As converts to the neoliberal faith, Ukraine’s government is ever eager for spiritual advice. While the debt standoff in Greece provided opportunity to declare its slavish devotion to austerity, and the recent Yalta European Strategy conference offered “faithful reflection” on “reform,” none of this can substitute getting personal spiritual council from the father of supply-side economics, Arthur Laffer.
In mid-September, in a barely noticed move, Ukraine’s Ministry of Finance named Laffer as an advisor on tax policy. According to the Ministry’s press release, this esteemed economic confidant of Reagan and Thatcher will help Ukraine create a tax system “which should contribute to the increase of investments, economic growth and employment as well as improve the quality of public services for business and thus provide a powerful stimulus for the sustainable economic growth of our country.” This statement’s vapid syntax should not go elided in a world where the “menace of unreality” dislodges materiality. Yet again, despite its utter bankruptcy as policy and principle, the neoliberal incantation that the interests of the “job creators” are the interest of all remains potent voodoo. That the Ukrainian government is now soliciting one of neoliberalism’s most influential necromancers is yet another indication where the Revolution of Dignity is really going.
Many American readers won’t recognize Laffer’s name even though they’ve been living under the tyranny of his doctrines for years. Ukrainians are advised to peruse his record to see what kind of services their government just bought. Laffer is most famous for developing the Laffer Curve, a bell curve he scribbled on a cocktail napkin during a steak dinner with Donald Rumsfeld and Dick Cheney in 1974. The Laffer Curve argues that high taxes discourage investment and can bring down government revenue, while low taxes encourage investment and can even increase the state’s coffers. The Curve usually accompanies calls for austerity and tax cuts for the rich as the motors for economic growth. Most economists doubt its economic efficacy. Paul Krugman explained the Laffer Curve’s dubious history as follows:
“There was never any evidence to support strong supply-side claims about the marvels of tax cuts and the horrors of tax increases; even freshwater macroeconomists, despite their willingness to believe foolish things, never went down that road.
And nothing in the experience of the past 35 years has made Lafferism any more credible. Since the 1970s there have been four big changes in the effective tax rate on the top 1 percent: the Reagan cut, the Clinton hike, the Bush cut, and the Obama hike. Republicans are fixated on the boom that followed the 1981 tax cut (which had much more to do with monetary policy, but never mind). But they predicted dire effects from the Clinton hike; instead we had a boom that eclipsed Reagan’s. They predicted wonderful things from the Bush tax cuts; instead we got an unimpressive expansion followed by a devastating crash. And they predicted terrible things from the tax rise after Obama’s reelection; instead we got the best job growth since 1999.”
What Krugman fails mention is the real purpose of Laffer’s alchemy: the tax cuts + austerity = economic prosperity is thinly disguised class warfare from above. In all the years neoliberals have had their economic way, the United States has been a bastion of gross economic inequality.
Yet one need not survey the last thirty years to see the results of Laffer’s dogma. Rewind to 2012, when Laffer advised Kansas Governor Sam Brownback to shove his slash-taxes-for-economic-growth snake oil down the Plains State’s throat. Brownback, a disciple himself, dutifully complied. Laffer’s plan, after all, would serve as a “real live experiment” for the potency of supply-side economics. By 2015, Kansas was stuck with a $600 million budget deficit. When Brownback reproached Laffer on his promise of economic growth, Laffer chided him for his lack of faith and urged patience. “Kansas is doing fine,” says Laffer. What was the prescription for this calamity? Austerity. Which is exactly what neoliberals like Laffer like.
As do most of the Clown Car Commandos riding on the Republican presidential ticket. As the Washington Post’s Jim Tankersly reported in April:
“As the 2016 GOP primary season takes off, Laffer is more in demand than ever before, with Republican candidates embracing tax-cut-for-the-rich policies even as they bemoan economic inequality. Candidates have been meeting with him in recent weeks, and on Friday in Nashville, he says, his schedule includes Rick Perry at 10 a.m., Ben Carson at noon, Jeb Bush at 1:15 p.m. and Bobby Jindal at 5. Dinner is scheduled with Ted Cruz. He has already met at least once with Wisconsin Gov. Scott Walker.”
Now you can add the Ukrainians to Laffer’s itinerary of worshippers seeking guidance and communion. There’s certainly a bit more room in the clown car.
And Laffer’s spiritual wisdom only begins with tax policy. He has all sorts of other ideas that would frankly produce laughter if they weren’t so utterly devastating for working people. In 2014, he opined on Fox News, “The minimum wage makes no sense whatsoever to me. I mean, honestly, it’s just the teenage – black teenage unemployment act and this is the very groups that we need to have jobs, not be put out of work because of the minimum wage.” He elaborated on this in his article “How to Fight Black Unemployment” in the Wall Street Journal. There he argued that the best way to alleviate African-American “suffering” is to create “enterprise zones” in America’s poverty stricken inner cities. To make these American maquiladoras effective, he called for the elimination of the payroll tax for businesses, the suspension of the minimum wage, the removal of all building codes, regulations, restrictions and requirements that “impede economic growth,” and for all profits be taxed at one-third the regular tax rate. He summed it all up with: “Businesses don’t move their plant facilities as a matter of social conscience. They do it to make profits for their shareholders. If you want more jobs in our most depressed areas, make those areas more profitable for companies to relocate there. It’s as simple as that.”
The concrete benefits from serving as cheap labor in poor working conditions for African Americans was left, well, to faith in the inherent benefits of economic growth. Exploitation is all part of the game when it comes to making profits for shareholders. Dignity and other matters of social conscience are merely fetters.
This is the type of “advice” the Ukrainians can expect from “well-known international experts” like Laffer. Khai zhive revoliutsiia!