthcare bill Wilkinson describes, or whether the deficits Suderman projects materialized.