Former Reagan adviser says tax cut will jump-start the economy

Republicans got at least one key point of the tax cuts right this time, and that will jump-start the economy, a Reaganite economist said.

The latest round of cuts, which includes a big corporate rate reduction as well as other business breaks, will juice the economy because it will go into effect immediately, said Arthur Laffer, a former adviser to President Ronald Reagan and now an adviser to some GOP leaders.

“This is a good law. Could we have made it a lot better? Of course we could have,” said Laffer, adding he would have also liked to see payroll tax reductions. “But never let the best be the enemy of the good.”

He said the cuts will boost the economy as the 1980s cuts eventually did.

The new cuts, Laffer says, will lead to an immediate economic and stock market boom.

“We are already experiencing higher growth than at any period under the Obama administration,” he said. And Laffer argued that this time, tax cutters learned from history.

He conceded that before the economy turned around under Reagan, it had to go through some hard times because cuts were delayed. As most cuts took place in 1983, many businesses held off spending, waiting for lower rates, he said.

“We caused the deep recession or depression of 1982 by phasing in tax cuts,” Laffer said. Businesses delayed spending because they knew much lower taxes were coming in a year. “The way I explained it to President Reagan was, ‘How much do you shop at a store a week before it has its big discount?’ ”

However, he adds, once the 1980s cuts became fully effective, the economy boomed, growing some years at a rate of 8 percent.

This time, Laffer said, he “heavily” lobbied the Trump administration and Congress not to repeat that mistake. Indeed, he said that in the original Senate version of this year’s tax bill, cuts were not to become effective until 2019.

“If that provision had stayed, you would have seen a collapse in the market and a real downturn,” Laffer said. “Thank God they changed it.”

Laffer is contemptuous of what he called “the new normal” — the idea that the economy can no longer grow at more than 1 percent or 2 percent a year. The cuts, he said, will be “very good for the economy and the average person.”