The End Of Prosperity by Laffer, Moore, and Tanous

Has prosperity ended since Barack Obama started his presidency in 2009? That possibility seemed to be the selling point of the 2008 book The End of Prosperity: How Higher Taxes Will Doom the Economy-If We Let It Happen. While it’s a stretch to say prosperity in America has ENDED, I think it’s safe to say the “recovery” has been sluggish (in large part because of Obamanomics). The book’s authors, Arthur Laffer, Stephen Moore, and Peter Tanous, offer their prescription for the economy: a return to supply-side economics. How well do they make the case?

Per the book, there are four actions policymakers take that kill prosperity: trade protectionism, tax increases/profligate spending, increased regulations/government intervention, and loose monetary policy. The authors give good summaries of the economic policies that prove this point: Hoover protectionism knocked down US GDP, New Deal policies kept unemployment averaging 12% until WWII, and the “four stooges” in between Presidents Kennedy and Reagan brought us stagflation.

On the opposite end, when policymakers pursue pro-growth tax cuts, it is “less expensive for the job-creating class to expand their businesses, to raise the capital for new plants and equipment, and to hire new workers.” Examples cited to prove these points include the Harding-Coolidge tax cuts (which raised per capita income), the tax cuts of 1964 (which gave America a 6.4% economic growth rate), and the Irish cutting their corporate tax rate from 48% to 12.5% (which spiked Ireland’s growth rate while slashing unemployment). A smart tax policy is undoubtedly an important factor in just how productive a country’s economy will be.

But this leads to the book’s weakest point: tunnel vision. The authors claim that supply-side economics is more than just preaching tax cuts (such as their reference to the four “prosperity killers”). Yet the authors don’t acknowledge how the economy grew exponentially right after WWII thanks to severe spending cuts. President George W. Bush get only a token slap on the wrist for the profligate spending and regulatory record that helped trigger the recession (with no reference to monetary policy during this time).

Tunnel vision is also apparent when the authors discuss their “hero,” Ronald Reagan. Yes, President Reagan improved the tax system. Yes, President Reagan lent his support to actions that broke inflation. The results of these policies were more positive than negative. But their claim that Reagan was a “free-trader par excellence” is laughable. And while Reagan may have a good spending record compared to some of his predecessors and successors, his handling of entitlement spending only reinforced the unsustainable path these programs are leading us.

The End of Prosperity contains useful statistics, so it gets my recommendation. But the book is not gospel. Supply-siders do not offer a principled stand against runaway government growth, choosing instead to celebrate the Laffer curve impact tax cuts have on federal revenue. For libertarians, this is a source of continuous disappointment.

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