Arthur Laffer: the 'double dip' recession coming in 2011
Arthur Laffer, Supply Side economist who popularized the Laffer curve, is in headlines. Well not in headlines but byline of the 'Wall Street Journal' article named 'Tax hikes and 2010 Economic Collapse.'
ARTHUR LAFFER, Supply Side economist who popularized the Laffer curve, is in headlines. Well not in headlines but byline of the ‘Wall Street Journal’ article named “Tax hikes and 2010 Economic Collapse.” As the headline of the Article says we are heading towards another catastrophic years in 2011 after the financial fiasco of 2008-09. The spreading debt crisis in European countries and BP oil spill in the Gulf might be the reason behind the speculation but he perfectly correlates the current situation with the future through Tax plans.
The Economic Policy Advisory Board member of Reagan administration Laffer said in opening para that Government policy matters, “People can change the volume, the location and the composition of their income, and they can do so in response to changes in government policies.”
He further says that tax policies and the incentive plans do play crucial role in financial decision making, “if the government taxes people who work and pays people not to work, fewer people will work. Incentives matter.”
He warns that by the Jan 1 or so 2011 the Bush administration tax cut expire meaning huge hike in tax rates, “meaning that the highest federal personal income tax rate will go 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to 55% from zero. Lots and lots of other changes will also occur as a result of the sunset provision in the Bush tax cuts.”
He further says in the Article, “In my view, this shift of income and demand is a major reason that the economy in 2010 has appeared as strong as it has. When we pass the tax boundary of Jan. 1, 2011, my best guess is that the train goes off the tracks and we get our worst nightmare of a severe "double dip" recession.”Laffer was a republican Primary candidate for the US Senate in California in 1986.
Laffer authored and co-authored several books and articles, including “Supply Side Economics: Financial Decision Making for the 80s.”
Yale University Economics graduate of 1962 and Stanford University MBA can see the impending Financial Tsunami that hit the European coast and definitely heading towards American coast.
Is it just Tax led incentive plan and pre or post shift in financial decision making or something else that is behind the Double dip theory?
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