RFDC Preview: Art Laffer And The Economy

By Jonathan Maze, August 26, 2011

The last couple of years have provided a painful lesson that not all recessions are created equal. Today, despite a government that has used just about every weapon at its disposal, the economic situation remains perilously close to falling into another recession. Why? Dr. Arthur Laffer, who will speak at the Restaurant Finance & Development Conference in November, has an idea:

Government spending is the problem, he said last week on CNBC's Squawk Box. Government spending "doesn't create jobs, it hurts jobs," Laffer said. "The spending binge of the last four years is the reason we have a bad economy."

The uncertain recovery has been a mixed bag for restaurants, which are undoubtedly concerned about the prospects for another decline in conditions. Because some consumers have improved while others have not, some restaurants, such as Chipotle and Panera Bread, have improved while others, notably KFC and many family dining chains, have struggled.

Laffer is considered the "Father of Supply Side economics." He was a member of Ronald Reagan's Economic Policy Advisory Board. He is also the creator of the Laffer Curve, which shows that there exists a percentage rate in which governments will collect the maximum amount of revenue—the graph is a curve shape, where 100 percent tax rates and 0 percent tax rates each collect zero in revenue, and in between those rates the revenue collection grows. He will provide an exclusive national economic briefing at the RFDC, to be held November 7-9 at the Wynn in Las Vegas. Also speaking will be Aron Ralston, the mountain climber and adventurer whose five-day ordeal in a Utah canyon was the inspiration for the film "127 Hours."

Laffer has been critical of Warren Buffett, who last week argued in a New York Times piece that he pays too little in taxes, and notes that he pays a lower percentage in taxes than does his secretary. "The hypocrisy of Warren Buffett is unfathomable," Laffer said, suggesting that Buffett should propose a 50-percent wealth tax on anybody worth more than $1 billion. "That would really work for him, but of course he's not going to suggest that, because he would have to pay that."

Nevertheless, Laffer agrees that the U.S. needs more revenue. But how to raise that revenue in a way that won't hurt growth? Laffer, who called the spending binge "bipartisan ignorance," said that the country needs a low-rate "flat tax" and lower, controlled spending. He said that the government "wasted" its recession-fighting powder on wasteful consumption and "fighting wars in places where we can't pronounce the names of their cities," and "now we don't have any powder left."