Politico has a story about a phone call between President Trump and conservative Republican Senator Josh Hawley concerning a new COVID relief bill. Hawley recounts parts of the call in an interview with the magazine: “I said, ‘I think it’s vital that any relief include direct payments, and I’m not going to vote for it if it doesn’t.’ And I also urged him to veto any bill that did not have direct payments in it.”
Admittedly, direct payments to individuals makes more sense than a plan bailing out state governments whose reckless policies would have landed them in dire straits with or without the virus. But neither path makes much economic sense. Federal spending is federal spending, irrespective of its intention; someone has to pay for it.
Former Reagan economic advisor Art Laffer was on Fox News this morning making the point. Check out his exchange with anchor Sandra Smith:
Laffer: I think the more stimulus you have the worse the economy is going to be. It should come to the next administration. They were elected, they were put in; let them do it.
Smith: Oh, man, that’s tough, Art. There are a lot of people hurting out there still.
Laffer: Yeah, but there are a lot of taxpayers hurting too, Sandra. I’m telling you, the national debt has gone way, way up and someone’s going to pay for this. Government spending is taxation, and when you give people money like this you have to remember it comes from someone else.
Laffer, some may recall, penned the famous “Laffer Curve,” which illustrates that a zero percent tax rate would yield the government zero dollars, for obvious reasons, but so would a one hundred percent tax rate. Who, after all, would ever work if his entire paycheck were confiscated? People, after all, respond to incentives.
Laffer’s broad point to Smith was that the way to grow the economy, and thus help “people hurting out there,” wasn’t to spend money on them—money that comes from other people—but to keep spending and taxes low.
A rising tide, said JFK, lifts all boats. In his day, cutting taxes was common sense; today, not even all Republicans agree that tax cuts are the path to prosperity. If it wants to win back the House and expand its (likely) majority in the Senate in 2022, the GOP needs to speak with one voice when it comes to the benefits of cutting taxes and spending less.