Nobel Prize economist Dr Mundell and Dr Laffer prescribe tax cuts!

Posted on April 14, 2010 by


CNBC The Kudlow report with prominent economists Dr Mundell and Dr Laffer

According to Dr Mundell and Dr Laffer, the best way to pay off the debt is to get Americans back to work by cutting taxes!

“Over time, increased growth will contribute to paying off the debt” – recipient of the Nobel Prize in economics (1999) Dr. Robert Mundell

Increased economic growth coupled with restrained government spending is the most efficient road to a balanced budget. Having studied and written extensively about the negative effects of taxation on households and firms, it is clear to me that any income tax increase will reverse what seems to be the beginning of an economic recovery.

When asked if government should raise taxes on the rich to cut down the deficit, Dr Laffer and Dr Mundell agree that the upper income group is highly sensitive to tax changes. An increase in the tax rate will result in a decrease in tax revenues (Laffer curve) because the rich respond quickly to changes. The rich have more options than the rest of us. A tax increase on the rich gives them an option to either decrease their investment activities or to simply move their economic activity to other countries (Tax Havens), in either case, resulting in fewer jobs for the middle class and lower economic growth, which also means less tax revenues. According to Dr Laffer and Dr Mundell, tax cuts are the best way to get Americans back to work and to return to the growth that we’ve enjoyed in the past.

“Evidence collected since 1981 shows that the rich and their investments have contributed to the most growth”

Tax cuts for the rich stimulate investment and create jobs while tax cuts for the poor increase consumption and/or savings making households better off.

Watch the CNBC interview here