Customer Reviews

The End of Prosperity: How Higher Taxes Will Doom the Economy--If We Let It Happen

5 star:		(45)
4 star:		(9)
3 star:		(2)
2 star:		(1)
1 star:		(18)

 

 

The controversy around the Laffer curve is made by those who do not understand the fundamentals of economics: people respond to the incentives. Ask yourself this simple and easy question, would you work hard (or at all) if someone took out of your wallet $4 for every $10 yo earned? What about $5, $6 or more? The fact of the matter is the top 1% of income earners pay 40% of the taxes collect while the bottom 50% pay 3%.

The current economic conditions is bad, but it will get worse if money is stolen from a group of people in the name of so called "fairness". The Laffer curve allowed the world we live in today. It allowed the Bill Gates, Steve Jobs, and the Michael Dells of the world to make everyone's better. There would be no laptops, iPods, Amazon.coms if the courageous entrepreneurs in our economies were not allowed to reap what they sowed. People do not work so that they can pay the government. They work to improve themselves, and that is the point of this book.

(Note: I own and have READ all of this book) (...)
This is a bi-partisan book, and a 'must read' for all who truly care about the future of America.

Not often that I suffer that particular effect, but this book leaves me with an uncomfortable feeling. The future sounds a bit scary.
Very well written, with a wry sort of 'quietly despairing' humor that entertained me frequently. Good prose. Often dry and witty.
I will give you a short review first, and then a long review. Take your pick. That tells you perhaps I took the issues this book raises seriously. (Disclaimer: I don't want to upset anybody. Don't get mad. I'm just offering a working class grunt's opinion. I apologize for any perceived mockery of the Great Ones, the Federal Elite, who -of course- know what is best for me, and how best to spend my money for me.)

Short review:
Well written. Bang up to date. Touches intimately on political decisions and ATTITUDES, past and ongoing, that affect us all. Quite funny-sad-infuriating at times. Highly qualified writers/economists. You can argue if you want to that they are bone-headed wrong, dumb schmucks from the Rabid Right, but you can't deny they are shakers and movers. These three boys have been in the thick of it all for a long time. If you care about America, about people and their jobs and families, then -please- just for this one book, lay any and all prejudices and political bias to one side. Stop. Take a deep breath, and plow right on in. With an open mind.
Again, I'm not suggesting you should agree, but PLEASE, at least quietly consider the issues. They are of monumental importance to us real, live, breathing little human beings. If you know of a book that directly opposes this book's conclusions, I'd like to hear any suggestions...

Long review:
At issue, front and center, in this seminal work is the economy, and government intervention. Capitalism, free markets, laissez faire versus the Federal Government regulators, federal deficits, public works, taxation, monetary policies, etc. It asks searching questions.
When did it work? When did it not work? When was the economy sound? When not? Who damn well screwed it up? The greedy Rich? Left wing idealogues? Utopian reformers from Cloud Cuckoo land? Well meaning, sincere, but sadly misinformed politicians? Corrupt and lazy politicians, who couldn't (can't) be even BOTHERED to study economics, and who didn't (don't) give a damn, as long as they themselves were (are) all right, got (get) the votes, and got (get) re-elected? A gaggle of pompous Harvard trained politico career lawyers with a fee-feeble understanding of buh-basic economic principles? (okay, okay, I embellished that one a bit) Which President was the sharpest? Who was the absolute dumbest? How does the economy work? What keys on the economic piano should you hit, and when should you hit them? Can you achieve success just by hitting the right individual notes, or must you learn to play the right combination of notes, and hit the right economic recovery "chord"? How much harm can Mister Stoopid actually do? (A lot). Is uncontrolled Welfare undermining the American work ethic? Are we faced with "unintended consequences" from well meaning but naive policies? Or are we too thick skulled to read History, and therefore doomed to repeat the same boondoggling fiasco? Are massive public works, bail outs and federal spending the answer? Has Mr Obama seriously studied History? Economics? Has he considered the arguments in this book? Has he maybe even read this book? (I hope so) Has he chosen advisers who have a track record in the past of having been correct in their economic forecasts? Who are his economic advisers? Where do they stand on supply side economic theory? All of these issues and more, are carefully examined in this book.
To my delight, I discovered that this book was avowedly bi-partisan in many ways. Let me say that again: "this is a bi-partisan book." You can't just 'cop out', take the easy route, and avoid the undoubted serious cerebral effort of digesting this book, by conveniently plastering some 'right wing' label on it. It's not. Some of the other "reviewers" -obviously- did not take the trouble and make the effort to read it. One at least is vaguely honest, and right at the end of a rather long discourse, he tells us he only read the first chapter (!!), a few random pages, and relied on "Wikipedia" to fill in any gaps in his understanding. That seems to me a rejection of this books merits "in advance". Such a pity. This is a centrist book, that examines the issues, ("It's the economy, stupid!") and cuts right across party political lines. This isn't dogma. It's not faith. It's about the examination of historical events, past and ongoing. Some of it is factual, no debate. Some of it is interpretative, big debate. Great. Everybody involved. Both parties.
And that is another reason it should appeal to readers on ALL sides of the debate. You don't believe me?
Some examples: the authors cheerfully rain down fire on the "four stooges". Namely Presidents LBJ, Richard Nixon, Gerry Ford and Jimmy Carter. Two Democrats, two Republicans. Chapter 4 ("Honey, we shrunk the economy") (pages 61-83) goes into depth on their economic policies, and the results. This chapter pulls no punches, and soundly thrashes both Republican and Democrat economic policies. Chapter 4 alone contains lots and lots of thought challenging quotes, and you can agree or vehemently disagree, but I guarantee... it will get you thinking. I'll give you a sample below:
(page 65) "Two Democrats, two Republicans. Four presidents emitting one dimwitted economic policy after another in what was the largest assemblage of bipartisan ignorance ever. We'd say that from an economic policy perspective, it just doesn't get a lot worse than these four..."
(page 65) (on LBJ) "But the real economic poison pill was that for the first time in American history, at the same time we were spending more money for guns to win in Vietnam, LBJ unleashed a huge new spending barrage on butter, i.e. domestic programs. In 1965 LBJ launched the Great Society social welfare state "to end poverty in America". The grand failure of the welfare state would plague America for the next thirty years- not just in the $5.4 trillion in budget costs that were poured down this rat hole, according to the Heritage Foundation's cost estimate, but also in ill-designed programs that depreciated the value of work and family cohesion and created several generations of a permanent American underclass who were sucked into a cycle of welfare dependency. Poor families on welfare were pushed into 100 per cent plus effective tax rates, because they could lose more money in government benefits from working than they could earn on the job..."
(page 70) (on Richard Nixon) "To impose wage and price controls so that prices of goods and services could not rise exposed a fundamental lack of understanding of how the pricing system in a free market operates to allocate and place value on output..."
(page 71) (on Richard Nixon) "Next came Nixon's big spending proclivities - the budget ran wild during his tenure, much of this facilitated and urged by a spendthrift Congress. In 1970 the federal budget stood at $196 billion. By 1974 the budget had increased to $269 billion, an increase of almost 30 per cent. Nixon saw federal spending as stimulatory for the economy, and that is when he declared himself a Keynesian...."
(page 71) (on Richard Nixon) "This was a formal surrender in the fight to control government expenditures".
(page 73) (on Gerry Ford) "Ford's biggest failing was in misunderstanding how to combat inflation, which was still raging. Ford asked the nation in October 1975 to be "energy savers" and to wear the Whip Inflation Now (WIN) buttons to try and slay the inflation beast, as if inflation were a state of mind, rather than the result of monetary policy run amok".
(page 73) (on Carter) "....Jimmy Carter, who had run on an appealing anti-Washington, anti-big government,pro-balanced budget message. He was to be a new-era Democrat. It was a brilliantly crafted slogan for the times, yet once Carter was in the White House it became clear he had no idea how to lead the nation out of its deepening economic troubles.
(page 74) (on Carter) "Carter had promised to restrain the federal budget, but it stampeded on his watch...."
(page 74) (on Carter) "Lacking a core pillar of ideology, Carter proved to be a micromanager and a constant vacillator on policy. In his one term he launched seven major economic programs, none of which worked and some of which contradicted each other..."
(page 79) "It wasn't just high energy prices that flummoxed Jimmy Carter- but the rise in all prices seemed an irresistible force of nature during his presidency. He was a convert to the Phillips-Curve religion that high inflation had to be tolerated to put people to work, so even with the money supply rising by 11 per cent a year in 1977, he and his cadre of economists urged the Federal Reserve bank to lower interest rates and quicken the pace of the printing presses to push more dollars into the economy."

I hope these quotes show that the writers are not party biased, and that everybody gets a sock on the nose who they feel deserves it. (Oh, and by the way, Mr Laffer voted for Bill Clinton twice.) I hope also it suggests you cannot solve economic problems with good intentions, fine speeches, lofty ideals, massive spending, lots of free lunches. party political dogma, nailing the Rich, or by an extensive background in Law. It really is a must to have seriously read History, studied Economics, and to have listened (....) to alternative economic points of view. (Yes, how about... that Laffer curve thingie?)
Plenty of people have gone before, adamant that they knew best, unwilling to listen, dogmatic in their certainty, and been proven... dead wrong. And ordinary Americans have paid the price for this hubris, along with their families.
Here's two interesting quotes for you to test your own mindset:
(page 75) "The Journal advised: "It stands to reason that the US economy would benefit enormously if the rich paid more taxes. We have been arguing this, at least implicitly, for years. What we have not been able to get the politicians to understand, though, is that you can't get rich people to pay more in tax revenues by raising their tax rate".
Read it carefully.
(page 116) "But Reaganomics did create a rising tide that lifted nearly all boats."

Which of course, now, as of January 4th 2009, leads us to Mr Obama. He is a nice man. We all sincerely hope he will be a great President. And a sound, well read economist. Here's some quotes for you to mull over:
(page 78) "Like busing, nuclear-free zones, and Whip Inflation Now buttons, price controls should be viewed as one of those discredited 1970's experiments that deserves to be forever banished from public policy discussions. We despair that they are now being seriously debated in the current energy policy discussion in Washington. Barack Obama and many other leading Democrats favor a windfall profits tax on oil companies and anti-price-gouging laws. UGHH! The lessons of Carter's failures still haven't been learned."
That concerns some of us. But it might just be idle talk. Give the man a chance. He's good. Great orator. He'll fix it.
Maybe.
Fast rewind to page 9 ("The gathering economic storm") "The short answer is that we aren't just optimists, we are first and foremost realists. And we are now witnessing nearly all of the economic policy dials that were once turned toward growth being twisted back toward recession. The problem is not a crisis of the American Spirit or work ethic, or value system, or some inevitable decline due to complacency. It is that our politicians in both parties, but especially the liberal Democrats, are getting everything wrong - tax policy, regulatory policy, spending policy, trade policy. We call this the assault on growth. The political class seems to be almost intentionally steering the United States economy into the abyss - and, to borrow a phrase from P.J.O'Rourke, the American electorate, alas, seems ready and willing to hand them the keys and the bottle of whiskey to do it. Almost all of the catastrophic policy mistakes are being coated with good intentions....."
The book also relates an interview (pages 9 and 10) between Mr Obama and Charlie Gibson of ABC News.
You might like to read the interview. I'm not sure what to make of Mr Obama's odd comment "Well, that might happen, or it might not". There might be an innocent explanation. But it sure didn't fill me with confidence either.
The authors write: (page 10) "This amazing exchange left us scratching our heads and wondering whether this gifted orator who can fill stadiums with 70,000 or more adoring fans and followers and says that he is promoting 'The Audacity of Hope' has even the slightest clue about how economics works in the real world...."

I can't quote the whole book to you, and it would take many, many more quotes to run through the suggested economic remedies. But I hope... I have maybe set the stage and stirred your interest. Read this book. Please. And come visit with me some time on Writers Harbor. (org)

If you know of a book that is the polar opposite to this book, and refutes the contents, I'd like to hear a suggestion.
Peace. Enjoy the read.
PS: Please 'comment' constructively if you feel I am missing the point somewhere, or if you feel you can point me to further useful reading material to broaden my understanding of this time period, or to correct flawed reasoning - thanks...

This book was pretty much what I expected: a loud siren acting as a wake-up call to the Obama administration. But, to my surprise, it turned out to be a lot more. I learned a great deal here.

The most surprising thing: JFK was a supply-sider! Back in the early 60s, Democratic President John F. Kennedy was proposing tax cuts to get the economy moving, and the NAY-SAYERS were a bunch of curmudgeonly Republicans. (In a similar vein, you will be astonished to learn that this story goes back all the way to Warren Harding!)

Kennedy got his tax-cut package passed (just as Ronald Reagan did) and the economy took off. Tragically, Kennedy was shot dead, and America unfortunately entered what the authors call the "Four Stooges" period of the American Presidency: LBJ, Nixon, Ford, and Carter. Particularly interesting was the slicing-and-dicing of Richard Nixon. He has become known as "The Watergate Villain," and almost nobody remembers his disastrous, idiotic mismanagement of the economy. Wage and price controls, anyone? "We are all Keynesians now?" Ford and his silly WIN buttons helped not a bit, and then Jimmy Carter managed to drive the misery index to its highest level in decades. The Four Stooges, indeed.

I haven't finished this book yet, but I've already learned so much from it that I thought I should post this review. And I will close with a single image, which may be helpful to those who still think that the U.S. President can do as he pleases. This is Bill Clinton, who is getting sound advice that his re-election depends on maintaining credibility with key financial markets.

Clinton is so angry he pounds his desk, and shouts, "You mean to tell me that the success of the program and my re-election depends on the Federal Reserve and a bunch of *(%@&(% bond-traders??!!"

I suspect that this Clinton Moment is due for a replay in the very near future.

In the meantime, read this book. It is excellent in every way.

I sometimes wonder why we don't teach economics in high school!

As for those who think this is a "pro-Republican book," or an "anti-Democrat book," please go back and read this review again. The book heaps praises on JFK, trashes LBJ, Nixon, Ford & Carter, praises Bush Senior until his tax-betrayal -- and, in sum, is almost totally indifferent to partisan politics. What counts, for the authors, is how we will manage our economy.

Can we find a candidate willing to commit to a goal of economic growth? I suspect the White House is waiting for him.

Excellent book. Anyone who ever took Econ 101 knows that people respond to financial incentives. When productive activities (the hated business owners and corporations)are taxed more, their incentive to produce goes down, affecting all but hitting the little people worse by putting them out of work. Corporations are people. The Left has never learned this and is about to repeat all the old mistakes when it controls government. This book is a warning that punishing tax rates will kill economic growth. Loved the analogy of SD vs. ND. One is growing and has not state tax and one is losing population and does have a state tax. The last chapter on investing is too simple and leaves out investing in real estate completely (other than your house) through REITS or other vehicles -- otherwise, great writing and useful factoids, charts and graphs.

The End of Prosperity is possibly the most informative book I have ever read and I recommend that everyone should read it. The name is unfortunate, but the authors are economists, not writers of fiction.

The book describes the ups and downs of the American economy over the past hundred years with colorful stories illustrating how political actions affect the health and well-being of the population and its economy. It is relatively easy to read and does not require that you be an economic professional to understand it. It is the first literary piece that I have ever read that clearly describes the causes of the Great Depression. The book is not written along any party line which is refreshing. It encompasses an understanding of sociology to predict and motivate human behavior.

Another very exciting aspect to this book is the fact that it was published last October, 2008. It references current politicians which makes it incredibly informative. We are facing a grim reality with respect to our economy here in California and when you get to the chapter on California, hold on; there is nothing in it we don't already know, but it will make you blue. Move on though because the next chapter is terrific. It is the success story of other nations and their incredible recovery to prosperous economic conditions, like the "Miracle of Ireland."

Please read the book from the beginning, or you probably won't understand it and you will miss the interesting stories like the plight of the Beatles and Rolling Stones when they were making so much money and the British government was taxing them at a rate of 95%. There are other comprehensive stories that will light up your understanding of events that took place when you were younger and perhaps did not have enough perspective to truly integrate their meaning.

When I first read the book I found the Foreward to be a bit confusing. Don't let that put you off. I suggest starting at Chapter 1 and you will be amazed at its clarity.

When you finish the book you may, or may not agree with all of it, but I assure you that you will be far more educated and that is precisely what we need more of in this country, educated people who will take the time to study the facts and elect intelligent and wise leaders.

The end of the book does finally speak about how to grow and protect your assets, but it is anti-climactic by comparison to the understandings you will gain earlier in the book.

Everyone in Congress should be reading this book TODAY as they ponder how to deal with the financial mess we are in, and the looming bankruptcy of our nation. Lots of clear and simple lessons have been learned in the past 75 years of economic policy, all of which are highly relevant to our current situation. What a great book!

While I am not willing to make Supply Side Economics the hammer that makes all economic problems into its nails, it sure provides a sensible base from which to start thinking about the ways in which government distorts markets and gets in the way of prosperity and economic growth. Sure, government has a role to play, but a much smaller one than the government had even under Reagan. If government played the role of a rules committee, and one trying to set up a fair game rather than equal outcomes, we would all be better off. Instead, we assume government to be the engine of our prosperity and want to get on its payroll. Bad plan, bad economics, and bad morals.

Laffer, Moore, and Tanous provide an interesting recap of what the Laffer Curve REALLY says, rather than what those who oppose say it says. There are four basic principles behind the Laffer Curve and they all make sense. 1) Since taxing something increases the cost of that thing, you will get less of it. Lowering taxes on something will lower costs and get you more of it. 2) Tax systems should be about helping the poor become more well off and even rich rather than making the rich into poor people. 3) The higher the tax rates the more they impede the economy and the more you have to gain by cutting those rates. 4) When tax rates get to a very high point you actually get lower tax receipts instead of more. These make sense, right? They do to me.

The authors show us the mess the federal government and the American economy was before Reagan, how Reagan turned things around, and why our current path to abandoning Reagan's foundation of prosperity to return to New Deal and Great Society spending and taxation is not only wrong headed, but immoral and destructive.

They also discuss the way Europe is turning towards Reaganism just as we are turning away from it, why capital gains taxes should be cut to zero, why flat tax rates are better, why estate taxes are a terrible idea, why trade protectionism is bad, and why we don't want the federal government following California and taking us all into its tax and regulatory hell (and bankruptcy).

A good read and would that we would learn from these authors.

Reviewed by Craig Matteson, Ann Arbor, MI

As one can see from some reviews writen so far that they did not even read the book. It is only an opportunity for some just to spout off thier own views rather then an honest evaluation of the book in question. My view is that this book is well reasoned and a very real warning to those who would consider voting for Barak Hussein Obama. I in particular liked the example of Ireland of the dramatic change from huge unemployemnt and zero growth to today as an economic powerhouse.

The End of Prosperity is a very realistic look at the current bleak economic situation facing United States since Great Depression of 1929. The reform that was created as a result of this Great Depression; the creation Security Exchange Commission, relentless efforts for corporate transparency, and greater information for investment decisions fired backwards to destroy these very ideals that upheld the free enterprise system in a strange twist of events.

Mortgage lending companies were not setup as traditional depositories or brokers, but as real estate investment trusts (REITs). It is a corporate form for developers to avoid corporate income taxes. REIT pays out the earnings to shareholders who pay personal income taxes on them. Since they are publicly traded, it avoids regulators. But it comes under SEC which focuses mainly on insider trading, and corporate transparency, and not on mortgage lending. The lenders and borrowers used this little gap to mismanage the mortgage industry. There is another side to this story; for years congress commanded banks through Community Reinvestment Act to lower credit standards, and make more loans to low-income borrowers who could not payback mortgages.

The principal author (Arthur Laffer), a strong proponent of supply side economics provides an insightful review of the excesses of Keynesian dynamics that paved the way for governmental intrusion; higher taxes, manipulation of interest rates through control of monetary flow (through federal reserve) thereby weakening the dollar, and currently large scale bailouts of failed economic systems, that is in excess of one trillion dollars, and not to mention the national debt of $10.6 trillion. Just the interest payments on these vast amounts scare most nations. Major investment firms, mortgage-lending industry, and commercial banks are being bailed out, and even the major auto industries are seeking governmental intrusion to fix the financial problems during the merger process. States such as California is almost bankrupt is also looking for bailout. The question is who is going to pay for these excesses; the magic word is, "the taxpayer." Things get worse in a world of chaos; cry for economic equality and fairness in taxing system is making the politicians to twist the economic system to their advantage and enhance electability to the public office. One of the common complaints is that rich are getting richer and they are paying less tax: This has a strange meaning and consequence because rich pay more taxes and increase the governmental revenue (see Table 7-1, and Figure 7-3.)

Monetary control by Federal Reserve to curb inflation, and lower taxes, provide a model for economic growth (see for example Figure 7-1) that emphasizes free-market capitalism as the engine of prosperity and not by government intervention. The four killers of economic prosperity are; trade protectionism, tax hike and reckless government spending, regulation (governmental intervention) as opposed to deregulation, and monetary control to Federal Reserve.

The first chapter provides a quick review of economic growth and prosperity from Reagan years to Clinton's presidency (chapters 5 & 6; also see Figures 5-1, Table 5-1, Figure 6-1,). The imminent economic danger includes; unemployment, lower wages, lower-housing prices, inflation, recession, and too much governmental intervention. The lower-income households are most affected by trade barriers and import-tariffs. Made in India, and China where the labor is cheap results in less cost to American consumers and hence can afford varieties of household goods and appliances. Global competition also keeps the prices down.

The benefits of lowering taxes include the take home wages for an average person is higher, and his spending and investing will be higher (see Figure 5-5), the government revenue is higher because of higher volume of spending by the consumer (Figure 3-1 to 3-3, Table 3-1). Lastly the rich and wealthy would like to invest at home where the tax policies are favorable (see Figures 5-2 and 7-2). When the investor-employers earn more, with less tax, the wages of their employees will rise. The impact of higher taxes and governmental intervention reduces economic growth (Figure 4-1), and deregulation has significant impact on prices (Figure 4-2). Impact of higher taxes is well discussed in chapters 4, 13 and 14: Chapter 14 also discusses the impact of increased regulation and anti-immigration policies on economic growth. The last chapter provides some sound advice on your personal investments for years ahead.

1. Financial Shock: A 360º Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis
2. Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis
3. Confessions of a Subprime Lender: An Insider's Tale of Greed, Fraud, and Ignorance
4. Full of Bull: Do What Wall Street Does, Not What It Says, To Make Money in the Market
5. Public Economics in Action: The Basic Income/Flat Tax Proposal (Lindahl Lectures on Monetary and Fiscal Policy)

This book is as timely and insightful as any book I've read in a few years. It is written, of course, by one of the supply-side architects and icons, Art Laffer, but the team has provided a very interesting history of tax policy and how it is a very non-partisan subject. I only hope the Obama team takes the time to read it and act on its wisdom.