Arthur Laffer (19:16)
Let me do the first one. Inflation, printing too much money and all that. Prior to 1913, in this country, we had a private money system. It was not public. Now, the Government did do three things. It defined what a dollar was. It's 1/20 of an ounce of gold. It's 1 ounce of silver. That's a dollar. It also did one other thing as well. It did mint coins. If you brought bullion into the federal government, it got it the right purity. It would mint the coins and charge a commission. But so did lots of other private sector mints. All did the same thing. So there, the real thing they did prior to 1913 was the government audited banks balance sheets. Banks would issue their balance sheets, their income statements, and the government would audit them and say they're true and correct, et cetera. At that time, banks created money. There were banknotes that were the liabilities of individual banks. They had those. They had gold coins, circulating silver coins. Circulating money was private. The only thing the government did was define what a dollar was. And that was the world back then. Now, some, some banks notes sold at a slight discount to other banknotes like they did because they were all private liabilities. And that was a system that went from 1776 until 1913 in the U.S. that's a. What is that? 137 years there now, starting in 1913, we put in the Federal Reserve. The government started to nationalize money. We then had the Roosevelt won the gold confiscation of 1933, where they confiscated gold at $20.67 an ounce. Then they devalued that. So they just had this huge wealth tax. We were the only country, I think, ever that has had our citizens prohibited, legally, criminally, for holy gold. I mean, it was just amazing. And then of course, we had the interest equalization tax. We had the. A voluntary foreign credit restraint program. Those were the ones I did my dissertation on at Stanford. We went on up to Smithsonian. I was in the White House in Smithsonian time. I was George Schultz's right hand person. When we went off gold completely and totally, we were a freewheeling paper currency unbacked by anything anywhere at any time. George Schultz's comment was we've raised the price of gold, of the gold from $35 an ounce to $42 an ounce. But we're unwilling to buy it or sell it at that price, which is joke. And now finally, government had 100% control of money in 1972. They did. Inflation from night from 1776 until 1913 was zero upcast. Yep, zero. There were no major depressions or anything like that. There were some financial panics, but they were over in a matter of weeks or months. There was nothing there. Long bonds. Now these are all from Jeremy Siegel and Jeremy Schwartz, who are Mike colleague at the University of Chicago. Best people in the world. Long bond yields in 1776 were in the five and a half percent range. By the time you got to 1910, 1912, they had gone down to about four and a half percent. Just all very stable state. No ba ba ba ba ba ba ba ba ba, none of that stuff. It was a beautiful system. From 1913 to the present, the price level has risen 35, 40 fold. You've had interest rates that I've mentioned went from 21% down to zero. But we had the biggest depression ever. You know, this is a classic example of the federal government nationalizing an industry and screwing it up. We went from private banking, which worked really well, to public one, which just screwed it all up. And the U.S. by the way, screwed it up a lot less than other countries did. We are the tallest midget in the bunch on that now. When it gets you to be scared, I look at cryptocurrencies as being the private sectors and gold as being the private sector's way of circumventing government monies and creating a money of their own. Especially things like tethered and these other stablecoins. They can really stabilize values. And what I'm seeing in this world is the private sector moving back in and replacing the government monies and which makes me very optimistic about the long term there. So that's the monetary inflation one. Now you have redistribution. You said, let me go to redistribution with you. And this is a really important topic. And by the way, I've written a lot on the banking system as you know, if you did my background stuff that's my bailiwick and trade. The book I wrote on this one is called Taxes have consequences. It's two and a half years old. It is the complete history of the US income tax from 1913 to the present. In this, I just want to say we have every single tax return. You know, the last two months of 1913, we had an income tax. And all the way here, we know the last guy in the top 1%. We know the first guy in the bottom 99%. We don't have his name, but we have his tax return. All right, we have this. We see how the first year 13, 14 and 15, the number of people required to file was about 358,000 out of 62 million adults. Just teeny tiny little group. And the tax rates went from 0% to 7%. That was it. A little bitty, little bitty. And then, of course, by 1915, 16, 17, it had gone up to 77%, was the highest marginal income tax rate. It went up to 6.4 million people. That was World War I. That was the pandemic then. And then Wilson dropped it to 73% in 1918. 19, boom on down went down as low as 25%. Under Harding and Coolidge, we have had huge amounts of variation in the tax rates on the rich. We have. We've had enormous amounts. And we don't just guess what happens when you raise tax rates in the rich. We know we have every single example. And let me just summarize, if I can, on Saez Piketty and all these other guys, you know, Zuckman and Sancheva and all the redistributes. Bernie Sanders, AOC I can easily imagine raising tax rates on the rich and collecting more money and helping the poor. I can also easily manage raising tax rates on the rich. They hire more lawyers and accountants, deferred income specialists. They have bad economic activity happen to them, and you actually collect less money from the rich. Either one of those is very possible because these guys are rich and they can hire lawyers, accountants, deferred income specialists, whatever. So we have to look at the facts rather than feelings. Every single time, we've raised the highest tax rate on the top 1% of income earners. Every single time, three things have occurred. The economy has underperformed. Tax revenues from the rich have gone down, not up. And the poor have been hammered. Every single time we've cut the highest tax rate on the top 1% of income earners. Every single time the economy has outperformed, tax revenues from the rich have gone Up. And the poor have had opportunities that have exceeded other time periods by long shot. So that's where we are in this. So as you can probably guess, I'm far less afraid of mom, Donnie's, Elizabeth Warren's, and yeah, they screw up, they dumb, they don't understand economics, they don't know straight up from Sikkim. But you know, frankly, they sooner or later are going to be squashed and they're going to be replaced by a low rate flat tax. In 1944, the highest marginal income tax rate in America was 94%. Every dollar you earned, you were allowed to keep 6 cents. God bless you, son, for working hard. Today the highest marginal income tax rate is 37%. We've made enormous project progress over the years. If you look at states, in 1976, there was one state in the United States that did not have a state death tax and that was Nevada. All right, Every other state did. All right, today, 38 states have eliminated the death tax. All of them eliminated the inventory tax. You know, when you look at the progress we've made, we've now allowed people to do discount sales. We've gotten negotiated rates in the stock market. In 1973, every stock traded by law had to pay 34 cents as a commission. Today it's zero. Trucks were decontrolled, airlines decontrolled, all of this stuff. You know, we are making enormous progress coming along here. And you know, I do see the problems you're saying, and I do think they're correct. And a lot of the response is anger. But you know, we had a lot of anger after Nixon. I don't know if you were aware of that. You're way too young to understand that world. But I was the chief economist in the White House then. I was George Shultz's right hand person. If you think it's hostile and political today, you have no idea how bad it was under Nixon and Ford and Jimmy Carter and all. Oh my God, it was awful. So this stuff is repeating, but every time it's repeating, I'm telling you, it's getting better and better and better. Yeah, we make five steps forward, then we're pushed back three steps and it's all true. But we're making progress all over the place on inflation, private money, tax rates, all of this stuff. We are really making a big difference in the world in the right direction. We're creating a lot of new problems too, but they are soluble in the us. The way our structure is is that we allow those solutions to Come back into the system where other countries really don't. You can't get a vote in Russia, for example, and you have a hard time. Even in Britain, you don't vote for the Prime Minister. You vote for a party that then is 100% in control. That's not the way we do it. We do checks and balances. Britain does not. So.
