Northwestern’s conservative students’ group, Young Americans for Freedom (YAF), hosted economist Arthur Laffer Tuesday evening at Swift Hall to speak on his economic work and theories.
Laffer significantly influenced American economic policy while working for President Ronald Reagan, and later, during his first and now second term, President Donald Trump. At his talk, Laffer discussed a wide range of topics from domestic issues like poverty to international issues like trade, staying consistent in his praise of both supply-side economics and Trump.
Laffer is both a follower and developer of supply-side economics, which arose after the simultaneous increases in unemployment and inflation, or “stagflation,” in the 1970s. These variables were previously assumed to be negatively correlated, bringing conventional economic wisdom into question.
Supply-side economics aims to increase the namesake national supply of goods and services by lowering taxes and deregulating markets to foster economic growth and achieve restabilization, implemented as “Reaganomics” in the 1980s.
Laffer is well known for his eponymous “Laffer Curve.” It envisions a graph of government revenue as a function of tax rate, the main takeaway of which is that there is a certain, optimum rate at which revenue is maximized.
Laffer said he was a strong supporter of free trade and that Trump’s promotions of incredibly-high tariffs “scared the living hell” out of him. He nonetheless asserted that the threat of trade wars, of which “there are no winners” and other countries would face economic losses would be enough to encourage nations to fall in line with American interests.
He similarly praised Trump’s focus on military power as a means of “strength through deterrence” and the president’s extensive regulation cutting.
McCormick junior and event organizer Caleb Nunes commented on how Laffer will work to achieve his planned initiatives under president Trump.
“I really have no idea how (Laffer) is going to react to the volatility (of Trump), I think what he cares the most about … is taxes, that’s his biggest goal — and deregulation,” Nunes said.
Laffer mentioned several historical events important to his argument for supply-side economics, including the introduction of a national income tax in 1913; the 1929 Smoot-Hawley tariff; the downsides of government spending and programs from 1964-1980; comparative advantage and transfers of wealth.
Laffer only addressed these topics at a surface level, with Weinberg sophomore and event attendee Franke Gordon asserting that, despite Laffer’s effectiveness as a speaker, his application of economic theory was of mixed quality.
Gordon said he approved of Laffer’s description of trade deficits, but saw his descriptions of comparative advantage and American historiography as less rigorous and more politicized.
“I think, at a lot of times, he misapplied economic terminology. … Some of his theorizing came off as more polemical,” Gordon said.
While Laffer came to the orthodox supply-side conclusions that wealth transfers harmed the poor by slowing down economic growth, and brought up unique ideas such as medical transparency and “enterprise zones” to encourage inner-city economic development, his speech may have been more political than economic in substance.
“The content of it left me wanting something more, especially out of someone who was a former economic advisor,” Gordon concluded.
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