Fmr Reagan Economist Explains How He Thinks Trump’s Policies Could Boost Economic Growth

Former Reagan economist Art Laffer, Tuesday on Fox Business, explained how he believes President-elect Donald Trump’s policies could boost the economy.

During an appearance on “Kudlow,” Laffer said there’s a need for serious budget and tax cuts. He added that the Office of Management and Budget (OMB) was designed to equip policymakers with the necessary tools to identify and eliminate government waste, abuse, and fraud.

“They should have done it long long long ago. I mean that’s what the OMB is all set up to do, it’s [to] give you all the tools to be able to go in there and find out where the waste, abuse and fraud is. And I think with Elon Musk and Vivek Ramaswamy, they’re going to be able to find lots of areas where they’re being able to cut, which would be just absolutely wonderful areas,” Laffer told host Larry Kudlow when asked about budget cuts.

The former economist also said it is necessary to differentiate the impacts of these policies on inflation and economic growth.

“This is really doable. I think it will be done. I think what we really want, to make sure we don’t confuse, is bringing down inflation is great and that will bring down the inflationary premium on interest rates. And that would be wonderful, and Biden has done a really bad job on this. But also once we start that economy growing, the expected real return on capital is going to be rising very sharply,” Laffer said.

Laffer said that increased returns would not only boost productivity and growth but also expand the availability of goods and services, ultimately leading to lower inflation and a reduced inflationary premium.

“And this is the one thing we really really want is higher returns on capital, higher productivity, higher growth that will have two effects,” Laffer said. “One, it will raise the real rate of return but to a higher real rate of return means there are more goods and services available, which means lower inflation which means a lower inflation premium right around now. I’m not sure which of these two factors plays the most important role, but we do need to get inflation under control.”

Leading economist Peter Schiff previously said that Trump will inherit economic challenges in his upcoming administration. Schiff said the economy is a mess under President Joe Biden, and Trump will face a bigger mess once he takes office.

During Biden’s administration, Americans face rising expenses, with inflation peaking at 9.1% in June 2022. The inflation has since subsided. The consumer price index, which measures everyday goods costs, however, still reflected a 2.7% increase from the previous year, as reported by the Bureau of Labor Statistics in December.

Analysts say this inflation surge is due to significant government expenditures under the Biden-Harris administration. Recently, U.S. Treasury Fiscal Data said the national debt has reached $36.16 trillion.