President Trump on Wednesday awarded the Presidential Medal of Freedom to economist Arthur Laffer, a former top Ronald Reagan adviser whose theory of supply-side economics has long been a lightning rod for controversy.
“Few people in history have revolutionized economic theory like Arthur Laffer,” Trump said at a ceremony in the Oval Office. “I’ve heard and studied the Laffer curve for many years. A very important thing you did, Art.”
Laffer’s economic philosophy — that tax cuts will spur economic growth, which will in turn increase government revenue — has been embraced by Republicans over the years, including former president George W. Bush, former Massachusetts governor Mitt Romney and Trump.
But Laffer’s critics — Democrats and Republicans — argue that there is little evidence to support his theory, popularly known as the “Laffer curve,” and that it inflates budget deficits.
“He more than any single living person is responsible for the GOP’s cowardly betrayal of its historic commitment to fiscal rectitude,” former Reagan budget director David Stockman told NPR via email. He lambasted Laffer as “the greatest Fake Economist to ever come down the pike.”
Also criticizing Laffer’s economic approach on Wednesday was Washington Gov. Jay Inslee (D), who is running for president.
“Laffer is the last person who deserves a Medal of Freedom,” Inslee said in a tweet. “You don’t grow the economy by giving tax cuts to billionaires. We’ve blown up that GOP myth in WA. We have the fastest-growing economy because we build from the middle-out, not trickle down.”
After Republican Sam Brownback took office as Kansas governor in 2011, Laffer advised him on a far-reaching tax-cut plan that ended income taxes for 200,000 small businesses and cut rates for top earners. The plan led to a hefty budget shortfall and ended up almost costing Brownback his reelection 2014 as voters revolted over the impact on school funding, the state’s rising poverty rate and its downgraded credit rating.
In 2017, Kansas Republicans reversed most of the tax cuts, overriding Brownback’s veto.
Last month, the nonpartisan Congressional Research Service issued a report showing that the 2017 Trump federal tax cuts championed by Laffer have not led to higher economic growth. Laffer has said his policies simply need more time to bear fruit.
Together with Stephen Moore, who recently abandoned his bid for a Federal Reserve seat amid uproar over his writings about women, Laffer last year co-wrote “Trumponomics: Inside the America First Plan to Revive Our Economy.” Trump praised the book in a tweet, declaring that the authors “have really done a great job in capturing my long-held views and ideas.”
In a television interview earlier this month, Moore suggested that Trump should nominate Laffer to succeed Kevin Hassett in the White House’s top economist job.
“Well, look, I know from talking to the president that he thinks that Laffer is the best economist in the country; he would love to have Arthur,” Moore said on Fox Business. “The question is, what you and I need to do is put the pressure on Arthur Laffer to accept the job.”
Despite having served as an adviser to Trump, Laffer has occasionally parted ways with the president, particularly on trade. Laffer told Vice News that he has advised Trump against ratcheting up trade tensions, arguing that his threats against America’s trading partners could backfire.
“He’s trying to get their attention — bang! — so we really get true, free trade,” he said. “I believe. Now, does it scare me? Yes . . . I am terrified of a trade war. Protectionism is a killer. And it kills your industries that are protected, and it kills your economy.”
Laffer has also drawn criticism for an April interview on Fox News in which he blamed former president Barack Obama for the 2007-2009 recession. Obama took office in January 2009. Most experts say the financial crisis was caused by a combination of factors unrelated to Obama.
“If you’ll remember, coming into the election in 2008, when Obama started rising in the polls and doing well in the polls, the stock market crashed,” Laffer said in the interview. “And the stock market tells you what will be, not what has been. And the stock market looks forward. And if they see an Obama coming into the office, they’ll crash, and that’s what led to the Great Recession.”
In its final report in 2011, the Financial Crisis Inquiry Commission cast blame for the crisis on factors including risky practices in the financial industry, lax regulation and federal housing policy.
Zachary Goldfarb contributed to this report.