the national interest

The Fatal Calculations of the Economists Steering Our Public Health

Arthur Laffer in 1981. Photo: AP/Shutterstock/AP/Shutterstock

One night in late March, President Trump, seized by one of his periodic bouts of dismay with his public-health officials, sought out a second opinion on how to handle the coronavirus pandemic. He called Arthur Laffer. After missing the president’s first three calls, the 79-year-old Laffer finally answered, and the two men connected for what Laffer described as “a very serious conversation,” shortly after which Trump tweeted, “WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF.”

Trump gravitated back to his public-health advisers, but he is again lurching toward the opposite pole — one anchored by Laffer and his close allies: National Economic Council head Lawrence Kudlow and economic adviser Stephen Moore. They have seized on their historic role as the antagonists to the administration’s public-health wing because they have a particular competence of their own, honed over decades: persuading Republican officials to ignore experts.

Even before his current role, Laffer was perhaps the most successful policy entrepreneur in modern American history, at least if measured by political influence. In the 1970s, as an economics professor who had served in Nixon’s Office of Management and Budget, Laffer developed a friendship with Wall Street Journal editorial writer Jude Wanniski, whose job had previously included defending Richard Nixon’s conduct in the Watergate scandal. The two came to believe that Laffer had developed a blinding insight with world-historical ramifications. A tax rate of either zero or 100 would yield no tax revenue at all, Laffer posited. Drawing a sloping, sideways curve between those points, he further hypothesized that reducing tax rates might increase revenue.

The “Laffer curve,” which at one point Laffer drew on a cocktail napkin for an impressed Dick Cheney (the Smithsonian now claims to display the original), formed the basis of what became known as “supply-side economics.” The doctrine held not only that tax cuts could increase tax revenue, but that changes in tax rates were the primary driver of all economic events. Republican economist Herb Stein coined the name as a term of derision, intending to highlight the absurdity of building a model entirely on one side of the economy instead of considering both supply and demand. Economic experts mocked Laffer’s notion that reductions in tax rates at existing levels could produce anywhere close to enough new economic growth to pay for itself.

And the experts … were completely right. After supply-siders converted Ronald Reagan and promised his tax cuts would pay for themselves, revenue hemorrhaged. Reagan’s non-supply-side advisers prevailed upon him to sign a series of tax increases for the purpose of “reducing the size of the nation’s fiscal disaster,” his budget director later admitted. When Bill Clinton raised the top tax rate from 31 percent to 39.6 percent, supply-siders insisted he would kill the recovery and reduce tax revenue. Instead, revenue soared far higher than anybody had forecast.

Kudlow and Moore began ascending in the 1980s, shuttling between right-wing think tanks and media — especially the Journal editorial page, which remained the high temple of the supply-side cult. I first came across Moore when he was writing Journal columns arguing that the supply-siders had been right to predict Bill Clinton’s tax hike would reduce revenue. (A hallmark of supply-side thought has been to refuse to concede any error or complication in its analysis.) The supply-siders went on to insist that George W. Bush’s tax cuts would produce untold prosperity. Moore wrote a book called Bullish on Bush, and Kudlow wrote the foreword to The Bush Boom and a series of columns dismissing “pessimistas” who detected economic turmoil. “There’s no recession coming. The pessimistas were wrong,” he wrote in December 2007.

In the spring of 2016, just after Trump had sewn up the nomination, Laffer, Kudlow, and Moore set out to meet the candidate at Trump Tower. Like many members of the conservative elite, they initially harbored reservations. But unlike foreign-policy hawks or social traditionalists, their concerns were devoid of any moral component, like a suspicion of dictators or philanderers. Their sole misgiving concerned Trump’s populist rhetoric and occasional campaign vows to raise his own taxes. The troika wanted to find out if he really meant it. To their relief, he didn’t. “He wanted tax cuts. He wanted to deregulate, he wanted to get the government out of the way,” Kudlow recounted in the foreword to Laffer and Moore’s laudatory book, Trumponomics. “The three of us saw Trump in a whole new light.”

Kudlow joined the administration as Trump’s chief economic adviser. Trump announced he would nominate Moore for the Federal Reserve Board, but the Senate killed Moore’s bid over a combination of embarrassing ignorance of the subject — just two years before, he’d admitted on a panel, “I’m not an expert on monetary policy” — and years of sexist comments, including an obsessive hatred of women working as play-by-play commentators on basketball games. He and Laffer instead served as outside advisers and allies to Trump, who last summer bestowed a Presidential Medal of Freedom on Laffer.

Trump rewarded their confidence by implementing a large corporate tax cut, which was intended to encourage more corporate investment and therefore “would yield about the same revenue — and possibly more — than the current system,” Laffer and Moore wrote in Trumponomics. Naturally, it failed. Business owners got a windfall, but there was no corporate-investment boom and corporate-tax revenue fell by more than a third. Just as naturally, they acted as if events had proved them right.

And so, when the coronavirus struck, Trump had on hand a coterie of loyalists who would not hesitate to question legitimate experts. Kudlow forcefully endorsed Trump’s optimism that the virus would never spread. On February 25, Kudlow said it had been “contained … pretty close to airtight.” Even two weeks later, he was insisting, “I would still argue to you that this thing is contained.”

When public-health officials persuaded Trump to abandon his denialism, the supply-siders formed the resistance. Applying Laffer’s old dictum, “All economic problems are about removing impediments to supply, not demand,” they reasoned that the problem facing the economy was not a deadly pandemic but, as ever, bad incentives imposed by government — in this case, restrictions on business and excessively generous unemployment benefits that “discourage work.” If the government just stopped suppressing incentives, the economy would spring back to life.

The Journal editorial page published some of the first pushback against the wisdom of lockdowns. As early as mid-March, Moore denounced on Fox News the first closings, in California, as “a very dangerous, almost Orwellian situation.” Trump began repeating the supply-siders’ warnings that he had ceded too much authority to scientists (“If it was up to the doctors,” he mused, “they might say shut down the entire world”). Trump relented to his public-health experts but, by early April, was again listening to the supply-siders. Moore began proposing May 1 as a deadline to reopen the economy, a timeline Trump endorsed soon thereafter.

The supply-siders’ struggle to tug Trump away from his medical experts has both public and private facets. Laffer and Moore promoted a new administration task force to focus on economic reopening, a counterweight to the coronavirus task force led by doctors Anthony Fauci and Deborah Birx. Moore encouraged anti-shutdown protests in several states to pressure governors to speed up their timetables for reopening businesses. “I call these people the modern-day Rosa Parks,” he explained, “They are protesting against injustice and a loss of liberties.”

In their book, Laffer and Moore fondly recall Kudlow’s instructing Trump to ignore budget forecasts that tax cuts would reduce revenue. “Don’t get stressed out by the phony numbers of Washington’s bean counters,” he said. “They are always wrong.” The message today is largely unchanged. The main difference is that the experts they are urging the president to dismiss are counting lives. We’re the beans.

*This article appears in the April 27, 2020, issue of New York Magazine. Subscribe Now!

The Fatal Calculations Steering Our Public Health