Arthur Laffer

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.

I feel very uncomfortable with respect to looking at inflation.

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.

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.

The United States is a nation located in the global economy, and we get enormous, enormous benefits from dealing with foreigners.

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.

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.

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.

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.'

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.

The Laffer Curve, by the way, was not invented by me.

Obama is a fine, very impressive person. He really is. Unfortunately, everything that he is doing in economics is exactly wrong. He is a crappy president.

Ask me whether inflation represents longer-term problem. I think there's a potential there for excess reserves to create problems.

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.

The states that have large in-migrations of Hispanics are Florida, Texas and California. And Florida and Texas are way above average in educational achievement, while California's the lowest, just about.

The linkage between tax rates and public services is, if not non-existent, negative.

Sometimes, tax rate increases create the very problems that the spending is intended to cure. In other words, the tax rate increases reduce economic growth; they shrink the pie; they cause more poverty, more despair, more unemployment, which are all things government is trying to alleviate with spending.

What you do by having an income tax rate reduction across the board, you really provide great incentives for people to work, produce, and increase output. So I would support a carbon tax in replacement for a progressive income tax.

I'm worried about economic growth in the United States. And the creation of jobs, output, and employment. And if you tax people who work, you're going to get less people working. And what the carbon tax would do is remove the tax from people who work and put it on a product in the ground.

A carbon tax by itself would make driving more expensive, that's very true. But in exchange for that, there are going to be more jobs, more output, more employment, and more products available. So really, as long as you're going to collect the revenues you're going to collect, you're going to have to trade off one tax for the other.

When you look at the government, when the government collects a buck, it's not free. They have to spend resources, the IRS, audits, all this sort of crap, to collect the dollar. I'm not assuming any Laffer curve effect here at all. There are just transactions costs of collecting that money.

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.

Taxes are not trivial - they're a huge portion of this overall economy. And that's why I focused on them.

Tax rates aren't everything with regard to incentives to work. I would probably work at a 100% tax rate next to a nude modeling studio. I'm joking, but you know what I'm saying. There's a lot more to it than just tax rates. It's economics that I do; I don't do nude modeling studio economics. People do respond to taxes.

And let the Fed sell bonds to bring bank reserves back down to required reserve levels, so we have restraint on bank lending and bank issuances of liability.