The following is an unofficial transcript from Friday night’s Kudlow & Company supply-side debate between supply-side founder/mentor Art Laffer and James Surowiecki, financial columnist at The New Yorker. (Incidentally, if you haven’t already read Art’s recent supply-side counter-offensive, you really ought to check it out. Click here to read it.)
KUDLOW: Supply-side economics is under attack from various liberals and lefties. And the next guest is at the center of the controversy. James, we haven’t seen you in awhile. I loved you when you were talking about the wisdom of the markets. But now you’re whacking away at supply-side economics. What’s your big beef here?
SUROWIECKI: The beef is pretty simple. It’s just that, I think in the United States today, saying that tax cuts grow tax revenues’”which is essentially what President Bush, Vice President Cheney, and every Republican presidential candidate has been saying’”is simply false. Tax cuts leave government with less money than it would otherwise have. And that’s basically continuing to perpetuate the myth or the lies of supply-side economics. I think it’s just deceiving voters.
KUDLOW: Alright Art, your response?
LAFFER: Well, in some areas it’s clear that tax cuts don’t increase revenues. But it’s clear that in other areas they do, James. I mean, for example, capital gains. That’s very clear that tax cuts there have increased revenue. On the very upper income groups, it’s very clear. They’re paying a far larger share of all taxes and have been for the last twenty-five years. That rate’s been going up. But let me just push you right to the point, James. The thing that bothered me about your editorial is even if tax cuts didn’t provide more revenues, they still do an enormous amount of good. They reduce poverty, unemployment, despair. They increase output, production, productivity. You know, you cannot tax an economy into prosperity, James. I don’t know where you got your economics from, but if you tax people who work, and pay people that don’t work, don’t be surprised if you find a lot of people end up not working.
SUROWIECKI: Can I say a couple things on that? The first is I would have no problem if candidates were going out there and making the case Professor Laffer just did. Just saying this is what tax cuts are going to do, they’re going to leave the government with less revenue, so we’re gonna have to, you know, cut spending or whatever. That would be totally fine. That’s not what these candidates are doing.
LAFFER: Well why didn’t you say that [in your article]? I mean you started attacking supply-siders. You called it a big lie. Which is not true. Supply-side economics has never argued that every tax cut raises revenue. That’s just misrepresentation. And [Jonathan] Chait’s book is just awful in that regard. And you know it’