Art Laffer's Chinese Curve Ball

[endicom]

PJ Media
David P. Goldman
Aug. 24, 2018

God bless Arthur B. Laffer, the author of the eponymous curve. If statesmen are hedgehogs (with one big idea) or foxes (with many little ideas), Art is the mayor of Hedgehog City. His big idea is that lower taxes give you more economic growth. Along with my former business partner Jude Wanniski, Wall Street Journal editor Robert Bartley, and a handful of other economists and publicists, Art sold the idea of dramatic tax cuts to Ronald Reagan and thus stood midwife to the greatest US economic boom of the past century. All of them were the intellectual children of the great Robert Mundell, but that’s another story. Years ago I had the honor to write the occasional paper for Art's consulting service. He's an American treasure.

Art had one magnificent idea. I took his economic service  when I ran research groups at Credit Suisse and Bank of America, and he stopped by once a year for a talk. In 2001 he stopped by at Credit Suisse. American manufacturing jobs were disappearing and America’s trade deficit was exploding, but Art wasn’t fazed. Americans shouldn’t manufacture anything, Art averred: We would do the design, like Apple, and foreigners would dirty their hands making the actual goods.

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Goldman may be missing that Trump's focus is on revitalizing the U.S. economy and not on trashing the Chinese economy.

[Sanguine]

If you want to compare the debt position of the United States and China, consider that the United States has run up $21 trillion in government debt, and has nothing to show for it but future obligations to pay entitlements. China has run up a similar amount of debt, but has used it to build infrastructure. It now has dozens of brand new cities designed for self-driving cars, 30,000 kilometers of high-speed trains, excellent roads, and brand new airports. The U.S. has collapsing infrastructure, a rail system that is a national humiliation, and airports look like Third World leftovers.

All the other problems in the world are trivial next to the challenge of China. Russia has less than half of our population and a GDP the size of Italy. The world’s jihadists are primitive barbarians who can annoy but not defeat us if we show a modicum of resolve. But China is like the Borg in Star Trek: We will assimilate you, Beijing tells the whole of Asia. Resistance is futile. China wants to Sinofy the 600 million people of Southeast Asia and the 200 million Turks and their relations who live between Turkey and Tajikistan.  It seeks to swallow up the great European and Japanese industrial companies into this burgeoning market. It wants to dominate the next generation of technology, including quantum computing. If that happens, there will be a word for an American who works for a Chinese, and it will be, “employed.” That is a nightmarish scenario, but it is not improbable.

Sadly, President Trump is bringing a knife to a gunfight. Much as I hate to disagree with old and good friends, I have to say that Art Laffer is steering him wrong.

Very thought provoking piece.