OPINION:
President Trump has many well-qualified potential candidates in mind to succeed Jerome Powell as chairman of the Federal Reserve in May. He recently revealed his top choices to be the two Kevins: Warsh and Hassett. Both capable. Reportedly also under consideration: Christopher Waller, Michelle Bowman and Rick Rieder. All are qualified.
Yet there’s another candidate Mr. Trump should put at the top of his list: Arthur B. Laffer, a key figure in ushering in President Reagan’s golden age.
Mr. Trump gave Mr. Laffer the Presidential Medal of Freedom in 2019, and he recently sang the man’s praise on Truth Social, calling him “Reagan’s economic ‘whiz’” and “a man of such wisdom.”
Mr. Laffer would be the most qualified figure for the Fed to propel Mr. Trump’s promised Golden Age.
Mr. Trump is not exaggerating in calling Mr. Laffer Reagan’s “economic ‘whiz.’” Mr. Laffer is the last survivor of the Kemp/Mundell/Laffer supply-side nucleus that, against relentless establishment ridicule (“voodoo economics” from the Republicans and “trickle down” economics from the Democrats) introduced dramatically lower tax rates, dropping the top rate from 70% to 28%.
Just as important, though subtler, was the demand from us, the original supply-siders, to stabilize the dollar. These two key policy reforms, achieved despite fierce establishment resistance, ended the high “misery index” era of the Nixon/Ford/Carter stagflation.
The policies then championed by Mr. Laffer set the stage for almost two decades of sizzling economic growth.
On Nov. 13, 1979, the day Reagan officially declared his presidential candidacy, the Dow closed at 814. It recently closed above 49,000. Even adjusting 814 for the 346% cumulative inflation since 1979 to about 3,600, the Dow is more than 10 times more valuable now than it was then.
In real, inflation-adjusted terms, in 1980, when the supply-side revolution took wing, real median per capita income was $32,000. Now, it’s $70,000. America’s nominal gross domestic product in 1980 was $2.8 trillion. Now, it’s $30 trillion.
The “Laffer curve” — lower tax rates, broader base — plus a firm, noninflationary monetary policy inaugurated a 20-year epoch of epic prosperity.
Not bad for “voodoo.”
Mr. Laffer was instrumental in making that happen. Mr. President, to signal your seriousness about creating a Golden Age, play the Laffer card: someone to boldly lead the Fed in accordance with your values.
The Kemp/Mundell/Laffer wave of prosperity started to peter out around 2000. A series of presidents, most notably George W. Bush and Barack Obama, eroded the underlying supply-side policy formula.
Growth slowed dramatically and, compounded over a quarter century, put America’s GDP at 50% below trend. We can make that up fast with Mr. Laffer in charge of the dollar because Messrs. Trump and Laffer both demonstrably know the “secret sauce” to America’s prosperity.
In the initial 1975 supply-side manifesto, the recipe for the best monetary policy was to reinstate the gold standard. What came to be called the “Laffer curve” was a footnote.
Reagan, instinctively pro-gold, was thwarted by his advisers from adopting the gold standard. Instead, he delegated squeezing the inflation out of “the misery index” to Fed Chairman Paul Volcker.
Volcker, to his credit, succeeded, but he did so through brutal, albeit temporary, interest rate hikes.
The gold standard, properly done, would have slain the inflation dragon without the collateral damage to borrowers. Mr. Trump can do Reagan one better by appointing Mr. Laffer to go for the gold.
Nobody alive understands gold better than Mr. Laffer, except perhaps Mr. Trump, who in 2016 extolled the gold standard on his campaign trail. He told GQ, “Bringing back the gold standard would be very hard to do, but boy, would it be wonderful. We’d have a standard on which to base our money.”
Mr. Trump’s fine instinct on gold was thwarted by some bad advice. (America has, by far, the most gold in its official reserves than any other nation.) Few understand the mechanics of doing gold right. Mr. Laffer is rare among economic policymakers who understand.
Gold would lay the missing foundation for the highest level of sustained economic growth with price stability in the 21st century. Bonus: The classical gold standard would promptly end our merchandise trade deficit. The last time we had the sustained real economic growth rates historically associated with the classical gold standard, plus palatable spending restraint, a massive federal budget surplus replaced a massive federal budget deficit.
Win-win-win!
Mr. Warsh and Mr. Hassett are formidable. That said, Mr. Trump aspires to be more than formidable. He aspires to be a transformational historical figure.
To seal that deal, he should put the illustrious Arthur Laffer in as chair of the Fed. A Chairman Laffer would supercharge the inauguration of the next Golden Age.
• Ralph Benko is the founder of the monthly meeting of supply-side economic policymakers, the Prosperity Caucus, a co-author of “The Capitalist Manifesto: the End of Class Warfare, Toward Universal Affluence,” and co-founder and chairman of the 193,000-follower Capitalist League Facebook group.
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