Wall Street Journal Op-Eds: My Two Recent Articles On Taxes And Inflation
This article is a special guest post by Dr. Arthur Laffer, Economic Adviser to President Ronald Reagan. Read on for summaries on inflation and higher interest rates in his Wall Street Journal articles.
This is a special guest post by Dr. Arthur Laffer, Economic Adviser to President Ronald Reagan.
WSJ OP-ED NUMBER 1:
The percentage increase in the monetary base is the largest increase in the past 50 years by a factor of 10 (see chart nearby). It is so far outside the realm of our prior experiential base that historical comparisons are rendered difficult if not meaningless. The currency-in-circulation component of the monetary base -- which prior to the expansion had comprised 95% of the monetary base -- has risen by a little less than 10%, while bank reserves have increased almost 20-fold. Now the currency-in-circulation component of the monetary base is a smidgen less than 50% of the monetary base. Yikes!
The expansion of money, given an increase in the monetary base, is inevitable. Ultimately, the consequence of this expansion of money is higher inflation and interest rates. In shorter time frames, the expansion of money can also result in higher stock prices, a weaker currency, and increases in commodity prices such as gold and oil, as we are currently seeing.
This WSJ Op-Ed is a follow up to my previous report, "1970s Redux, Inflation, Back from the Dead."
WSJ OP-ED NUMBER 2:
With states facing nearly $100 billion in combined budget deficits this year, we're seeing more governors than ever proposing a "simple" solution to balancing the budget: Soak the rich. However, we have found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.