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- [00:04]
Goldman Sachs Markets Podcast Host
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- [01:15]
Maren Somerset Webb
Co.
- [01:20]
Bloomberg Audio Studios Podcasts Radio News hello, Marin Talks Money listeners. We are recording an episode of Maren Talks Money in front of an audience the morning after Rachel Reeves, UK Budget. I want you to join us for croissants and conversation. We've got Helen Thomas of Blonde Money as one of our guests. We've also got John Stepper. You're gonna love it. Well, you might not love it because it'll be right after the budget, but you'll find it interesting. At the very least, find the registration link in the show Notes Space is limited, always limited, so sign up soon. Now onto today's show, which may well cover some of those very same topics.
- [02:06]
Welcome to Marin Talks Money, the podcast in which people who know the markets explain the markets. This week I am speaking with Arthur Laffer. Arthur is an American economist famous for his work on supply side economics and the invention of the Laffer Curve. We'll come back to that actually, because it's not really the invention of the concept, it's the invention of the curve, isn't it? We'll come back to that. This illustrates the relationship between tax rates and goods, government revenue. In the late 70s he founded Laffer Associates as an economic research and consulting firm as well as Laffer Investments, an investment management firm. We may come back to that too. Recently, Art has co authored a book called Prosperity Through Boosting Living Standards in an Age of Autocracy and AI. This is a primer for reviving the UK economy Not everyone agrees with that, by the way, but I think I do. We're going to talk about the ideas that he and his co authors put forward in that book and we're going to get his take on the UK economy and the US economy as well. Welcome to Marin Talks.
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Arthur Laffer
Money. Thank you very.
- [03:02]
Maren Somerset Webb
Much.
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Let's go on to defining the Laffer Curve. So this idea that there is a relationship between tax rates and the amount that you raise, and there is a point at which you have put up a tax rate by too much and revenue will then start to fall, that's an idea that has been discussed, you know, for thousands of years because it is absolutely obvious, right? Or it's seems to me. But what you did was you drew a curve that gives us more of a sense of how it really works, more than.
- [03:33]
Arthur Laffer
That. But in the 60s and 70s, they were literally looking at no relationship. If you raise tax rates by 10%, revenues would rise by 10%. Now everyone knows. They didn't know it then. They really didn't. And they just used that everywhere. So they were always overestimating revenues for tax increases and underestimating revenues for tax declines. And that's true. It's been around forever, though, as you say, it's in the Muqadima by Ibn Khaldun. By the way, I also didn't name it the Laugher Curve. That was Jude Waniski of the Wall Street Journal who did. And again, I love the name. I just love it. And I'm gonna keep it.
- [04:06]
Maren Somerset Webb
Myself. Look at this modesty. You didn't name your own curve or.
- [04:10]
Arthur Laffer
Not. Yeah, I know, but I'm trying to get some sort of victimhood there. So you feel sorry for me in the days that follow. But if you look at it, it's really important, the relationship between tax rates and total revenues. A lot of things come between those two. Now, it's true when you raise tax rates, you do increase the amount of revenue per dollar of tax base. That's true. But it's also true that when you raise tax rates on a tax base, you cause that tax base to be less attractive and you shrink the tax base. Now, you may shrink it because people work less hard because they invest less, but you also shrink it because people move offshore. Because many people change the composition of their income. They the volume of their income, the timing of their income. And also they use tax shelters, Marin. And that's probably the biggest slip twixt the cup and the lip here between tax rates and total revenues. And that's why it's such a powerful concept. Especially today when Gordon Brown raised your tax rate In Britain from 40p to 50p, revenues actually fell. The economy, people left the country, they fell and all that. And that was a classic case of the Laffer.
- [05:15]
Maren Somerset Webb
Curve. Let's stick with that for a moment because that looked like clear evidence. At the Laffer Curve, we say it's common sense, not everyone believes it. I'm holding up the book for the purpose of the video. Everyone go buy the book. One of the things that you say in the beginning of this is that these aren't opinions. That Laffer Curve is not an opinion, it's a provable truth. So you have tens and tens of years worth of American tax data which you can use in a very granular way to show that it's not an opinion, it's a.
- [05:45]
Arthur Laffer
Reality. Thank you. That's true. It's exactly true. And no one should care about your opinion or my opinion. This is about facts, not how we feel. What happens when you raise tax rates on the rich? We know what happens. Now, this is from my prior book of two and a half years ago. Taxes have Consequences, which is the entire history of the US income tax. We have every single tax return for every year, okay? And every single time we raise the highest tax rate on the top 1% of income earners. Three things happened. The economy underperformed. Tax revenues from the rich from the top 1% dropped. They fell, not rose. And the poor got hammered. Every time we've cut tax rates on the rich, the economy has outperformed. Tax revenues from the rich have gone up and the poor have found jobs, output, employment, production and had their lives improved. So those are the facts. And I go through it with the States as well in the opening section of the book here, it just blasts at you, Marin. It is facts and it is facts. In Britain, it's in facts. In all these other countries, it's just shocking. Yet politicians invariably ignore it because they want a virtue signal rather than do what's good for the poor. If you want to help the poor create growth, that's the.
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Maren Somerset Webb
Answer. Okay? But one of the reasons why politicians are able to ignore it and pretend that it doesn't exist is because it's imprecise. You can't say the Laffer Curve proves to us that income tax at this level is the correct level. This is the correct level. And above this that this happens, and below it that happens. And there is also a sense that it shifts, right, depending on politics, depending on whether it's Wartime or peacetime, depending on how people feel. Depending on vibes. Right. It could shift around with that. While it's a very clear idea, it's hard to make it precise enough to persuade a politician to be clear on.
- [07:29]
Arthur Laffer
It. I don't think you're right on that. I really don't. You're correct. All of those statements you say are true, but they aren't materially very true. Now it's true. The smaller the tax base, the more likely it is that you're in the prohibitive range of the Laffer curve. The longer you're willing to wait, the more likely it is you're in the Laffer curve. The elasticities do change to respond to this. That's all true. But we have very precise measures of how these effects are. Now, all of these other effects undoubtedly do impact it, but they don't change the direction.
- [07:59]
Maren Somerset Webb
Merit. No, no, no, I didn't mean that. I just mean that it's hard to say 32% is the correct rate for income.
- [08:05]
Arthur Laffer
Tax. But raising Rachel Reeves. Let's take Rachel Reeves right now. Let's talk about her tax increase. Now, I have not seen the budget, so I don't know if she did, but I assume she's going to raise taxes in her budget. I assume that's going to. We know that's the wrong thing to do in Britain. We know that with perfect certainty. Britain has been declining in its growth. Britain's declining in its revenues. It's been declining in its ability to provide a good living for the poor, the minority, the disenfranchised, we of that. And we know it's because of the disincentives in part of the tax codes, of regulatory policy, of monetary policy and of trade policy. And yet she goes and does the wrong thing, period. And they all cheer and whoop as they pass it through. And it's not just the Labor Party, it's the Conservative Party, too, by the way. You can go back and look at them. You can look at all these others. They want a virtue signal. I'm for the poor. I'm going to raise tax on the rich. That's the elephant in the living room. If you want to help the poor, you've got to create job opportunities and economic growth so they can earn income. And they all know that. The numbers all show that, and yet they go the wrong direction. And by the way, it's no different here. Except for Trump. Trump has been very good on this, but Biden and all these people, I mean, they're just crazy. They're going against all data and against all logic and they push the thing and then stand on stage and I'm here for the poor. And it's this posturing that really bothers.
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Maren Somerset Webb
Me. It does slightly feel, doesn't it, as though for some time now the tax system in the UK has been used less as a revenue raiser than a virtue.
- [09:35]
Arthur Laffer
Signaler. Exactly true, thank you. And it's wrong. It's just wrong because these are real people, Marin. They're people with children and lives and happiness. You're destroying their futures. You're ruining a whole generation of people who are just like you and me and have hopes and aspirations. Every single Brit I know loves the National Lottery. They all want to be rich. And the greatest way of being rich is not having a lottery, for God's sakes. It's cutting tax rates and allow them to fly with their own wings and with their own skills. But no, they don't do that. But then they provide the lottery to give the people who don't work hard the chance to become super rich. But they all want to be rich and yet the government hates the rich in their.
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Maren Somerset Webb
Policies. It'd be much better for everyone to be better off than a couple of people to be super rich. The lottery doesn't work for us now, so let's go back a little bit. So let's pretend our country was not the mess up that it is and we were starting from scratch with the tax system. What we want presumably is a very broad based, reasonably flat tax system. Totally flat, is that right? If we were looking only at income tax, where would you pitch.
- [10:40]
Arthur Laffer
It? What I would do is I'd have the lowest possible tax rate on the broadest possible tax base. The reason for that is the lowest rate is so you provide people with the least incentives to evade, avoid or otherwise not report taxable income. And, and you have the broadest base with the least deductions, exemptions, exclusions or credits, write offs, whatever. Those things are loopholes so that they don't have easy places to go into to avoid paying taxation. Now I did Jerry Brown's flat tax here in the US a long while ago and the number we came out with, a static revenue flat tax, it came out to about 11.8%. If you got rid of all federal taxes and replaced them with two flat rate taxes, one on business, net sales, that's your VAT, and one on personal unadjusted gross income, those two taxes, that's it. No other taxes, starting with the first dollar to the last dollar, it came out 11.8%. I rounded it up for Jerry to 12, just to make sure. And he was scared because politicians don't understand all this stuff. He rounded it up to 13%. And we could replace every tax, every federal tax in the US with that. Every single one. Marin, can you imagine what the economy would look like? No one would have to file a tax return. If you earn 100 bucks, the company sends in 13 bucks into the treasury, gives you 87 bucks. That's it. Bang. No, you don't even have file returns or any. There are no lawyers, no accountants, nor deferred income specialists. There are no tax dodges, there are no loopholes. There are no schemes. All of that stuff just disappears. I mean, it's just amazing how high we can fly with those wings. It would just be.
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Maren Somerset Webb
Great. Arthur, any accountant listening to this, any tax specialist, most of the legal profession, they're listening to you and they're going, please, no, don't do this to us. Imagine the unemployment. Because you're not just talking about a low tax system. You're talking about a simple tax system. And there's an awful lot of people who don't want a simple tax system that's longer than the complete works of Shakespeare. That works for.
- [12:32]
Arthur Laffer
Them. Yeah, let me also. It's just like all those people who love COVID 19. The undertakers, the morticians, the people who ran hospitals. They love COVID 19, even though it killed lots and lots and lots of people. They loved it because it provided them with jobs, output, employment. By the way, they can go straight to Hades, if you forgive my French. And they can get good jobs that create wealth rather than good jobs to dodge immoral government policies. I just cannot allow myself to be swayed by people who do makeshift projects that don't help the world. Forgive me for.
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Maren Somerset Webb
That. So how do we get an economy like that of the.
- [13:09]
Arthur Laffer
Uk? I think the.
- [13:11]
Maren Somerset Webb
Uk. Here we are. This is a disaster on every single level, as you say. We've barely grown, not just since the financial crisis, but actually since several years before the financial crisis. We have every single kingdom that you suggest. The book, by the way. Everyone talks about the five kingdoms of growth. And there's taxation, government spending, monetary policy, regular trade policy. All of these are wrong. And I would add to that, by the way, Arthur, if you didn't mind me adding a kingdom. I would add energy policy because of cheap energy that could be energy drivers of. I would add a six to that. So, you know, we have all those. We've done them all wrong. We've got this appalling deficit, unbelievably awful level of public debt, a level of taxation that is already, I would say, very clearly on the wrong side of your curve. We have a budget coming up where we have rumors all over the place that she's going to break every manifesto promise son. At 2p to the basic rate of income tax, 5p to the top rate of tax. We hear all these kinds of things. This is going in the wrong direction. How on earth do you get an economy in a state like this to a position where it can conceivably introduce a low, flat, broad based rate of.
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Arthur Laffer
Tax? I don't want to be.
- [14:21]
Maren Somerset Webb
Hyperbole. A transition feels like.
- [14:22]
Arthur Laffer
Hell. Transitions are not bad. They are not. They're really good. They're really easy. But let me just say this. I worked with one of your prime ministers very closely, a young lady named Margaret Thatcher. From 1970 on through the whole term there, she dropped the highest tax rate. Now I'm obviously picking and choosing and cherry picking, but 98% the income dropped it down to 40%. You can see what happened during there. We moved towards it. A North Star that you described is something to guide us the direction we should be moving there now with the US With Ronald Reagan, we cut the highest marginal income tax rate from 78%, 70% to 20% to 28%. Excuse me. We cut the corporate rate from 46% to 34%. We went from 14 tax brackets to two tax brackets. We got rid of all the deductions, exemptions, exclusions. So it was revenue neutral merit. Now what we've done here, what I would like to see done in Britain, is you can make these tax codes revenue neutral so there is no fear of losing revenues. And all you have is upside. Now this is really a very easy way to do it within the states here because we have so many deductions, exemptions. If you get rid of those and lower the rates, you can do it so that the static revenue is the same, but you now have all the incentives working in the right direction. And Britain can do that too. It really can. And then once it starts, Marin, once the growth model starts, it hits the wind at your back. It's like Thatcher, it's like Reagan. Once it starts, then they start doing all these things. They privatized all these companies, they sold them off, they deregulated, they had the trade policy, the inflation, all of that happens. And it's a virtuous cycle rather than a death spiral. And that I think is what Britain can do if they get the right person. And it happened with Thatcher, it's happened with Reagan, it happened with Kennedy. We've had four or five episodes in the US where it really happened. It lasts only for a generation. But hell, I'm 85. I'll take a.
- [16:16]
Maren Somerset Webb
Generation. Lasts for a generation. Because they forget, you.
- [16:19]
Arthur Laffer
Mean? Yeah, they do. They forget and then they start virtue signaling again. There's nothing wrong with being rich. There is something very wrong with being poor. People who are poor need to have their opportunities increased. They need to become rich, they need to have more income. Rich people are fine. Poor people need to have the opportunities provided to them. And that's why I did enterprise zones, which I did in the 70s here and I did it in Reagan, through Reagan and Jack Kemp did, where we have tax free zones in the inner cities where these people are the poorest of all. So they have no income tax, no VAT tax, nothing in the inner city. You have to live there, live there in your primary residence and also work there. And no income tax and no vat. And you can imagine how the jobs would be created and these people would be able to earn their way into prosperity, which is what everyone wants. No one wants handouts, Marin. They really don't. They'll take them because they have to. But it's much better to earn an income. I mean, Jack Kennedy put it so well. He said the best form of welfare is still a good high paying job. And jobs are created because of returns on capital and returns on labor. That's.
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Maren Somerset Webb
All. Yeah, but you do have an incentive problem with welfare systems across the.
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Arthur Laffer
World. Terribly bad. It's called.
- [17:29]
Maren Somerset Webb
Welfare. Very often you can earn as much on welfare as you can earn in a job. Because we have an oversupply of.
- [17:35]
Arthur Laffer
Living. You do not need to interview you. I would interview you because you're exactly right on all this. And it's so damned obvious, Marin. It's so damned obvious. Yet these people avoid it like the plague. And they claim it's going to be catastrophic. The cut in welfare, my foot it will be. Getting rid of this because you create jobs is not going to hurt you at all. Everyone will be better off. The poor, the rich, the middle, all the left, the right. East coast, west coast, north, south, up, down. Everyone will be better off. A rising tide raises all.
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Maren Somerset Webb
Boats. Now the pushback you would get in the UK from pretty much every politician would be okay, but Liz Truss. Okay, but bond market. Let's talk about Liz Truss. They'll look at the next budget and they'll say if she does not put up taxes very significantly, which I think you would say is a terrible idea because it just makes the economy even worse, makes growth even lower, makes it even harder to pay back the debt. But what most people would say is if she doesn't put up taxes, 40, 50, 60 billion, whatever it is, the bond market will punish the UK and then our interest bill goes up and then we're in even more trouble than we were before. And hello fiscal.
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Arthur Laffer
Crisis. Can I respond to that if I.
- [18:42]
Maren Somerset Webb
Could?
- [18:42]
Arthur Laffer
Absolutely. First place, she never got a policy and she was thrown out so quickly before even she and Quasi could get a chance to put it in and all that. My telling you this and I know you won't believe me and I know they don't believe me, if her policies had been put in, she would have increased tax revenues.
- [18:58]
Maren Somerset Webb
And. But isn't the key point that she didn't have time? If Rachel Reeves were to follow your advice, she probably. She may also not be given the.
- [19:06]
Arthur Laffer
Time. Yeah, she might. I don't think it will take time for the effects to occur, to be honest with you. These people are waiting. They're moving out of Britain all over the place. You're in Abu Dhabi, you find Brits all over the world except in Britain. The thing about Liz Truss is she didn't prepare the environment. I don't think, now I'm talking politics now where I'm really ignorant. But she didn't prepare the groundwork to get it there, to get it so that you could go to each of these different groups and get buy in on their part. Now with us at the US with Reagan and with Trump, we got all these different groups to get by. For example, in the one where we dropped the highest tax rate from 50% to 28%, we raised the lowest rate from 12.5 to 15%. We cut the corporate rate from 46 to 34%. We did all the deductions. When we did all the lobbying with all the groups, we passed that bill in the senate in the US by a vote of 97 to 3. Now let me say that again. Every commie in the US Senate voted for it except for three of them. That was Simon in Illinois, Levin in Michigan and Merkla in Montana. But Teddy Kennedy voted for it. Tall and pink. Bill Bradley voted. Joe Biden voted for it. Al Gore voted for it. All these guys voted because they were primed as to how it would work. They love America, they love good budgets. And it was passed 97 to 3. If you do your groundwork well politically, you go through and explain it and you go through the numbers with all the people. They're not dumb, they're smart. But build up this consensus and then put the bill in and make them co authors. It's amazing how far you can go if you give other people.
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Maren Somerset Webb
Credit. Yeah, let people put their name on.
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Arthur Laffer
Stuff. Let them put their names on it. And that's what Liz Truss did not do. And she called it the Blob and all this other sort of stuff. And the Blob doesn't make blob people feel good about their role in life. You know what I'm saying? No American is ever made better off by pulling a fellow American down. Every American is made better off if any one of us is made better off. This is not rich versus Poor, black versus White, old versus Young, male versus Female. Hate never wins. Love always wins. These tax codes should be tax codes that the rich think are right and that the poor thinker Marin if you make 10 times as much as I do, you should pay 10 times as much in taxes as I do, but not a thousand times as much. Yes, and once you start exploiting one group and making a class warfare, you're done. It's cooked, it's fried, it's baked, it'll never work. And you've got hateful people all over the place. And I'm sick and tired of.
- [21:34]
Maren Somerset Webb
Hate.
- [21:39]
Goldman Sachs Markets Podcast Host
Foreign.
- [21:45]
What's driving the markets this week? What's on investors minds as they look ahead? Find out on the Markets podcast from Goldman Sachs A breakdown of market moves and macro signals in 10 minutes or less. The Markets podcast from Goldman Sachs. Listen.
- [22:02]
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- [22:10]
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- [22:52]
Arthur Laffer
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- [23:09]
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- [23:31]
Maren Somerset Webb
Stories.
- [23:47]
Now. Arthur, let me take this from the other side. We spent a lot of time so far talking about taxes which are too high that on the wrong side of the curve. Are there any taxes that you look at that you think actually we could get these a bit higher? These are too low. I'm thinking specifically of land taxes. There's quite a big lobby group in the UK and I know there is in the US as well for the land value tax, for georgism. Is there anything that you can see a type of tax that could go up rather than down and still raise more.
- [24:13]
Arthur Laffer
Revenue? When I was over there last week, one of the podcasts asked me if you were Rachel Reeves and you had the choice of doing little bitty taxes all over the place or raising the principal, what would you do? Why if you forced me to that choice, I'd raise one of the three primary taxes. Yeah, all right. When it came out laffers in favor of raising one of the three primary tax which was not quite the.
- [24:34]
Maren Somerset Webb
Correct I'm not going to use that headline. I'm not going to use that headline. I'm just interested in looking and looking at the bottom of the.
- [24:41]
Arthur Laffer
Curve. Rather than get rid of all of your little diddly taxes and put them all into the two taxes, there is what I do. I'd get rid of all these little squirrely taxes, all this, that and the other thing. Have people focus on doing business and paying tax once and for all and having it collected by the government directly from the companies. That's the way I'd go about. I think land taxes are really bad. There are three types of taxes that for this discussion. One are income, sales and value added taxes. They're on total gdp. Then there's what we call turnover taxes which are on transactions. And then there are wealth taxes. For every 1% transactions tax is equivalent to about a 4% on the income taxes or the broad based tax. And every 1% on a wealth tax is equivalent to 3.5% on the transaction tax or 12 or 13 on the other tax wealth taxes are extraordinarily bad because the value of the asset falls and the people are all poor in property taxes here. Every 1% increase in the property tax rate, all right. Reduces property values by about 12.5%. Now that's getting big. So if you have 2, 3, 4% property taxes, you're really dropping the value of assets and then it doesn't work. I think your tax system on property is probably better than ours by a substantial amount. But I'd get rid of all these little diddly things all over the place. Just clean it. Get your leaf blower and blow them all out of here. Put them in the garbage.
- [26:08]
Maren Somerset Webb
Bag. You're demanding a level of honesty and straightforwardness and lack of complication and fighter attack system that I do not think our politicians are anyway now. But you and I working together and.
- [26:17]
Arthur Laffer
Do. We can get it and we've gotten it in a lot of other countries. We did it in Argentina under Menemen and maybe we'll do it under Malaya. I've been down there a couple times. I love it. I think there's a chance we did it. And I did it in Chile back in the 70s with Sergio de Castro and Ralph Luders, Pinochet, period. Yes, it wasn't democratic, but we got it. The best economy in South America for 35 years. Really amazing. Under Thatcher we did it pretty well. We did it under Reagan and we did it. We're doing it under Trump. Come join the club. Let's have a big dance hall together. And all of us love each other and lower taxes and all of us become rich together. That's what the dream.
- [26:53]
Maren Somerset Webb
Is. I mean, I feel like I'm in the microwave. Look, let's look at. Let's look at some of the other things. So the next thing we get to. You've got these, these groups that we were talking about earlier, UK government spending. I don't think we need to talk about that at length. We can just agree that maybe there should be less of.
- [27:07]
Arthur Laffer
It. Yes, I think we could just.
- [27:09]
Maren Somerset Webb
Agree and then we can look at UK regulatory policy. Regulation. I think again we can probably just agree. Could we have legitimate. I'm with you 100% and then UK monetary policy. Perhaps we can just agree on that. It could be less.
- [27:19]
Arthur Laffer
Awful. It could be less awful, but it needs to be less awful. Britain is not a country like the US or like some of these others. Britain has to worry about its trade accounts and it has to worry about monetization and currency boards to do it. It's much more subject to the vagaries of the world economy than is the US we are the big elephant. Britain's not as big an elephant. It's like Argentina thinking they can have their own separate currency. They can't. Now Britain is much better than that. But Britain needs to be very careful to make sure they get things like stablecoins. If you like the crypto world, I would suggest that Britain try to put in something like stablecoins in the British pound and make it to the dollar or to the pound. And they could do this like tether and some of these others that they could really take advantage of the monetary policy of cryptocurrencies and circumvent all this political garbage out of the bank of England and the Federal Reserve. Excuse me. It's not just you. We are equally as guilty in that as you are. But you're guilty.
- [28:15]
Maren Somerset Webb
Too. What do you mean by political.
- [28:16]
Arthur Laffer
Garbage? Well, the bank of England should not be independent. Who gets blamed for inflation in Britain? The government does not the bank of England. And so they're not held responsible for the things they cause. And you always want to align authority with responsibility with accountability, and they don't. In Britain, it's just not right now the.
- [28:34]
Maren Somerset Webb
Government. But if that's the case across the world. Right. The central banks are remarkably undemocratic organizations that they put in place. Policies that shift wealth around the place are effectively fiscal policies in the end, rather than monetary policy. They're not accountable and not accountable in any way for.
- [28:46]
Arthur Laffer
This. That's. And you're right. And you're right again. You're the expert on this one. Not only do you see it, I think you're lecturing me on it being.
- [28:53]
Maren Somerset Webb
Correct. I reckon I should get that Nobel Prize.
- [28:55]
Arthur Laffer
Yeah. You can have the one I don't have. How about that.
- [28:57]
Maren Somerset Webb
One?
- [28:57]
Arthur Laffer
Excellent. There you.
- [28:58]
Maren Somerset Webb
Go. Right, listen. Okay, so that's monetary policy out of the.
- [29:01]
Arthur Laffer
Way. Let's go to the big one in the living.
- [29:03]
Maren Somerset Webb
Room. Perfect. And we agreed on energy policy, make it cheaper. So that takes us to trade.
- [29:09]
Arthur Laffer
Policy. Yes, it.
- [29:10]
Maren Somerset Webb
Does. Now this is an interesting. You are a big believer in free.
- [29:13]
Arthur Laffer
Trade.
- [29:13]
Maren Somerset Webb
Yes. And I think that you also believe that Trump is a big believer in free trade and what we have here is effectively a negotiation. Yes. Tariff policy is a negotiation to bring us to a much less mercantilist.
- [29:25]
Arthur Laffer
World.
- [29:25]
Maren Somerset Webb
Yes. Over maybe a four or five year period. Is that.
- [29:28]
Arthur Laffer
Right? 100%. You've got every word of my thoughts completely, completely encapsulated in that.
- [29:34]
Maren Somerset Webb
Conversation. Okay. Let me ask you this then. Are there limits to free trade? If we look back over the last decade, when we live in a world that we was talked about it being a globalized world of free trade, and of course it was nothing of the sort because some economies were running a mercantile policy, a very self interested policy, and other economies, such as say, for example, the UK and the US were running what they believe to be real free trade policies. And that of course has led to serious disadvantages for the economies that were operating actual free trade.
- [30:01]
Arthur Laffer
Policies.
- [30:01]
Maren Somerset Webb
Yeah. How do we work our way through.
- [30:03]
Arthur Laffer
That? The North Star? Is free trade moving in that direction? Right. But no matter how much I believe in free trade, I would not sell nuclear weapons to Kim Jong Un. I'm just not going to do it. All right. There's a limit right there. Now, that's obviously extreme. There are all sorts of things that you want to do, oil reserves, this type of stuff. But the market would do a lot better job on these arbitrage conditions and the supply chains than the government does. And I really mean that. For example, we have huge amounts of gold and silver in Fort Knox. What the hell is it doing there? It's sitting there. And everyone goes oo government when it tries to interfere in free trade, except in the extreme examples of Kim Jong Un. And that stuff does not do a good job. If you need inventories for critical materials and stuff, private sector can do those inventories better. They know how to do the calculations better than government does. So when you see a problem on trade, and we all see lots of problems on trade, we all do. When you see a problem, the question to ask is not, oh my God, there's a private sector problem. Let's put the government. The question is, would the government solution to this problem be better or worse than the private error being made right now? That's the right question. And in some cases, of course you're right when you look at it. If I could break free trade and get Russia and Ukraine to agree on a peace plan, I do it every day of the week and twice on Sunday. I am so happy with the results in the Middle east with Gaza, it was horrible what was going on there. I think Trump did a great job in Africa with the three wars he stopped the Pakistan, Afghanistan, and he did it all with trade, all of it with trade. That's the brilliance of Donald Trump's negotiation. Now, is it all moving it towards free trade? No, it isn't. But if it's moving war, God, I'd do that. Ronald Reagan did the same thing with Gorbachev. We invited them in. It was called peace through strength. Invited them into our prosperity. But if you don't come in, we got a big stick here, we're going to hit you in the head. And that stuff works. And I do understand not going always at all times, in every which way. Free trade, negotiations for peace, et cetera, is also a very important characteristic of trade negotiations. And I'm not an expert in this stuff. I'm a wuss, Marin. I'm 85. When I see negotiations going on, I get all scared. I start crying. I wet myself. I climb roll in a fetal position. I climb under my bed and cry. Donald Trump does not. Ronald Reagan did not. They didn't do that. They really went at it, and they were successful. We got world peace under Reagan with Gorbachev and Kosyzhin and Brezhnev and all that. And it lasted for a long time. And I think Trump's going to do the same thing. And so I am much less harsh on my criticism of Trump for violating free trade and peanut butter oil, because he's really using the trade issues very, very effectively to get a lot of other objectives we need desperately in this world. So I support him 100% so far in what he's.
- [32:57]
Maren Somerset Webb
Done. What would you criticize him for so.
- [33:00]
Arthur Laffer
Far? Oh, he's a human. And let me just say it this way. You got to treat Donald Trump seriously, but not literally. Some of the grandiose things he says and does are not my style. He's much more like my godfather was, who is Reagan's top friend in California, Head of the kitchen, cabinet, blah, blah, blah. Donald Trump is a CEO, and he's a great CEO. Sometimes he creates unnecessary hostilities by his conversation, but bottom line, I think he's just doing a great job. If he yelled at me, I would cry and I would, but I wouldn't stop loving his policies and what he.
- [33:37]
Maren Somerset Webb
Does. Passing though, isn't it? And we're already getting well into his second term. What happens.
- [33:42]
Arthur Laffer
Next? I don't know. I'm 85. I don't give a damn, to be honest. No, I.
- [33:46]
Maren Somerset Webb
Do. You so do.
- [33:49]
Arthur Laffer
You. So do I do. I think that once these get locked into stone, once he gets through his first year, which will be in another, what, five, four months, something like that, then we got three years left. He's got another almost year of control of all the House and Senate, and he controls the Supreme Court. He controls the state legislatures mostly and governorships, and he will, by Then have the Fed under control and have his own chairman in there and we'll be able to lock these things into stone. So it's very difficult to undo them. But believe me, when I'm coming up to my 120th birthday, Marin, when I come up there, I expect to see a whole new set of problems that will have to re educate the world again on supply side economics. But it works. And economics is all about incentives. And the government can change the attractiveness of activities. And if you tax people who work and you pay people who don't work, don't be surprised if a lot of people stop working.
- [34:48]
What you need to do to create a prosperous, well functioning societies reward things that are good. We tax speeders on the freeway to get them to stop speeding. We tax smoking to get them to stop smoking in the same breath. Why do we tax people who earn income? Why do we tax people who employ other people? Why do we tax businesses that make wonderful products at low cost and make lots of profits? We don't tax them to get them to stop earning income or stop employing other people or stop making great products. But don't think for a second that those same consequences don't occur because our motive is different. That's just crazy stuff. And it goes with regulation spending, it goes with taxes, it goes with. Oh, it goes with trade, it goes with everything. And it also goes with energy policy and it goes with privatization of.
- [35:38]
Maren Somerset Webb
Industries. You are such an optimistic.
- [35:41]
Arthur Laffer
Man. And I'm very optimistic. We're winning and we're going to really.
- [35:44]
Maren Somerset Webb
Win. Okay, all right. And hopefully that will happen to the UK as well, though maybe not in November. I think we have to go a little lower before we can. Probably got to scrape the bottom before we can. But you need to come up.
- [35:55]
Arthur Laffer
Again because you're gonna like a lot of money. It's a lot of.
- [35:59]
Maren Somerset Webb
Fun. So we've talked a lot on the podcast over the last couple of months about the debasement trade, about the general collapse of fiat money and how the endless public debts mean that you can't really trust trust money anymore. Can't trust fiat money. And hence we saw the gold price rise and rise and rise. And you've talked about crypto already. Where do you stand on that? You got a lot of gold sitting in your.
- [36:18]
Arthur Laffer
Portfolio? No, no, of course I don't actually, I don't have any crypto either. But what I do is, do I have crypto? I don't. Currency holdings is a long term investment.
- [36:29]
If you look at Bitcoin or some of these other. They are a good store of value, but they've had a huge rise and so is gold. But when you look at my portfolio, my portfolio is from a grandchildren, my great grandchildren. That's where I'm at. When I look at the world at large, I see cryptocurrencies as being a private solution to a government problem. They are trying to circumvent the bad currencies that have been put into place since 1913 and going to drive them out. What we should do is have a government that welcomes a private solution to a bad public problem. And that's a bad currency. The pound is terrible. It's gotten so bad. It's gotten so bad Marin that they're now calling it the ounce. And other countries don't mind my joke. Sorry. I thought it'd be really.
- [37:12]
Maren Somerset Webb
Good.
- [37:14]
It is quite good. It just took me a beat to get it, but I got it now. My audience are cleverer than me. They'll get it much more.
- [37:20]
Arthur Laffer
Quickly. Well, you know, when you look at all these currencies, I think these cryptocurrencies, especially the stablecoins are going to replace the currencies. So it's a private solution to a government problem. Do you know what blockchain does to transactions cost? When you send a check, give someone a check, they send it into the bank. It takes seven days to clear.
- [37:37]
Maren Somerset Webb
It. We don't do that in Europe anymore. That's only in the US none of us have seen a check in a.
- [37:42]
Arthur Laffer
Decade. When you use a credit card, same thing, they go beep. You can pull your card out. It's all clearing, it's all the double payment problem. Blockchain takes care of that instantaneously. I'm on the board of this one company called Soulmate which deals with Solana and it's a phenomenal thing. We can do 40,000 transactions in a second. Bingo. You don't need banks, you don't need any of this other stuff. You don't need energy. You just need the crypto. And you just go in there and do it. You can do it in secrecy because you know of all the, all the code breaking that you can keep it. It's just wonderful stuff. And the government should allow it to come in and replace the pound or replace the dollar and put us on a very stable valued currency for eternity. Why.
- [38:24]
Maren Somerset Webb
Not? So with your long term confidence in the U.S. your long term confidence in everybody and.
- [38:29]
Arthur Laffer
Everything. I'm a chubb humans by really.
- [38:32]
Maren Somerset Webb
Do. Very gratifying. Me too. With that confidence then your long term portfolio for your grandchildren is 100% in US.
- [38:38]
Arthur Laffer
Equities. It's 100% in equities. Not all us, but there are a lot of them are. But I like a little bit down there in Argentina. I think some other stuff in the world is cool. I've got a mining company stock now which is gold and it's also bitcoin, but I've had it for a while. But it's in Africa. So I have some fun stuff in there and I think I do those just because I'm excited by them. I'm on a lot of boards and I love being on the boards because I learned so much about this modern world. I'm not modern. Do you speak any German.
- [39:06]
Maren Somerset Webb
Maren? I don't know some of the languages, but no German. I'm willing to.
- [39:11]
Arthur Laffer
Learn. Ich bin nicht von Gestrin. Nicht bin von voor Gestrin. I'm not from yesterday. I'm from the day before yesterday. I'm in the ancient kingdoms of the Goths or whatever it may be. I love, love modernity. The technology that's coming through, immunology, all the physics that's going to. Oh, but much more than A.I. the genetic stuff, the CRISPR, all of that stuff. I'm really into this stuff big time. And it's just such a wonderful world that we're looking out at all these problems that have befallen humanity and animal kingdom for four plus billion years. We're solving my daughter. I can tell you about my daughter, my number four. She lives in Britain, she's a British subject and she got metastatic melanoma, fourth stage. They claimed that she had 16 weeks left to live. After I stopped crying, we went to work on this. Her roommate at Yale was head of Wisconsin's medical. I also used a Justin Stebbing in London who's world's expert. I went down to, went down to Houston Anderson Hospital. There we did the. We found this immunotherapy and that Jimmy Carter had used and brought him back out of hospital. That gave it to her. The tumors are all stopped growing. They're all killed. Now she has seven lesions in her back. They had to have surgeons remove it. But she's alive because of immunotherapy and they didn't have to cut her all up. And do tell me it doesn't make you really optimistic about this.
- [40:36]
Maren Somerset Webb
World. No, it does. I have a similar story about my father. Amazing. I was going to ask you Arthur, at the end of this interview, what it was that kept you so optimistic and energetic, but I think we already have the answer to that.
- [40:48]
Arthur Laffer
One. Yeah. And immortality is this. Having offspring is the second best thing next to immortality. And I'm so proud and so pleased with my kids, and I just love life. The older I get, the more I love life. And I'm not afraid of dying. I know it's going to happen one of these days, but I figured out how I want to die, Marin. I want to die the exact same way my uncle did, peacefully, in his sleep, not like the three passengers in the car he was.
- [41:16]
Maren Somerset Webb
Driving. Oh, very.
- [41:17]
Arthur Laffer
Good. Thank you. Thank you. I have.
- [41:19]
Maren Somerset Webb
To. I'm definitely giving that one.
- [41:21]
Arthur Laffer
In. You don't mind me having a little humor with you guys, but it's a deadly serious topic that you're doing. But humor is always important to let it get through. I'm no one's enemy. I know I get all sorts of hate mail and all this stuff, but I'm no one's enemy. I'm just sitting here. If you don't like my advice, throw me out. I've had a lot of experience. I've been going to the Oval Office now for. For 55 years. I've gone through all of this stuff. If I have anything of any experience that would make you guys better off, it's yours for the taking. And if you don't like what I say, I'll go home. I'll sit out there on the farm. I'll drink my bourbon and forget about all you.
- [41:55]
Maren Somerset Webb
People. Has anyone ever contacted you from the Scottish government to ask you your views on.
- [41:59]
Arthur Laffer
Things? Several times. And I'm Scots, Irish, German. Like all of us in Appalachia. I'm 50. 50. I'm not. I'm much more German, but my kids are all 50. 50, 50. Presbyterian, Scots, Irish, and German. That's Appalachia. And they did. And I was. What were the people that. Lady fish and the lady salmon. Do you remember those? And they came to my office and we talked. And I had been advising the Irish government on the tax cuts at the time. And when they found that they were offended by it and left. And you can see how well they've done. They've done a horrible job in my home country. My grandfather. We're all from the Ulster Union, Belfast and Dalwhinny area is where we're from there. And of course, we're from Konigsberg in Germany and West Prussia as well. It's a shame what's happening in Scotland. Gordon Brown's about as dour as they get. And he's a cheerful fellow in Scotland. Just.
- [42:52]
Maren Somerset Webb
Joking.
- [42:54]
You know, I'm in Scotland at the moment. While we're.
- [42:56]
Arthur Laffer
Speaking. Where are.
- [42:57]
Maren Somerset Webb
You? I'm in.
- [42:59]
Arthur Laffer
Edinburgh. Do you know.
- [43:00]
Maren Somerset Webb
Breaching?
- [43:02]
I know who. Yes, I do. Just, I mean, it's like an hour and a half, two hours drive away. Yeah, Very good.
- [43:08]
Arthur Laffer
Friends. You live there up the. Up the little glen there, up to Brecon. And I was married in the church there up in Edsel, up the Tanty Road, as they say.
- [43:17]
Maren Somerset Webb
There. I know that church.
- [43:19]
Arthur Laffer
Well. I was married there in 1963 and my first wife was Scottish Highlander. We had four kids. Then I got. We got divorced, drifted apart and then we got divorced. I raised the four kids and then we got two more kids and got another.
- [43:32]
Maren Somerset Webb
Two. It's all one man war against the fertility.
- [43:35]
Arthur Laffer
Crisis. Yeah. Scotland is such a wonderful place. The people are so wonderful. But there's a reason why they populated the rest of the world. Because they were getting the hell out of Scotland. And that's unfortunately the truth. And Scotland needs to welcome its citizens of ideas, providing them with opportunities. And that just doesn't seem to be in the cards right.
- [43:54]
Maren Somerset Webb
Now. I don't want to end on that note of.
- [43:56]
Arthur Laffer
Misery. No. Can I tell you one.
- [43:57]
Maren Somerset Webb
Story?
- [43:58]
Arthur Laffer
Yes. Okay. Now this is pretty close to being literally true. About every seven days in a year on average, there's a country that celebrates its independence from Britain. Now think of that. Now that statement says two things. Number one, it says how Britain has lost all this stuff. But it also says how much Britain once had and we can reverse that flow in terms of prosperity. I have never been more excited about a country becoming prosperous and reclaiming its authenticity, its authorship of the capitalist revolution and of industrialization and prosperity and elimination of poverty that Britain did. And it was all by the way, in Greyfriars Churchyard. You remember that John Knox and the Church of the Covenant there, and you look there and false loon, Fudaili, Spock, Mass and malug. And it's all the birthplace of Adam.
- [44:57]
Maren Somerset Webb
Smith. The revolution, the grave of Adam Smith right there. We do a show every year, Arthur. In fact, I'm going to send you an invitation to this. Every summer we do a show at Pamua House, which was Adam Smith's house in Edinburgh where he died, where he lived with his mum. Poor old mum, poor him. I don't know. One of them was poor for a long time. Where he did the second, the final editions of wealth of nations and Moral sentiments. Every year during the Edinburgh Fringe Festival we do a show there and we get on an economist, a comedian, politician every day. Both, I'll be both and you can be the whole lot. And we chit chat, we try and recreate the feel of Adam Smith salons and we just, we chat. It's great fun. And you're going to come and I'd love.
- [45:35]
Arthur Laffer
To. And we can have a little session there in Greyfriars churchyard. We do sit down there with Jenny Geddes and the whole thing and it's just so much fun. It's just so cool. I love it. And we need to reconstitute the prosperity that Britain once had and it's just such a wonderful country and I just love being there. And.
- [45:55]
If there's anything I can do to help you re establish and recreate the prosperity and the elimination of poverty in the country, I'd be more than happy to do anything I can.
- [46:04]
Maren Somerset Webb
Can. I'm hoping that this podcast may have made a.
- [46:06]
Arthur Laffer
Start. Let's hope so. Thank.
- [46:08]
Maren Somerset Webb
You. Marin, thank you so much for joining us today. Couldn't appreciate it.
- [46:12]
Arthur Laffer
More. My.
- [46:12]
Maren Somerset Webb
Pleasure.
- [46:17]
Thanks for listening to this week's Marin Talks Money. If you like our show, rate, review and subscribe. Wherever you listen to podcast and keep sending your questions or comments to marinmoneyloomburg.net you can also follow me and John on Twitter or X. I'm Arnesw and John is johnstepper. This episode was hosted by me, Maren Somerset Webb. It was produced by Sam Asadi and Moses Andam Sound designed by Blake Maples and Robert Williams. A special thanks of course to Art Laffer who I believe is also on X or Twitter. Arthurlaffer I think so you can find him there. He may not know you can find him there, but I know you can find him.
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