Laffer is known best for an economic theory called the Laffer Curve. Laffer's theory states that somewhere between 0% and 100% there is a tax rate that will result in the most tax revenue. The Laffer Curve was one of the theories around which President Reagan's economic policies, "Reaganomics," were based. Reagan was a firm believer that lower tax rates, controlling the money supply to reduce inflation, less government regulation of the economy, and reducing government spending will lead to economic growth. After the four-year economic debacle called the Carter Administration, the following happened as a result of "Reaganomics" :
- By the end of Reagan's last year in office, unemployment had fallen from about 12% when he took office to about 4%. In other words, he cut it by two-thirds.
- Gross Domestic Product (GDP) grew at a rate of nearly 4% from 1981-'89.
- Federal Income Tax receipts grew from $309 Billion to $549 Billion from 1981-'89.
- Get rid of current Federal tax structure in favor of one low-rate flat tax.
- Cut Federal spending.
- Have sound money. He said Ben Bernanke's policies are poor.
- Ease up on the regulations that are causing unintended damage.
- Have free trade.
Source : article on Newsmax.com titled Laffer : Obama Must Use Reaganomics to Save Economy