My godfather was a man named Justin Dart. Some of you may remember Justin Dart. My younger son's name is Justin, named after Justin Dart. I was executor of his estate, and he was my godfather. I first really got time to spend with Ronald Reagan with Justin Dart personally, one-on-one.
It has always amazed me how tax cuts don't work until they take effect. Mr. Obama's experience with deferred tax rate increases will be the reverse. The economy will collapse in 2011.
In 2010 the U.S. will have a payroll tax rate increase, an estate tax increase, and income tax increases. There's also a tax increase coming in 2010 on carried interest. This rate will rise from its current level of 15 percent to 35 percent, and then it will rise again in 2011.
In 1994, Estonia became the first European country to adopt a flat tax, and its 26 percent flat tax dramatically energized what had been a faltering economy. Before adopting the flat tax, the Estonian economy was literally shrinking. In the eight years after 1994, Estonia experienced real economic growth - averaging 5.2 percent per year.
What I'm not saying is that all government spending is bad. It's not - far, far from it, but there is no free lunch, as a former colleague of mine used to say. There is no public tooth fairy. Father Christmas does not work on the Treasury staff this year. You can never bail someone out of trouble without putting someone else into trouble.
People can change the volume, the location and the composition of their income, and they can do so in response to changes in government policies.
People can also change the timing of when they earn and receive their income in response to government policies.
The story of how the Laffer Curve got its name begins with a 1978 article by Jude Wanniski in 'The Public Interest' entitled, 'Taxes, Revenues, and the Laffer Curve.'
You know, without China there is no Wal-Mart and without Wal-Mart there is no middle class and lower class prosperity in the United States.
Over the past 100 years, there have been three major periods of tax-rate cuts in the U.S.: the Harding-Coolidge cuts of the mid-1920s; the Kennedy cuts of the mid-1960s; and the Reagan cuts of the early 1980s. Each of these periods of tax cuts was remarkably successful as measured by virtually any public policy metric.
The linkage between tax rates and public services is, if not non-existent, negative.
And just remember, every dollar we spend on outsourcing is spent on U.S. goods or invested back in the U.S. market. That's accounting.
Raising taxes is not a frivolous venture that you do on the editorial page of 'The New Republic,' for god sakes. It's something that you really have to think about and go through carefully.
I've been truly blessed. I've been a fly on the wall of history. I've been just so many lucky places just by chance and serendipity, and obviously a huge portion of that serendipity had to do with my relationship with the real president, Ronald Reagan.
Sound money is the sine qua non of a prosperous society.
Because tax cuts create an incentive to increase output, employment, and production, they also help balance the budget by reducing means-tested government expenditures. A faster-growing economy means lower unemployment and higher incomes, resulting in reduced unemployment benefits and other social welfare programs.
And you can't have a prosperous economy when the government is way overspending, raising tax rates, printing too much money, over regulating and restricting free trade. It just can't be done.
The Laffer Curve illustrates the basic idea that changes in tax rates have two effects on tax revenues: the arithmetic effect and the economic effect.
I used the so-called Laffer Curve all the time in my classes and with anyone else who would listen to me to illustrate the trade-off between tax rates and tax revenues.
California is the highest-tax state in the nation and has been for a long time. It has the highest-paid teachers in the nation, by far - $400 a month more than New Jersey - and yet California is the third lowest state on test scores for fourth and eighth grade English and math in the nation, and has been at the low level for a long, long time.
