Why Wealth Inequality Is Rising—And What You Can Do About It Before It’s Too Late | Arthur Laffer X Tom Bilyeu Impact Theory

Summary

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Podcast Summary

Impact Theory with Tom Bilyeu

Episode: Why Wealth Inequality Is Rising—And What You Can Do About It Before It’s Too Late
Guest: Arthur Laffer
Aired: December 17, 2025

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Episode Overview

Tom Bilyeu sits down with legendary economist Arthur Laffer for a deep-dive discussion on the dynamics of wealth inequality in America, the implications of macroeconomic policy, the future of currency, and actionable steps individuals can take to thrive in a changing world. In a broad-ranging conversation peppered with history, personal anecdotes, and policy critique, Laffer outlines what he sees as the causes of stagnating real wages, evaluates the legacies of recent U.S. presidents, and describes his vision for a freer, more prosperous economic landscape—while Tom probes, challenges, and grounds the discussion in first principles.

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Key Topics & Discussion Points

1. Wealth Inequality and Perception of Prosperity [01:01–03:30]

• Tom argues that people are less upset by inequality per se than by the feeling of stagnation or decline in their own prospects. Economic strain makes inequality visible and intolerable.
  • Quote:
    “The second you break that, you are in a real problem. And we have broken that. And right now things are getting harder and harder for people to afford.”
    — Tom Bilyeu [02:24]

2. How Macroeconomic Policy Drives Outcomes [03:30–07:10]

• Laffer introduces his "five kingdoms" of macro: taxation, government spending, monetary policy, regulation, and trade (occasionally adding defense/security).
  • He grades Trump and Biden across these metrics, praising Trump’s first-term policy actions (tax reform, trade negotiation, deregulation) and expressing optimism for structural changes if Trump returns.
  • Quote:
    “Trump is an outlier, doing really well on taxes, government spending... and on trade policy.”
    — Arthur Laffer [06:35]
  • Laffer credits Trump for being a “change agent,” using negotiation and leverage, with a CEO-style approach.

3. Trade Policy as Negotiation Tool [07:10–12:05]

• Laffer details his initial skepticism about Trump’s tariffs ("He scared the hell out of me on trade"), but explains Trump’s rationale: use U.S. leverage, reciprocity, and flexibility to push for lower barriers with foreign nations.
  • Quote:
    “I’m a free trader and I’ve watched what he’s done, and when I’ve seen what he’s done, he has done exactly that. He uses international trade as a negotiating tool to achieve all sorts of global good objectives.”
    — Arthur Laffer [11:25]

4. Timelines for Seeing Results in Policy [15:40–18:10]

• Tom asks about what metrics and timelines Laffer uses to evaluate policy success.
  • Laffer points to the "horizon effect"—measuring effectiveness over the longer term (3–5 years, citing Reagan as an example). He anticipates lower tax rates, freer trade, and a stronger economy if current trends follow through.
  • Quote:
    “The dream is that we’re honing in on the horizon effect, which is a freer trade, more peaceful world. The way Reagan left us after NAFTA. I think Trump is going to leave us with much lower tax rates.”
    — Arthur Laffer [17:21]

5. Growth, Tax Cuts, and the Reagan Analogy [18:25–22:36]

• Debate over whether Trump, like Reagan, will deliver tangible prosperity. Tom is concerned Trump is “erratic,” that tariffs have acted as a cudgel rather than as a negotiating tool, and that the effects haven't yet reached Reagan-era levels.
  • Laffer responds that Trump’s phased-in approach means growth will come, but not as a singular bounce; expects growth in the 3–6% range, leading to broad prosperity.

6. Federal Reserve, Interest Rates, and the Future of Money [23:45–30:14]

• Laffer advocates for a “price rule” to anchor the dollar’s value, referencing pre-1913 gold standard and Volcker’s tactics. Suggests the new era might use spot commodity indexes, cryptos, or stablecoins for monetary stability.
  • Quote:
    “We need a monetary system like the gold standard was from 1776 to 1913. That’s what we need.”
    — Arthur Laffer [28:06]
• Tom pushes back, describing concerns about fiscal dominance (debt too high for reasonable rates), government spending, and risk of bubbles if rates are lowered.

7. Crypto, Stablecoins, and the Future of Currency [30:50–39:17]

• Tom and Laffer discuss adoption hurdles for crypto.
  • Laffer is optimistic about stablecoins fostering monetary competition, predicting crypto will become a stable medium of exchange.
  • Tom is skeptical that the average person will migrate to crypto, citing human behavioral inertia and emotional barriers to change.
  • Quote:
    “The math does not justify your optimism. … Crypto right now is best understood as an asset.”
    — Tom Bilyeu [38:38]
• Laffer responds with the “pillowcase full of $20 bills at Harvard” story to argue that incentives work even for the most ideologically opposed.

8. Human Nature, Socialism, and Policy Outcomes [39:44–45:15]

• Tom contextualizes U.S. exceptionalism as an anomaly, pointing to historical debt cycles and the collapse of past empires. Laffer argues for activism and incremental change, not passive optimism.

9. Policy Activism and Individual Agency [57:05–58:35]

• Tom presses for actionable takeaways. Laffer urges political activism, supporting politicians who champion low taxes, deregulation, and smaller government—regardless of party label.
  • Quote:
    “Get out there and get in there and get. And do the right markets. Get the good politicians in it.… It's not party. Get your guys to get in there and become political activists because it’s your future, it’s your kids’ future, it’s everyone’s future.”
    — Arthur Laffer [57:38, 58:18]

10. Personal Reflections on Advice, Independence, and Legacy [58:43–63:34]

• Laffer explains his commitment to independent advice (“never go to work for government”), his role influencing policy while avoiding conflicts of interest, and his long-term optimism for the U.S. economy and society.
• Emphasizes the importance of structural constraint on government, markets, and personal accountability.

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Notable Quotes & Memorable Moments

• On Policy & Human Nature:
  “If you map socialists as people that want to help the poor, you will be eternally confused. If you map them as people that want to hurt the rich, they will suddenly make all the sense in the world.”
  — Tom Bilyeu [19:54]
• On Emotional vs. Rational Economics:
  “They live on those incentives. They just like the emotional crap of this. But when push comes to shove, we can manipulate them with perfectly good economics all day long and twice on Sunday.”
  — Arthur Laffer [42:33]
• On Stock Market Optimism:
  “I think I see a very, very boisterous, wonderful future. And the stock market is reflecting its expectations of higher profits and greater prosperity in the future.”
  — Arthur Laffer [53:35]
• On Activism:
  “I am an active change agent. So I’m not someone who just sits back and goes, now that is for sure inarguable.”
  — Arthur Laffer [44:40]
• On Adapting to New Technology:
  “Blockchain is incredible… This is a period of incredible efficiency gains in the marketplace and transactions. And I watch this happening before my very eyes and I’m just blown away. I’m 85, but I can’t believe that.”
  — Arthur Laffer [37:52]

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Timestamps for Key Segments

| Timestamp | Topic / Quote | |----------------|---------------------------------------------------------------------| | 01:01–03:30 | Wealth Inequality, Real Wages, and Social Perceptions | | 03:30–07:10 | The Five Kingdoms of Macroeconomics, Trump vs. Biden | | 07:10–12:05 | Trump’s Trade Policy—Negotiation, Reciprocity, Leverage, Flexibility| | 17:17 | "The dream is that we’re honing in on the horizon effect..." | | 23:45–30:14 | Federal Reserve, Monetary Reform, Crypto & Stablecoins | | 39:17–42:50 | Human Motivation: Incentives, Rationality, and Economic Change | | 53:00–56:58 | Stock Market Sentiment vs. Fundamentals | | 57:05–58:35 | What Individuals Should Do: Political & Policy Activism | | 58:43 onward | Personal Philosophy, Independence, and Advising Without Employment |

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Tone & Style

• Conversational but substantive: Tom is probing and a bit skeptical; Laffer is affable, confident, and occasionally self-deprecating.
• Anecdotal storytelling: Laffer’s sense of humor comes through, especially in stories about Harvard, Reagan, and his own history.
• Policy-based optimism vs. reality-based caution: Tom grounds the discussion repeatedly in “first principles,” while Laffer stakes out a consistently optimistic, reformist economic vision.

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Takeaways for Listeners

• Understand the underlying drivers of wealth inequality—focus on real wages, not just income numbers.
• Macroeconomic policy (taxes, spending, regulation, trade) shapes prosperity more than party labels.
• Be cautious but active: Laffer argues for optimism and engagement, Tom for critical thinking and activism—both agree passive acceptance is not the answer.
• The future of currency could include stablecoins and crypto, but mass adoption depends on incentives and behavioral economics, not just technology.
• Get politically engaged and fight for sound economic policy—it makes a real difference.

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(This summary omits all advertisements and non-content sections for clarity and flow.)

Transcript

[Arthur Laffer]

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[Host (Economic Analyst)]

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[Arthur Laffer]

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[Host (Impact Theory - Tom Bilyeu)]

Welcome back to part two of my conversation with Arthur Laffer. Okay, so the there's one thing in all of this that I still worry about, which is whatever the government makes mandatory is the only thing the average person is going to use. So if the government is making the hyper, it's not technically hyper inflated, but the very inflated currency, the mandatory one to pay your taxes and all that, that's the one people are going to understand. I don't think the vast majority of people understand crypto, nor will they embrace it unless they are for to they need to because otherwise they're getting hammered by inflation and so going yes, they.

[Host (Economic Analyst)]

Are, but they understand that. Yeah, go ahead. Sorry.

[Host (Impact Theory - Tom Bilyeu)]

Here, here's the thing. They don't understand inflation. That that is a hill I will die on. But I to your point, intuitively, they know something is going wrong. Okay, so that's one the wealth inequality. Even though that's the right thing to point at in terms of what drives people crazy from a there's just a algorithm embedded in us from evolution that makes us hate jealous inequality.

[HomeServe Advertiser]

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[Host (Impact Theory - Tom Bilyeu)]

However, you can distract people from that by giving them relative growth. So if they believe that, oh, I'm making more money today than I was yesterday and buying that car, that house, that whatever, is a little bit easier today than it was yesterday. And I'm going to be able to amass some amount of wealth that I'll be able to pass on to my kids so that I have reason to believe that their life is going to be better than mine and therefore all of my sacrifices are worth it. Yeah, the second you break that, you are in a Real problem. And we have broken that. And right now things are getting harder and harder for people to afford. And so that makes them go, wait a second, that guy's making a whole lot more than me, which they never would have worried about or thought about if things that they wanted were getting effectively cheaper for them.

[Arthur Laffer]

You're right.

[Host (Impact Theory - Tom Bilyeu)]

So the question becomes, since we agree on that and we know we're moving.

[HomeServe Advertiser]

In the wrong direction, we what precisely.

[Host (Impact Theory - Tom Bilyeu)]

Is Trump going to do from a.

[HomeServe Advertiser]

Policy perspective, or more importantly, what are.

[Host (Impact Theory - Tom Bilyeu)]

You advising him to do to get it moving in the other direction so.

[HomeServe Advertiser]

That real wages are going up?

[Host (Impact Theory - Tom Bilyeu)]

Not the nominal where it's like, yes, I'm making more dollars.

[Arthur Laffer]

Gotcha. Gotcha.

[HomeServe Advertiser]

That one.

[Host (Impact Theory - Tom Bilyeu)]

Obviously, I'm not saying for you, I'm saying for the audience. Okay, but so that the, the dollars I'm making, sure, are more, but in terms of what they buy, it is less. So real wages is where it's like, hey, the actual difference between how much I'm making, how much something costs has changed and I'm in a more powerful position. Okay, how do we get there?

[Host (Economic Analyst)]

Yeah, well, you know, I break it.

[Arthur Laffer]

Into five kingdoms of macroeconomics. If you look at a big macroeconomics textbook, you've got five sections in there, at least if you're talking about the US and developed countries. First section is taxation. Second section is government spending. Third section is monetary policy, inflation, all that stuff. Four sections, regulations. And fifth section is international trade. And I sometimes add one piece through strength, which is defense security.

[Host (Economic Analyst)]

Sometimes when I look at those five.

[Arthur Laffer]

Grand kingdoms, I look at, let's say Joe Biden, he's a loser in every single one of them. Just, just across the board. Trump in his first term, cut personal income taxes, cut corporate taxes 100% expensing, cut the death tax dramatically in the Tax Cuts and Jobs Act. He did a great job on taxation, on government spending, that he did the defense stuff, that was pretty good. He reduced the rate of increase of spending there until it came to Covid and then he blew it on the COVID But even when he blew it on the COVID he did get the vaccine in operation, warp speed by within 10 months, which is pretty impressive by the way. They were expecting eight or nine years there. If you look at his monetary policy, he was 1.5% inflation during that period. There was, that was what he had there. If you look at regulations, he decontrolled energy, he decontrolled healthcare, price transparency.

[Host (Economic Analyst)]

I could go.

[Arthur Laffer]

He write to try. He did all of that Stuff, which is pretty cool on regulation and on trade. I'd love to talk to you about trade data. Take a longer. But all the deals he did in his first term were lowering tariff barriers, lowering quotas, lowering restrictions on trade, not increasing them. The Japan deal, the usmca, the South Korea, the Brazil and the Colombia ones were all freer trade, not less. This term he got the Tax Cuts and Jobs act permanent. He got no tax on overtime. So all those guys, all those firefighters in California and all the people in Palestine, Ohio, who spend 80 hours a week at 9 11, you know, do all the work and take all the risk, it doesn't. You don't tax the living crap out of them anymore. You're not going to tax them for putting in 90 hours a week at the highest rates. Interest on loans should be tax deductible as long as interest income is taxable. Interest loans should be tips.

[Host (Economic Analyst)]

Why in the hell should you spend.

[Arthur Laffer]

A billion dollars trying to collect a million dollars from tips? You know, there's just some things that are just not worth it. He did that as well. What he did, he put in workfare in there, he put in the medical price transparency and the big beautiful bill. He put in a bunch of other things there that I won't go through the details on, but are all pretty damn good. What I see him doing on trade is trying to negotiate to get better free trade deals. That's my belief. He's a free trader all the way. He just loves to negotiate them to reduce their tariffs. We have much lower tariffs than any of the other major countries and he wants them to bring theirs down. And that's exactly.

[Host (Economic Analyst)]

And the deregulation, I mean, he's doing that really well. So I think in the five grand.

[Arthur Laffer]

Kingdoms, Trump is an outlier, doing really.

[Host (Economic Analyst)]

Well on taxes, government spending.

[Arthur Laffer]

I think he's doing well on monetary.

[Host (Economic Analyst)]

Policy, on regulatory policy and on trade policy. And I think his use of trade to negotiate peace, like in Ukraine, like in China, with Taiwan, like in the four countries in Africa that he's done with Pakistan and Afghanistan, what he did in Gaza, you know, he really knows.

[Arthur Laffer]

How to leverage those types of tools to bring the peace down. He is very Reagan esque in every.

[Host (Economic Analyst)]

Respect except his personal demeanor.

[Arthur Laffer]

He is a CEO. Reagan was soft spoken, was lovely high. Reagan was as radical a revolutionary as Trump is. I mean, my godfather was Justin Dart who was head of Reagan's kitchen cabinet. Believe me, he was Donald Trump. He was a CEO. Donald Trump is doing all the right things there are to be Done. And I couldn't be more happy than I am about how he's doing it. So that's my story, I'm sticking to it. Let me give you an example where I was wrong and some of my advice to him. He scared the hell out of me on trade.

[Host (Economic Analyst)]

He scared me to death.

[Arthur Laffer]

And I've just.

[Host (Impact Theory - Tom Bilyeu)]

Because of the tariffs.

[Arthur Laffer]

Yeah. And whenever I see a president getting involved in that stuff, I'm like, here's the depression 1929 when they passed the Smoot Hawley tariff in the fourth quarter the stock market fell by 35% when it was signed into law by Hoover on June 30 19, June, June 30, 1930 the market fell to 8, 13% of its previous high unemployment rate. It's really bad. I was there in the White House when Nixon put in wage and price controls, when he did the 10% import surcharge, when he excluded foreign made capital with a job development credit. I was there. I watched the country go to hell in a hands basket. These president guys don't know straight up from second. They're really bad and no lesson to be learned from the second kick of a mule. And so when I hear a president talking about using trade, I'm scared. He called me. Now this is a true story. He called me I think in 2019 at home. It was in the evening early. I had, had not had my first bourbon yet but I was preparing I Maker's Mark a little bit. Oh, I love it.

[Host (Economic Analyst)]

And he said, arthur, I want to.

[Arthur Laffer]

Talk to you about trade. I'd love to sir. He said, you know, I'm a free.

[Host (Economic Analyst)]

Trader and you know, basically I've known.

[Arthur Laffer]

Him for a long time. Not well. I've known him, but not well. I'd never sat down chatted with him alone. And you know, he ran an international company and I believed him always to be a free trader. I don't know of any CEO of a big company that's not a free trader. Fred Smith, all the rest of them are all free traders. And I then said, in addition, anyone who imports two foreign wives has to be a free trader. He didn't giggle, by the way, Eric. And what he said to me was the following.

[Host (Economic Analyst)]

He said, you know, if you look.

[Arthur Laffer]

At the major countries in the world, the US is the freest trade big country. Now maybe you get the Isle of Man, you maybe get Jersey, Guernsey and Sark or Monaco or maybe Hong Kong is freer trade than we are, but we are a really free trade. It all came about from World War II. At the end of World War II, we granted all of these combatants, both hostiles and friendlies, the right to use protectionist trade legislation to develop their industry, infant industries. We allowed them to do that, but.

[Host (Economic Analyst)]

They never gave it back.

[Arthur Laffer]

And as they grew and finally became big, they have all these tariffs against America. We have very little against them. That's what's called reciprocity. He said. There's also another thing that is there too, as well, which is called leverage. When you look at these countries, these countries, big countries with large markets, have a lot of leverage over little ones because they don't bear the gains. They don't bear the loss of the gains from trade nearly as much. The other. The point here is that everyone's hurt in a trade war. Everyone is. No one wins in the trade war.

[Host (Economic Analyst)]

But they don't all lose equal amounts.

[Arthur Laffer]

And little countries, especially little relative to the US Lose more than we do. So it gives us a leverage factor on them.

[Host (Economic Analyst)]

The last thing is today it's flexible. You know, back in the days of.

[Arthur Laffer]

The Smoot Hawley Tariff, you had to pass legislation. It took you two, three years to get the coalition. Finally it passed it there. It takes equally as long to undo it. It's just a very cumbersome, inflexible thing. Today with executive orders, he can raise.

[Host (Economic Analyst)]

A tariff on you today, cut a.

[Arthur Laffer]

Tariff on me tomorrow, you can get a tantrum and put a tariff on Ford in Canada, that guy who runs Ontario, and then put, drop it the next week because he gets cool.

[Host (Economic Analyst)]

It's flexible. So reciprocity, leverage and flexibility are new.

[Arthur Laffer]

Features of the trade system. What he tried to describe to me was these three features gives him the ability to negotiate other countries to lower their tariff barriers. Here he said, I'm going to scare the bejabers out of these people, get them to come to the table to negotiate free or trade deals with them. That's what he said to me. Literally. I'm a free trader and I've watched what he's done, and when I've seen what he's done, he has done exactly that. He uses international trade as a. As a negotiating tool to achieve all sorts of global good objectives in the system. So that's where I am on Trump on trade.

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[Host (Impact Theory - Tom Bilyeu)]

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[Host (Impact Theory - Tom Bilyeu)]

What's the metric that you look at to decide whether it's net effective or net problematic?

[Arthur Laffer]

What the final results I expect to.

[Host (Impact Theory - Tom Bilyeu)]

Be as of when, like how long are you going to give this?

[Host (Economic Analyst)]

But there is no moment, you know, which with Trump, it's like a Calistoga.

[Arthur Laffer]

Or Conestoga wagon coming down a mountain with rocks, etc. With no driver. You know it's going to be bumpy bump. If you think the harmony is going to be achieved next week, think again.

[Host (Economic Analyst)]

It's just going to be a new.

[Arthur Laffer]

Issue, a new bang thing. He keeps disrupting, he negotiates. He is a change agent all the time and you don't need to change agent forever. But when this dust settles and the smoke clears, I think we're going to have a much freer trade world, a much more peaceful world. I think he's going to solve the Ukraine, Russian situation. I think he's going to solve the China, Taiwan situation. I think he's gone long distance on solving the Gaza, Israel type of situation, Hamas. I think he's going to do all these other ones and I'm watching what he's doing and how he's doing it and every day, in every way, I'm getting a little bit more optimistic on how he uses these tools. He is a CEO. He is not a pollster in charge. He's not a other thing. He takes these tools and negotiates and brings them to achieve really good results is where I come out on trade with Trump. That's now, I think, in three, five years. And I'm sorry, I'm 85 years old, because you're probably 27 or something like that. I don't know how old you are.

[Host (Impact Theory - Tom Bilyeu)]

26.

[Arthur Laffer]

But yeah, okay, 26.

[Host (Economic Analyst)]

All right.

[Arthur Laffer]

You're going to live a wrong time and you can flip me off 10 years from now and I may not be around, but I'm going to be around. But I mean, the dream is that we're honing in on the horizon effect, which is a freer trade, more peaceful world. The way Reagan left us after nafta. I think Trump is going to leave us with much lower tax rates. He's going to get that tax rate below 28%. He's going to get the corporate rate. I would guess 15. 15 on all these. He's just pumping all the time, moving us in that direction. Bing bang on the rocks and everything in that wagon. But I am really excited. But it's the horizon effect I look.

[Host (Economic Analyst)]

At and the same one I did with Reagan. Remember, we didn't get the 28% tax rate until 1986. I mean, he had been in office five plus years before we got that. No, we passed that bill 97 to.

[Arthur Laffer]

3, which is amazing. We got every lived Democrat to vote for our bill to cut the rate down to 28%, to raise the lowest rate to 15.

[Host (Economic Analyst)]

I mean, how did Reagan do that? He did it by just working his.

[Arthur Laffer]

Tush off all the. Hi there.

[Host (Impact Theory - Tom Bilyeu)]

Hello.

[Arthur Laffer]

Hello.

[Host (Economic Analyst)]

But did he though.

[Host (Impact Theory - Tom Bilyeu)]

Or was it that he actually was able to deliver tangible prosperity? Because my concern with Trump is that what we're seeing is somebody who talks a Reagan game but really is erratic and that sort of.

[Arthur Laffer]

It's.

[Host (Impact Theory - Tom Bilyeu)]

I'm all over the map. I'm using this as a weapon and I buy into the way that you describe it. But in terms of how it's playing out in reality, it. The tariffs have turned into an incredible cudgel. They've generated billions of dollars, maybe even hundreds of billions of dollars so far.

[Arthur Laffer]

Well, you enjoy a piece I'm writing in the Wall Street Journal this week that'll come out this week.

[Host (Economic Analyst)]

You'll enjoy it because it's what you.

[Arthur Laffer]

Do with that money. And.

[Host (Impact Theory - Tom Bilyeu)]

Yeah. So I'll be very eager to hear if you've got anything you want to tease us with now.

[Host (Economic Analyst)]

But I'll tease you with it right now.

[Arthur Laffer]

Yeah, right.

[Host (Economic Analyst)]

They'll say, which would you rather do? Give money to people who don't work or cut tax rates on people who do work?

[Host (Impact Theory - Tom Bilyeu)]

I would rather cut tax rates on people who do work.

[Arthur Laffer]

And then.

[Host (Impact Theory - Tom Bilyeu)]

That is not true. There's no way you believe that.

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Arthur.

[Host (Impact Theory - Tom Bilyeu)]

You know better than that. There are people that are angry right now. There is a cross. A cross world study. Hold on, you've got to hear this.

[Host (Economic Analyst)]

I'm not going to do a poll. But you go Arthur number.

[Host (Impact Theory - Tom Bilyeu)]

That's if this. You know enough people.

[Host (Economic Analyst)]

When you say Arthur.

[Arthur Laffer]

Malaya always yells at me when I talk to me.

[Host (Economic Analyst)]

Professor, professor, sorry. I said look at. Remember, I'm on your side.

[Arthur Laffer]

Am I?

[Host (Economic Analyst)]

I'm just pushing you a little bit, but I'm not.

[Host (Impact Theory - Tom Bilyeu)]

Same here.

[Host (Economic Analyst)]

But I know I've got people.

[Host (Impact Theory - Tom Bilyeu)]

If. If you map socialists as people that want to help the poor, you will be eternally confused. If you map Them as people that want to hurt the rich, they will suddenly make all the sense in the world.

[Host (Economic Analyst)]

Exactly. You're right.

[Host (Impact Theory - Tom Bilyeu)]

But that means they don't want to vote for things that are going to help the wealthy. They don't want to vote for tax cuts for people that are making money. They want to get more money so that they can give it to the people who are starting something.

[Host (Economic Analyst)]

When you started, you said the politicians.

[Arthur Laffer]

All they care about is contain many maintaining power.

[HomeServe Advertiser]

Mm.

[Host (Economic Analyst)]

Now let's take a look at what happened when Reagan cut tax rates. He didn't give it out in handouts. Reagan didn't do that. He cut tax rates. He cut the Highest rate from 70% to 28%. That's not chop liver guy. He 46 to 34. He got rid of the capital gains tax was way.

[Host (Impact Theory - Tom Bilyeu)]

Didn't you say it was 12% GDP growth?

[Arthur Laffer]

Yeah.

[Host (Economic Analyst)]

And at 12% in 18 months we grew at 18.

[Host (Impact Theory - Tom Bilyeu)]

Trump is not giving us that.

[Host (Economic Analyst)]

No, but he is. It's just starting. Reagan was able to do that because he caused a recession depression in first two years and almost all of that was just bounce back in first part of 83. Trump did not make the mistake of phasing in tax cuts. He didn't make that mistake. So therefore you're not going to get the huge bounce. But those growth rates right now are 3 plus percent, 4% and I'm telling you they're going to come in 4 or 5%. You're going to get real serious growth. And when that stuff starts hitting, then you're going to start seeing people dance on the streets, you know, tussles and tousles all over Baton Rouge and all this stuff. It's going to be all, it's going to be a party time in the.

[Arthur Laffer]

US for a while. It'll be the 20s.

[Host (Impact Theory - Tom Bilyeu)]

I'm all right. So you really think that we're, we're going to see that kind of tangible growth for the average.

[Host (Economic Analyst)]

Not, not 12% in, in 18 months.

[Arthur Laffer]

Yeah.

[Host (Impact Theory - Tom Bilyeu)]

No, you were clear.

[Host (Economic Analyst)]

Four or five, 6%. The bounce back's not going to occur. But the huge rest of the Reagan period was huge too. We won the election in 84 with 49 states. I told you how I was on the executive committee of the Reagan Bush Finance Committee, which is fairly cool.

[Arthur Laffer]

I was the only poor person on it. All the rest were billionaires. And I worked with Reagan really closely. I knew Reagan very well. He come over the house for dinner. I've known him forever and ever. My godfather was his best Friend, I've always gotten my positions in life through privilege, not through earning them. And I love it. For getting privilege is much more fun than actually having to do the work. And you look at what happened with Reagan and you saw what Reagan could have won. President of the world.

[Host (Economic Analyst)]

Mondale was a great guy, but don't run against God. You're going to get hammered. We even were able to get that silly guy, George Herbert Walker Bush, elected in 88 because of the Reagan coattails. What a loser he was.

[Arthur Laffer]

I mean, Trump is right on that trail there. Not as dramatic, but the down wasn't nearly as dramatic either. When he came in, it wasn't a 12% unemployment rate. Reagan had to go up to well over 10%, I think. So I am very much in the camp that when these are the smoke clears and the dust settles there, you're going to see a very bullish economy. You're going to see a stable currency. And it may not be the dollar as we know it. It may be some tether dollar or something like that. He's going to do the inflation that the people he's going to point to, the Fed, are going to be really good, good price rule. People like Paul Volcker.

[Host (Economic Analyst)]

I mean, you know, all these things.

[Arthur Laffer]

Are coming together in a very cool way.

[Host (Economic Analyst)]

And, you know, I'm amazed at the.

[Arthur Laffer]

Guy given what he's gone through.

[Host (Economic Analyst)]

But, you know, he, he doesn't ask.

[Arthur Laffer]

His staff, what should I do?

[Host (Economic Analyst)]

He tells his staff what he's going.

[Arthur Laffer]

To do and what they have to do to stay keep their jobs.

[Host (Economic Analyst)]

And that's the way he should be.

[Arthur Laffer]

He's not a pollster in general. He's just not. He doesn't look at those polls, you know, if he did scare the hell out of himself. But he doesn't. And he's just doing the right thing.

[Host (Impact Theory - Tom Bilyeu)]

Talk to me about the Fed. I want to know what's the right thing there.

[Host (Economic Analyst)]

The right thing you do is use.

[Arthur Laffer]

A price rule, which I went back and what we did Prior to 1913, we defined a dollar, and what you had is the supply of money adjusted to the price level. You know, that's what you did back before that, and it did perfectly. What you need is a price rule. The way Volcker did it was he looked at spot commodity prices, and if they were rising too rapidly, he would sell bonds in the open market, take money out of the system, reduce the Fed's balance sheet, and then if it was going down too fast, he would do just the opposite and expand the Fed's balance sheet. And sooner or later if you stabilize spot commodity prices, the price level stabilizes right along the way. Exactly. What we did from 1776 to 1913 was a price rule. It happened to be gold, gold and silver from 1776 to 1913 which worked really well. This time you can just use the CPI or something else. That's just what Volcker did. And you know when Volcker did it.

[Host (Economic Analyst)]

The inflation rates, I mean I told.

[Arthur Laffer]

You it was 21.5% prime double digit mortgages were 15%.

[Host (Economic Analyst)]

He brought it down to way down. I mean if you just look at it, the inflation just collapsed. And that's what I think the Fed.

[Arthur Laffer]

People are being looked at in terms of doing that and structurally reforming the entire Federal Reserve System. There's no need to have 400 PhDs of Larry Summers at the Fed being employed there. We don't need 400 PhD economists at the Fed. Believe me when I tell you that these people should try to get. There's been huge creep in the functions of the Fed and it's been ruining the system. We need to really structurally change it. And I think that's what he's going to do.

[Host (Impact Theory - Tom Bilyeu)]

Given that we are you, you should.

[Arthur Laffer]

Be very excited by this.

[Host (Impact Theory - Tom Bilyeu)]

That's what they're going to do.

[Arthur Laffer]

I think they're going to do that. Yes. I mean I'm, look, I'm great at forecasting the past. I'm a lot less good at forecasting the future. But I have no choice here. I have to and I think that's what's going to happen. The next Fed term is going to re rock and roll and shake the foundations of the Fed and okay, that's very happy.

[Host (Impact Theory - Tom Bilyeu)]

That is the way that you describe it in terms of effectively steering by price is interesting. I'm going to set that aside for now because I don't. My intuition is that's not where we end up. So when I look at the. We have fiscal dominance so the government spending and debt obligation is so massive we can't raise rates and we are going to have to print money because we don't have have. Trump is not interested in balancing the budget. So you've got. We know we're going to be running hot right now. We're 2 trillion roughly a year. So that's going to have to be printed to make up for that. And given that and he's screaming for Jerome Powell to lower rates, which is from where I'm sitting, absolute insanity that is going to flood the market with even cheaper money. You're going to get bubbles. I think we're already in a massive AI bubble and I think that that's only going to get worse if we lower rates. So that given that that's what Trump is signaling, what is it that makes you think instead of doing that we're going to get a Volcker style?

[Arthur Laffer]

Not now. I'm going to use inside information with you, if you'll forgive me. I've known Trump for a long time and you know, he's been very successful in many, many ways. Comes from there and not to that you've got to take Trump seriously, but not literally. And I think you're taking him literally when you sit there and say, right, you know, what Trump does is he is on all sorts of sides of all issues, but he uses the chaos and the mayhem to be able to get things through and to get them done. When I look at what Trump's plan, when I look at what he's going to do is he wants lower inflation. He wants inflation to be effectively zero. Does he want the real return on capital to be zero?

[Host (Economic Analyst)]

No.

[Arthur Laffer]

I mean when you look at, let's say the end of Clinton, when the 10 year was the yielding 4 plus percent and it's healing 4 plus percent right now, all right, the composition of our 4 plus percent right now is probably 2.5% inflation. And then the real yield, the TIPS yield is probably one and a half, something like that. When you add to Clinton, it was just the reverse. What you want to do is you want to have a very high real return on capital, which is the tip shield. And when you have a very lower expected rate of inflation, those two rates always move in the opposite direction. And I think what we need to have is a fed that stabilizes the value of the dollar so that a price level, now a dollar bill, is worth today what it will be worth next year, five years from now, 100 years from now. We need a monetary system like the gold standard was from 1776 to 1913. That's what we need. And I think that's the direction we're going to go. When I look at the lessons of.

[Host (Impact Theory - Tom Bilyeu)]

How are they going to do that though, are they going to repeg to gold?

[Host (Economic Analyst)]

Well, no, I think they're going to.

[Arthur Laffer]

Use a spot commodity price index or they may use some of the cryptos.

[Host (Economic Analyst)]

I mean they're talking about all sorts.

[Arthur Laffer]

Of things now, just conversations. I'm not saying this is or not, I don't know.

[Host (Economic Analyst)]

But there are all sorts of things of a crypto dollar, where you have a tether for a dollar, where, you know, you guarantee it's stable. You know, a stable coin. You can design a currency today with crypto to guarantee it's stable in value. You can do it and you can do it with complete confidence of its, of its secrecy. Because if you read Singh's book on codes, you can make codes that cannot be broken. And the blockchain is a way of guaranteeing that you don't have the double payment problem. I mean, all of these things are there and available now that have never been around before. I mean, the dollar bill was an.

[Arthur Laffer]

Amazing creation back in 19, what, 13, whatever it was.

[Host (Economic Analyst)]

And we're now at one of those right away. And I just see market forces bringing that in. And any government that doesn't take advantage of that, stupid. And if this government doesn't do it.

[Arthur Laffer]

Which I think it will do it. You've got places like Buchales, El Salvador.

[Host (Economic Analyst)]

You'Ve got places like Malaise, Argentina. You've got all these other places in the world that are all doing it. And you know, we can't fight this, this thing of change, of getting a stable currency. You just can't. And it's like the dollarization of the world. Back in the day when the dollar meant something, we had dollarization, but we don't now. Now they can cure the dollar. They can, or they can allow us alternatives to come in and provide an alternative currency that's stable in value.

[Arthur Laffer]

I love that these cryptos are coming in and challenging the dollar. I just love it.

[Host (Impact Theory - Tom Bilyeu)]

Taking a short break. But there's more impact theory after. Stay tuned.

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Now let's get back to it.

[Host (Impact Theory - Tom Bilyeu)]

And when you say take advantage, are you talking about building a Bitcoin reserve?

[Host (Economic Analyst)]

Well, I don't even think you need a reserve. No, I just think bitcoin can do it itself. Now Bitcoin does not.

[Arthur Laffer]

Bitcoin is a fixed quantity, or at least supposedly a Fixed quantity of something.

[Host (Economic Analyst)]

When you have a fixed quantity, the prices vary.

[Arthur Laffer]

So Bitcoin serves beautifully as a store of value. That's true.

[Host (Economic Analyst)]

But when you see something like tether.

[Arthur Laffer]

And some of these other ones, they.

[Host (Economic Analyst)]

Have a fixed value and the quantities vary. You have a price primal and a quantity dual. With Bitcoin you have the quantity is fixed and the prices move.

[Arthur Laffer]

With a stablecoin you have the quantities.

[Host (Economic Analyst)]

Move and the price is fixed. And what we need is a stablecoin for transactions purposes. And in that regard we don't need.

[Arthur Laffer]

To have reserves, we don't need to do.

[Host (Economic Analyst)]

The bank of England ran the gold standard for two centuries without having effectively.

[Arthur Laffer]

Any reserves, except for a transactions volume of that.

[Host (Economic Analyst)]

It just. You don't need it. You just let the quantity of the entity vary.

[Arthur Laffer]

And we can do that really well.

[Host (Economic Analyst)]

By making sure it's stable in terms of goods and services.

[Arthur Laffer]

The way you do that is you.

[Host (Economic Analyst)]

Can take it like tether in terms of dollars and then it have it.

[Arthur Laffer]

Pay interest on that or allow the.

[Host (Economic Analyst)]

Currency to appreciate by the amount of inflation. And it ain't rocket surgery. It can really be done quite simply. You and I could sit here, I'll.

[Arthur Laffer]

Do the programming, you do the computer stuff. We can make that program and just guarantee that we have a currency that is stable in terms of goods and services in prices, forever and ever. Amen.

[Host (Economic Analyst)]

Why not now? I mean, and they're doing it. It's not back 15 years ago, there was none of this. Now it's all over the place. There are 55 stable coins. And you want to have the competition.

[Arthur Laffer]

Amongst these alternative cryptos.

[Host (Economic Analyst)]

I mean, you really do, because it's great. One does something, then another one, and they compete, get the. The consumer gains all the gains from.

[Arthur Laffer]

Competing crypto stablecoins and crypto value coins. So you see where I'm coming from and you understand what I'm talking about.

[Host (Impact Theory - Tom Bilyeu)]

I do.

[Arthur Laffer]

And I just don't know the math on this stuff.

[Host (Economic Analyst)]

I mean, you can make it completely secure and you can make it take care of the double payment problem.

[Arthur Laffer]

Bingo.

[Host (Economic Analyst)]

Blockchain is incredible. I mean, and they can do. Now blockchain trades 43,000 a second and they're going up to 200,000 a second. I mean, it's a. You remember when you have to go.

[Arthur Laffer]

To the store and put your card in that machine and you wait, don't pull it out yet.

[Host (Impact Theory - Tom Bilyeu)]

Beep.

[Host (Economic Analyst)]

Okay, you can pull it out. That's just clearing it to make sure.

[Arthur Laffer]

You take care of the double payment.

[Host (Economic Analyst)]

You Write a check. Your bank doesn't let you use it.

[Arthur Laffer]

Until they clear that check with the other guy's account. That'd take five days.

[Host (Economic Analyst)]

All of that's gone. All of those transactions are gone. This is a period of incredible efficiency gains in the marketplace and transactions. And I watch this happening before my very eyes and I'm just blown away. I'm 85, but I can't believe that. I mean, the world is really.

[Arthur Laffer]

I'm just ecstatic by what the world is creating.

[Host (Economic Analyst)]

Ah, well, okay. I go against your pessimism, but I.

[Arthur Laffer]

Do like your logic.

[Host (Economic Analyst)]

Your logic is much better than your.

[Arthur Laffer]

Feelings, by the way.

[Host (Economic Analyst)]

Your logic is super high.

[Arthur Laffer]

You.

[Host (Economic Analyst)]

You just want to be pessimistic. Did you beat your little sister or something when you were a kid or.

[Arthur Laffer]

I'm just joking with you.

[HomeServe Advertiser]

The.

[Host (Impact Theory - Tom Bilyeu)]

The funny. I am a extremely optimistic person by nature, but I have to ground. I don't trust my emotions, so I always ground it in logic. And the problem is that when I think up from first principles, I take the exact opposite of you, which is that the math does not justify your optimism. I've tried to anchor us in terms of what the difference is in the base assumption. So you think everybody will just migrate to crypto? I do not. Because they didn't migrate to assets. Crypto right now is best understood as an asset. Now the reason that I say that.

[Host (Economic Analyst)]

No, that's, that's only.

[Host (Impact Theory - Tom Bilyeu)]

I know you're gonna bear with me. The reason that I say that is because the. Their life is not set up to make that an obvious thing that they understand from the time that they're born. And so now they have to learn about it and they have to migrate themselves over to that system. And I'm saying that they're busy trying to make ends meet, trying to fall in love, you know, trying to keep their head above water. And the reality is that they.

[Host (Economic Analyst)]

That's not, that's not a first principles. That is a second principles.

[Arthur Laffer]

You believe that people are emotionally incapable of doing the right thing.

[Host (Impact Theory - Tom Bilyeu)]

That literally is first principles. The human mind works in a certain way. I think that you're falling prey to man as economic animal.

[Arthur Laffer]

And we are not Darwin. I'm the Darwin of economics. I believe.

[Host (Impact Theory - Tom Bilyeu)]

Perfect then. Then you will agree wholeheartedly that humans are an emotional creature. First, most. We do not think through things logically. We are emotion based. So listen, the, the. There has been a study where. Well, first of all, yes, we do when people get depressed enough. But if you selectively damage the area of the brain that is responsible for generating emotion. A human being will cease to be able to make a decision. So they can tell you why you should have fish instead of beef. And then they won't be able to, when you sit them down say, do you want fish or beef? They won't be able to decide. We use emotions as the thing that propels us in a direction. So given that anyway we, we could lose a lot of time there. But ten toes down on that's first principles.

[Arthur Laffer]

Before we started, I said I had a story for you on first principles and let me tell you my story on emotional people. I looked and I asked myself, where's the most socialist state in the nation? And I came to the conclusion, has to be Massachusetts. And I asked my what's the, what's the most socialist city in that state? Cambridge. What's the most socialist institution there? Harvard. What's the most socialist moment there? What department there? Sociology. And what's the most socialist moment?

[Host (Economic Analyst)]

And it's in the front lawn of.

[Arthur Laffer]

The Sociology department at Harvard University, Cambridge, Massachusetts. When Bernie Sanders is giving a speech. Elizabeth Warren is hoo, hoo, hoo in the front row. Everyone's going along this stuff. So what I did, I went to my house, I got some pillowcases and I packed them full of $20 bills, tied a little dot. I went over here to Nashville, bna the airport, flew to Logan, I got off there, I got an Uber, took me right over to Cambridge. I went right to Harvard University, I went right to the Sociology department, I went to that lawn where Bernie Sanders was giving his speech and I got one of those fold out chairs. All these people were tearing off their clothes, screaming and hollering, redistrib, reading, a tax rate, all this run, oh, it's Bernie's hair was flopping back and forth. And so I stood up on this little chair, there's a slight wind blowing, and I opened up the pillowcases full of $20. I threw them all and they floated over the crown in there. Within 20 seconds, every one of those $20 bills was picked up.

[Host (Economic Analyst)]

Every single one.

[Arthur Laffer]

They are as capitalist incentive based as anyone. All of their emotions went to the wind when one of them has a girlfriend and the other one wants to share that girlfriend with the first one.

[Host (Economic Analyst)]

They're like all the rest of us.

[Arthur Laffer]

They live on those incentives. They just like the emotional crap of this. But when push comes to shove, we can manipulate them with perfectly good economics all day long and twice on Sunday. I love that story, by the way. It's hypocrisy, by the way. Just isn't it fun?

[Host (Impact Theory - Tom Bilyeu)]

Obviously it is fun. So again, any theory has to describe the world that I actually see. And the world that I actually see is a UK that's fallen on its face, is Argentina that has struggled for over 100 years because they actually embrace socialist policies. Is a world where you had the USSR but it fell, only to be replaced with Putin. You've got China, that Mao, which God. I want to ask you about Mao. Since your time there in the 70s, Mao killed tens of millions of people. These things actually happen. They actually take control of people.

[HomeServe Advertiser]

You're right.

[Arthur Laffer]

Are we Mao, are we China?

[Host (Impact Theory - Tom Bilyeu)]

The thing. Well, we're getting there.

[Host (Economic Analyst)]

Well, I don't think so. That's where we do disagree.

[Arthur Laffer]

I think that's the real disagreement.

[Host (Impact Theory - Tom Bilyeu)]

Really fast. Let me just put a bow on that and then we'll debate that. So the bow on that is that America is historically from just a number of years that humans have existed. It's a total anomaly from the fact that every empire before it has collapsed. It's literally right on cue, we're now marching towards 130% debt to GDP. So you, you look at all of this stuff and we fit the historical patterns. No one before us has ever escaped and kept doing the right thing. Everybody does debt and money printing until they collapse. Literally everybody. More places have lived under tyranny than have lived under a thriving democracy. So it's like you put it all together and that tells me that humans are a certain way. And from where I'm sitting, we have an opportunity to get out of this death spiral. But we will not get out of this death spiral by going, ah, this ain't. It's all going to work itself out. So I'm like, no, this isn't going to work itself out on accident. We are going to have to really get into this. Now the reason that I say that.

[Host (Economic Analyst)]

That'S what I do. I'm an activist, I'm a policy shark. I'm not someone who sits back and waves my hands and oh, don't worry, it'll take care of itself. I'm in there every day fighting Prop 13.

[Arthur Laffer]

All the taxpayers cuts, all those were my babies. I worked on them to get them to go there. I am an active change agent. So I'm not someone who just sits.

[Host (Impact Theory - Tom Bilyeu)]

Back and goes, now that is for sure inarguable. Now I will say, I think we're.

[Arthur Laffer]

Going to get it changed in the right direction. That's my thing. I'm working on it day and night. Property tax limitations in almost every state in the nation.

[Host (Economic Analyst)]

Getting that tax rate down to 15% federal tax.

[Arthur Laffer]

And I think I'm going to get.

[Host (Economic Analyst)]

That, you know, of 15% corporate tax.

[Arthur Laffer]

I think I'm going to get that. I'd love to get. I mean, I think we're going to get a lot of these.

[Host (Economic Analyst)]

Trump gave me credit for price healthcare, price transparency.

[Arthur Laffer]

That's one I really were. I was chairman of the board of the Centennial over here.

[Host (Economic Analyst)]

I saw how crappy the system was.

[Arthur Laffer]

So I'm an activist and I'm a revolutionary. I'm just not a commie.

[Host (Economic Analyst)]

I really believe in using incentives. I think the commies are cute little stupid people.

[Arthur Laffer]

People.

[Host (Economic Analyst)]

And they don't know. They don't know what they're doing. And they act in one way like the picking up the 20 bills and protecting their girlfriends and shooting this. But their behavior, their. Their speeches are just silly. And I listened to aoc. I listened to this one, you know, there. And Bernie Sanders, I dare him to debate me. I dare him. I dare sayas or piketty.

[Arthur Laffer]

I've asked.

[Host (Economic Analyst)]

Oh, come on, let's do it.

[Arthur Laffer]

Manuimano.

[Host (Economic Analyst)]

No, let's go through it.

[Arthur Laffer]

They won't. And for obvious reasons, they won't.

[Host (Economic Analyst)]

They'll lose their shirts. I've had about five debates on income inequality and each one I've won in the other side concedes.

[Arthur Laffer]

Duh.

[Host (Impact Theory - Tom Bilyeu)]

I mean, that's awesome. We definitely need more of that.

[Host (Economic Analyst)]

It's just common sense. And then I try to go in there to policies and you see how.

[Arthur Laffer]

I explained it with regard to a.

[Host (Economic Analyst)]

Check versus lowering tax rates. You've seen that like, you know, and.

[Arthur Laffer]

The numbers really do bear me out.

[Host (Economic Analyst)]

And you know, I've been pretty successful presidents, pretty successful Argentina with Chile, with all those little alls my students down in Chile there. You know, those are the things I try to do.

[Arthur Laffer]

And I think we're winning on this one. And I think we're going to. You're going to be really rich. You're going to be really happy.

[Host (Economic Analyst)]

Do you have kids?

[Host (Impact Theory - Tom Bilyeu)]

I do not.

[Host (Economic Analyst)]

Oh, see, I've got six kids.

[Arthur Laffer]

So you can tell what an optimist I am.

[Host (Impact Theory - Tom Bilyeu)]

And what, 14 grandkids, two great grandkids.

[Host (Economic Analyst)]

Something like that, or great grandkids.

[Arthur Laffer]

Yes, you.

[Host (Impact Theory - Tom Bilyeu)]

It's amazing, man.

[Arthur Laffer]

My diary. Haven't you.

[Sponsor/Ad Voice]

Of course, of course.

[Host (Economic Analyst)]

But isn't it just.

[Arthur Laffer]

I mean, I've just never been happier.

[Host (Impact Theory - Tom Bilyeu)]

That's amazing. And I will say that comes Across. And Lord knows I hope that I am as energetic and sharp as you. At 85, it is thrilling to see somebody with your experience.

[Host (Economic Analyst)]

Dick Cheney, one of my dearest friends, classmate of mine at Yale, Dave Gergen.

[Arthur Laffer]

Just by they both co croaked recently. I mean, get all these people, Lieberman.

[Host (Economic Analyst)]

All, all, all of my classmates at Yale and all. If I want to talk with them now, I have to use a Ouija board. You know, it's, I mean.

[Arthur Laffer]

But I'm going to live a lot longer and I'm going to enjoy them. And we're going to have a thing there where you're going to say, you know, Dr. Laffer, you were right on those issues.

[Host (Impact Theory - Tom Bilyeu)]

Lord knows I hope so. Speaking of issues that I want to see, who is mapping this correctly. So I think that we are starting to make choices. Much like China, we're taking positions in companies. I think that is a very big mistake. What's your read on the intel situation?

[Host (Economic Analyst)]

And we did.

[Arthur Laffer]

We took it on. What was the one that Obiden did? That one, that sun, that sunlight shine one. What was it? Solyndra. He did it in Solyndra. The big government buyout of that Intel's just a lousy thing that. They did it in Columbus, Ohio. They did all the buyouts and everything. They gave them so much money. The government did Ohio as well as federal. All of them did intel and they're a loser. They fell behind and they became dependent on that. I don't like the government taking positions in companies. It's very hard for them not to, given the size. I would love to shrink government back down to where it was in 1910. That's me, you know, 1910 the federal government was about 3% of GDP, you know, and at that time we became the preeminent economic force on planet Earth with 3% of GDP. It's a little higher than that today. I thought I'd mention that to you. Just I know you aren't aware, but the government's got a lot bigger. But I think we can shrink this.

[Host (Economic Analyst)]

Quite substantially now on the state stuff.

[Arthur Laffer]

I moved to Tennessee from California because it's the lowest tax state in the nation since I've been here. We got rid of the death tax and gift tax. We got rid of the unearned income tax. I'm trying to get a property tax limitation like Prop 13. You know what I did there in California with 13. I'm going now. Working with Ohio. I'm working with Missouri. I'm working with all these states. Non Stop. I'm getting good policies in. I think think we're going to get government to be much smaller 15, 20 years from now than it is today. That's me now. I'm wrong a lot. I never try to be wrong. I really, I am wrong a lot. You could just ask my first wife if you want to find out how bad I can be.

[Host (Economic Analyst)]

But I really think I'm not wrong.

[Arthur Laffer]

And I really think we're at a big change in the US on bringing in free market economics back in. Your problems that you describe are true, but you know, the stock market when I told you in 1973 was by law you had to pay 34 cents per share traded. It's now zero. Airline decontrol was amazing. Truck decontrol was amazing. Energy decontrol has been amazing. You should see the stuff that have happened there.

[Host (Economic Analyst)]

You know, it used to be in America that you couldn't sell a product that was manufactured except that these manufacturers suggested retail price discount houses were elite.

[Arthur Laffer]

Eagle, we then got rid of Hubert Humphrey and we've now got discount houses.

[Host (Economic Analyst)]

All the hell all over the place. We are moving in the right direction and we're solving social issues with it. The bald eagle is back.

[Arthur Laffer]

My hometown, Cleveland, Ohio, Youngstown in Cleveland, two crappiest places.

[Host (Economic Analyst)]

If God had come back to earth.

[Arthur Laffer]

In the 1950s and Jesus come back to earth and had made the mistake of landing in Cleveland to prove that he in fact were the Christ, he wouldn't have to walk on the water. Hell, anyone could walk on the water.

[Host (Economic Analyst)]

He'd have to sink in the the water back then. You know, today the water's clean, Cuyahoga River's clean, Lake Erie's got the fish. I mean it's amazing the progress we're making. LA 3 stage smoggles. You couldn't go to school. People were there, all gone. The air in the Los Angeles basin is massively improved. I mean I could take you through all these things. We are still have lots of problems, as you point out very correctly, you're right. But the black footed ferret is hopping around. You know, all these.

[Arthur Laffer]

We are making enormous progress.

[Host (Economic Analyst)]

If you look at the air quality.

[Arthur Laffer]

In this planet, it is improving enormously without those stupid goofballs in the what is the something cord there, the quality Air Accord or whatever those people are.

[Host (Economic Analyst)]

You know, we're doing it, we're getting.

[Arthur Laffer]

There and the markets are adjusting and really providing this stuff. And I'm just very excited about the future as you can tell. But I think we're solving lots of problems and we are have still a lot to go. I mean debt is way too high. I will concede that to you here. I don't think it's rogue off high.

[Host (Economic Analyst)]

2018 of total net wealth is too.

[Arthur Laffer]

High, but it's not. I'm going to kill my country. And especially when you see what's happening with the currencies and all that stuff. Well, you've heard me lecture there. I'm just trying to fuse you with some of that lithium so that you too can see the star spangled banners and happiness and, and dancing girls and lights and shining and.

[Host (Impact Theory - Tom Bilyeu)]

You don't have.

[Arthur Laffer]

To you die to have heaven. You could have it here.

[Host (Impact Theory - Tom Bilyeu)]

Awesome statement. Let me ask in terms of what you see going on in the stock market today, what do you make of that? To me this looks like a liquidity, I'll say problem where assets are going sky high because debt is so cheap. We've printed so much money we people are trying to escape inflation. And so when I look at you know, a company like Xai raising money at like 150x my heart skips a beat because we're so detached from fundamentals.

[Sponsor/Ad Voice]

What do you see?

[Arthur Laffer]

Thank you. This is the best question of all. What, what we have seen happening over the last 20 years or so is you've seen private equity equity replacing stock market equity. And for good reason. It's the regulations, it's all the taxes, all the treatment, everything like that. So the stock market is a smaller share of total wealth than it has been historically if you look at it. And yet all of a sudden the.

[Host (Economic Analyst)]

Stock market starts really going way up. I think I see what the stock market sees. I think I see a very, very.

[Arthur Laffer]

A boisterous, wonderful future. And the stock market is reflecting its expectations of higher profits and greater prosperity in the future.

[Host (Economic Analyst)]

And that, you know, stock market doesn't tell you what has been, it tells.

[Arthur Laffer]

You what it expects to be.

[Host (Economic Analyst)]

And I think the stock market is expecting the type of world I'm describing to you.

[Arthur Laffer]

And so therefore I look at the stock market as reflecting what my view of the world is rather than. And telling me a bigger problem is here.

[Host (Impact Theory - Tom Bilyeu)]

So when you look at the stock market, you don't think business fundamentals, that's not really relevant. This is more of a sentiment. Well, so we've got whatever seven to 10 stocks that produce the entire performance and those are detached from business fundamentals, certainly from anything historic, not troubling.

[Arthur Laffer]

That's just you're using historical numbers rather than Future numbers.

[Host (Economic Analyst)]

And that's what I think the stock.

[Arthur Laffer]

If you knew that there was going to be a huge boom in the economy next year and that profits were going to increase tenfold, would you sell all your stocks now or would you buy more?

[Host (Impact Theory - Tom Bilyeu)]

I'd buy more.

[Arthur Laffer]

Thank you. I think that's what's happening now. I'm exaggerating obviously, the numbers that's sidestepping.

[Host (Impact Theory - Tom Bilyeu)]

The business fundamentals question because I agree in that scenario, metal.

[Host (Economic Analyst)]

Yeah, but you say the transactions costs.

[Arthur Laffer]

Are going to be gone. I mean when you go buy things.

[Host (Economic Analyst)]

And look at all this like the.

[Arthur Laffer]

Huge, huge change in productivity that's going to come about by, by get.

[Host (Economic Analyst)]

Replacing all of these transactions and banks and clearances and all that stuff. It's huge. By having transparency and health care prices. All of these things are going to.

[Arthur Laffer]

Be huge generators of productivity increase.

[Host (Economic Analyst)]

I think that that's me and I think the market's reflecting that.

[Host (Impact Theory - Tom Bilyeu)]

Yeah. I'll say once again, you and I agree on like the simple statements and then we take away very different conclusions. So that's all right.

[Sponsor/Ad Voice]

I agree.

[Host (Impact Theory - Tom Bilyeu)]

I, I think that AI is going to be transformative in ways that we can't even imagine.

[Host (Economic Analyst)]

Thank you. That's what I do too, for sure. In the stock market.

[Host (Impact Theory - Tom Bilyeu)]

Yeah. In, in a way that.

[Host (Economic Analyst)]

What is Nvidia? But that I was a big investor in Nvidia in the beginning and then I got scared and I sold it four years ago. How stupid is that?

[Arthur Laffer]

But at least I held it for a lot of up. And by the way, I'm also just for your viewers, I am not a guy you want to follow his market advice. If you follow my market advice, you're going to lose a lot of them.

[Host (Impact Theory - Tom Bilyeu)]

Yeah. I mean, so, Well, I, I think that probably points out something fundamental which people need to understand, which is that markets are first of all they're gambling. And second, it is people gambling based on emotion. Once you understand it's gambling based on emotion by people far more sophisticated than you, it becomes very difficult to make money. If you're trying to trade. If you're just going to buy and hold bet on sectors over the long.

[Arthur Laffer]

Run, that's all I do. And I still lose.

[Host (Impact Theory - Tom Bilyeu)]

Yeah. It all comes down to when you sell.

[Host (Economic Analyst)]

But.

[Arthur Laffer]

Well, no, well, I, I, there's no money. No, it doesn't come down to that. I start losing the day my check clears. Yeah.

[Host (Economic Analyst)]

I just keep driving.

[Arthur Laffer]

I could sell it any day and I still lose. But there is no money back guarantee with my statements about the stock market, just for the record, but I am very optimistic, as you can tell. And I am fully invested in the market. Fully, fully, fully, fully. And I love it.

[Sponsor/Ad Voice]

All right?

[Arthur Laffer]

I've got all my trust funds for my grandkids and my great grandkids and I'm just wallowing in fun.

[Host (Impact Theory - Tom Bilyeu)]

Okay? So you and I both agree that we've got a shot at the future being incredible, but it's not going to happen by accident. What should individuals do? Whether that's how they invest, how they vote.

[Host (Economic Analyst)]

Give money to good politicians and get those politicians that want to shrink government to lower tax rates, to free energy markets, decontrol the place, give them and get involved politically. People deserve the governments they get. And if you don't take care of that government, who does? Me. You know, come on, I'm working my tush off day and night to change.

[Arthur Laffer]

Government in the way you and I.

[Host (Economic Analyst)]

See the world, world, you gotta do the same thing and so do all your viewers. Get out there and get in there and get. And do the right markets. Get the good politicians in it. Get these guys out to her bed. It's not Republican, it's not Democrat, it's not liberal, it's not conservative, it's not left wing, right wing. It's just good economics. You know, I'm a Kennedy Democrat, I'm a Reagan Republican, I'm a Clinton Democrat. I'm a Trump Republican. You know, I was a Gary Hart's economist when he ran for president in 88. I was Jerry Brown's economist when he ran it in 1992. He wanted to get rid of all taxes and put in two flat rate taxes. The 13% flat tax, if you remember that. I did that with him. I think Jerry Brown was cool.

[Arthur Laffer]

I wish he'd won.

[Host (Economic Analyst)]

It's not party. Get your guys to get in there and become political activists because it's your future, it's your kids future, it's everyone's future. Get them out there. If they aren't involved in politics, they don't deserve to have good results.

[Arthur Laffer]

How's that?

[Host (Impact Theory - Tom Bilyeu)]

That was amazing. Arthur, I cannot thank you enough for coming on. I can't thank you enough for all the books that you've written. Where can people follow you?

[Arthur Laffer]

Right through you, you know, there. They could find me in the Internet. I have a thing there, but I don't. I don't even do emails. I don't know how to do emails. I have. I had a flip phone until Buchala's security people broke my flip phone. I had to get this new one. And I'm butt dialing everyone all the time. I don't know what the hell to do with this stupid thing. And so there is a thing called the Laffer center. If they want to get involved with it. 1065 Inc. It's called. And I have a firm here in Nashville, Laffer Associates, which is, but it's just small, just me and ten other people. But we do all the work we do here and we just put it on the line. And, you know, I, I have made a vow that I'd never go to work for government because once you pay a paycheck, you're an employee. And once you're an employee, you have an oath of loyalty. You know, I worked in the Nixon White House, as I mentioned to you, in 1970-72, and I found out what I don't do well, I don't work for government. Well, but, but when I'm not there, when I go in with Trump or with Reagan or with any of the others, I never took a job with anyone. I did get offered great, nice jobs.

[Host (Economic Analyst)]

But I didn't take them because I want to be independent and tell him what I think is right.

[Arthur Laffer]

I hold his confidences. You know, if he talks to me and stuff, I try not to listen to what he's going to do, but I then keep my mouth shut about it. And I, but I never operate against them in any way, shape or form.

[Host (Economic Analyst)]

But when I see my colleagues and.

[Arthur Laffer]

You know, my colleague at Yale, classmate of mine's married to Janet Yellen, I know all of them there. I know Austan Goolsbee, he has my position at the University of Chicago. I had 10 year professor there as well.

[Host (Economic Analyst)]

And I see them and these people.

[Arthur Laffer]

I mean, especially, you know, Romer, I mean, you know Romer and Jared Bernstein and all these guys, they will rebut arguments they know to be true in order to curry favors with their political benefactors. And I'm not willing to do that yet. Okay, When I go in there, I talk with him, he hears what I say. He can't fire me, he can't hire me, he can't double my pay, he can't have my pay, he can yell at me. But all of that.

[Host (Economic Analyst)]

So, you know, it's like with you, you, you know, we can have a good firm discussion, but you know, I'm.

[Arthur Laffer]

Trying to be straight with you, you know that.

[Host (Economic Analyst)]

And I'm trying to give you the best and, you know, you make the decisions that you make and present. God knows he has 10 times more.

[Arthur Laffer]

Information than I do.

[Host (Economic Analyst)]

He makes it. But all I want to do is make sure that he understands what I'm talking about, let's say in trade or deregulation or taxes, all that stuff and make sure he understands and uses that in his calculation. I'm not going to talk trash about.

[Arthur Laffer]

Him or good, I'm just going to step aside. And that's what I view my role at in this work now in state stuff I go in and do tax plans and do all that stuff and campaigns and stuff like that. Man. I was very involved in the Tax Cuts and Jobs act, as you know, in the 86 tax act. It was my paper. The complete flat tax that they use, Kemp casting as well as Bradley Gephardt with that. I really get involved in all that stuff right down then I did great, pretty. But I never take a job with a politician and I never ever, ever. Once they pay you, you're an employee. And then you gotta say nice things about your boss even when he does it wrong. I was with Nixon as George Schultz's right hand person when I was 29 years old, 30. I remember telling my mom, I said.

[Host (Economic Analyst)]

Mom won't believe it. I just wrote a speech for Nixon, mom. I wrote a speech for the President of the United States. I mean he loved the love. He only changed two words, mom. Only two words he changed. He said wherever I had is, he put is not. And wherever I put is not, he put is. But mom, it's my speech. And I learned, you know that that's.

[Arthur Laffer]

Not where I belong as in government, I belong outside giving really what I consider measured, correct based advice.

[Host (Economic Analyst)]

And then I go home, home, play.

[Arthur Laffer]

With my Great Danes and my family and my kids and all that.

[Host (Economic Analyst)]

But you follow me. It's really you get, you get, you get, you get co opted. When you buy into being a government.

[Arthur Laffer]

Official, you do and you're completely right. They want power and power and power. My job is to just blow up all this, all the positions of power until we, we get to the world that you and I really want want is a 3% of GDP. Government, state and local, 1 1/2%, 4 1/2% total. We have a low rates, broad based property tax that never exceeds 1% of market value. You have an income tax or flat tax rate, that's it. And get the hell out of the way and let the market solve the problems. Yeah, you're going to get problems. Pre markets have problems all over the place. They do, but government's even worse than free markets.

[Host (Impact Theory - Tom Bilyeu)]

When you talk about problems, ain't that the truth. Arthur, thank you so much for joining.

[Sponsor/Ad Voice]

My pleasure and I really appreciate it.

[Host (Impact Theory - Tom Bilyeu)]

Everybody at home, if you have not already, be sure to subscribe. And until next time, my friends, be legendary. Take care.

[HomeServe Advertiser]

Peace.

[Sponsor/Ad Voice]

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