Cut salaries, taxes to reopen U.S. economy says Laffer, conservative fave

WASHINGTON (Reuters) - Republican economist Art Laffer, an architect of the Reagan era tax cuts that paved the way for historic budget deficits in the United States, has a plan to rejuvenate today’s pandemic-crippled economy.

Tax non-profits. Cut the pay of public officials and professors. Give businesses and workers who manage to hold on to their jobs a payroll tax holiday to the end of the year.

What about the extra aid funneled to newly jobless workers by the $2.3 trillion fiscal rescue package? Such government spending, Laffer told Reuters in an interview, will only serve to deepen the downturn and slow the recovery.

“If you tax people who work and you pay people who don’t work, you will get less people working,” Laffer said. “If you make it more unattractive to be unemployed, then there’s an incentive to go look for another job faster.”

Laffer’s unconventional plan isn’t just an academic exercise. First of all, he says he has presented it to his contacts at the White House. They include presidential economic advisor Larry Kudlow, who considers Laffer a mentor.

Laffer is also being floated in influential right-wing circles as a good candidate to head a proposed new industry task force aimed at re-opening the U.S. economy as soon as possible. “Bring in the minds like Art Laffer,” Sean Hannity, the Fox News host said April 6 of the proposed task force.

Trump tweeted his support for the new economic task force on April 4, calling it a “good idea.” He hasn’t yet mentioned Laffer, but on Tuesday reiterated his support for a payroll tax cut, saying it would be a “fantastic time” to deliver it.

Trump awarded Laffer the Presidential Medal of Freedom last year.

Many mainstream economists, including former Fed Chair Ben Bernanke, say the lifeline extended to businesses and individuals through the fiscal package is critical and, indeed, more will likely be needed. Most economists agree here that the United States' consumer spending-driven economy can't be "reopened" until testing is widespread enough that infected people can be identified and isolated.

Outside economic adviser Stephen Moore, who co-wrote a book on “Trumponomics” with Laffer, told Reuters this week the White House was considering his proposal to appoint a recovery “czar” to oversee the logistics and implementation of reopening the economy.

“You probably need some really smart and renowned and respected business leader to sort of run that process,” he said, adding he had suggested FedEx Chief Executive Fred Smith for the role.


Trump in recent days has revived his push to reopen the largely shuttered economy, saying the cure cannot be worse than the disease.

That’s a sentiment with which Laffer agrees.

“I think it’s really important to balance out the economic consequences with the health consequences,” Laffer said, adding that increased poverty from an extended shutdown could mean lower life expectancy, more suicide and a jump in child abuse.

Trump has expressed similar worries.

Laffer is a long-time booster of tax cuts as a strategy to increase economic growth, ideas embraced decades ago by the Republican Party and U.S. President Ronald Reagan, and more recently, Trump himself.

Laffer said that people whose jobs are safe during this pandemic - such as taxpayer-funded workers like White House staffers, lawmakers, public employees and university professors - should share in the economic pain of the pandemic by taking a pay cut of 15%.

And to make things more fair, he said, government should impose levies on nonprofit educational, arts and other institutions.

“We all should lock arms, figuratively, and have mutual sacrifice for the benefit of the country,” Laffer said.

Laffer said he had not been approached by anyone in the White House about joining the proposed task force, but that he’s willing to do the work for free.

“I don’t have any reason to believe that I will be asked, but if I were asked to do it, I would love to do it, gratis,” he said.

Reporting by Ann Saphir and Jeff Mason; Editing by Heather Timmons and Andrea Ricci