Economist Laffer: The age of prosperity is over
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When a noted economist declares that an economic era is over, and does so in the Wall Street Journal, it’s worth noting. In this case the economist is supply-sider and Reagan influencer Arthur Laffer, who writes in today’s Journal, ‘The Age of Prosperity is Over.’
Laffer’s point, as I read it, is that the government’s panicked responses to the housing slump and the financial crisis are wrongheaded in the extreme, and will not only prevent the free market from correcting current imbalances, but will sink the economy:
Twenty-five years down the line, what this administration and Congress have done will be viewed in much the same light as what Herbert Hoover did in the years 1929 through 1932. Whenever people make decisions when they are panicked, the consequences are rarely pretty. We are now witnessing the end of prosperity.
It’s worth repeating what Laffer has to say about the housing bubble and bust (pet peeve: why is it so difficult for political leaders to acknowledge that much of our current crisis stems from a disastrous housing bubble?):
No one likes to see people lose their homes when housing prices fall and they can’t afford to pay their mortgages; nor does any one of us enjoy watching banks go belly-up for making subprime loans without enough equity. But the taxpayers had nothing to do with either side of the mortgage transaction. If the house’s value had appreciated, believe you me the overleveraged homeowner and the overly aggressive bank would never have shared their gain with taxpayers. Housing price declines and their consequences are signals to the market to stop building so many houses, pure and simple.
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--Peter Viles
Photo: A Newport Beach home. Credit: George Briggs
Hat tip: It All Happens on the Margin