Today’s Brew 10-15-14

The first book review we’ve seen for The Pillars of Reaganomics edited by Brian Domitrovic and featuring some of the collected works or Dr. Arthur Laffer. If you find other reviews, please let us know, we’d like to link to them.

New Laffer book details Reagan prosperity recipe

That’s where the famous Laffer Curve comes in. In the book, Domitrovic describes it:

“The Laffer Curve is a simple theoretical diagram, a bell curve…that compares tax revenues that are gained under all tax rates between 0 percent and 100 percent. At one end (the 0 percent tax rate), tax revenues are zero, at the other (the 100 percent rate), tax revenues are also zero, because no one chooses to earn money when the government confiscates every penny. In between there is a bulge. And at one point, that bulge peaks — implying that any tax rate increase beyond it will result in lower revenue….

“Laffer…had used the curve often in the classroom, as a teaching tool. Then in December 1974, he sketched the curve on the restaurant napkin before two high staffers of the Gerald Ford administration, Donald Rumsfeld and Richard B. Cheney, along with his friend, Wall Street Journal editorialist Jude Wanniski.”

Alas, Ford did not embrace supply-side tax cuts, the economy continued to stagnate and in 1976, voters canned him for Jimmy Carter.

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Editorial note: we made one correction to the quote above, there was a repetitive use of a word.

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