Four Prosperity Killers

You may recall reading about Arthur Laffer in a couple of my blog articles. He popularized a concept which is now famously known as the Laffer Curve.


Simplified: this as an economic view that tax revenues would be zero if tax rates were either 0% or 100%, and somewhere in between 0% and 100% is a tax rate which maximizes total revenue.

Thus, if tax rates are too high, then a lowering of tax rates will improve US growth (GDP)--which should in turn improve employment for Americans--and create more prosperity.

In a recent Wall Street Journal article, Laffer said that while Fed policy was undoubtedly important, it was ultimately tariffs, rising taxes, and currency devaluation which ruined the 1930s. According to Art, we face the same dangers today.

The four killers of prosperity are:

• Rising tax rates

• Inflationary money

• Trade protectionism

• Government control/re-regulation
  

You are already experiencing trade protectionism and much greater government control this year. Story after story abounds.

If the current tax policy is allowed to expire next year, then most Americans will be affected by higher taxes as we revert to tax levels from earlier in this decade.

Inflationary money has not hurt us yet, and there is debate over the prospects of inflation, or perhaps the opposite, deflation. So the story on this will likely develop one way or the over over the next couple of years. (More on that in a future blog article.)