Economists Debate Policy, Put Aside Partisanship

Rosemary Boeglin and Kate Gill

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Before economists Arthur Laffer and Jared Bernstein began to debate on Tuesday evening, they amicably shook hands. Laffer and Bernstein, who share a long friendship, sat atop a small stage in West Lecture Hall and engaged students, faculty and community members in a dialogue about economic policy.

After a long-winded introduction by College President Marvin Krislov — which detailed the economists’ credentials and career highs — the debate commenced, moderated by Department Chair and Professor of Economics Barbara Craig.

Craig launched the discussion, asking each economist about the role of government in ameliorating weak economies. Bernstein and Laffer took fundamentally different tacks: Bernstein framed the issue in terms of “market failures,” which he deems worthy of government intervention. Adopting a traditionally Keynesian approach, Bernstein defended stimulus in response to these failures, using the Great Recession of 2008 and health care as examples.

Laffer emphasized that “prosperity is written into the tax code.” Instead of advocating for government participation in the form of stimulus, Laffer proposed a very simple 12 percent flat tax, dismissing all federal tax — save sin taxes, which he considers effective in regulating the behavior of the citizenry — and taxing unrealized capital gains.

This stems from Laffer’s understanding of an economic system based on incentives and deterrents. Essentially, Laffer holds that if the product of an individual’s labor is redistributed to an unemployed person, the result will yield a huge population of non-workers. This logic informed Laffer’s impactful contribution to President Ronald Reagan’s economic policy, the implementation of trickle-down economics and the basis for Laffer’s nickname, “The Father of Supply-Side Economics.”

“Imagine we have a two-person world, Farmer A and Farmer B; that’s it,” Laffer posited during the debate. “If Farmer B gets unemployment benefits, who do [you] think pays for it? Am I going way over your heads on this one? Government spending is taxation.”

The debate was sponsored by the Office of Public Programs and spearheaded by the Oberlin College Republicans and Libertarians. According to Conservatory senior Taylor Reiners, president of the OCRL, the event came to fruition through the efforts of Steve Shapiro, OC ’83, a principal donor to the club.

“The event came about because we, for a long time, wanted to create a debate series,” Reiners explained. “Mr. Steve Shapiro, one of the donors to the club, said ‘Hey, I know Art Laffer, he’s a good friend of mine, why don’t we put him up for a debate?’ ”

Reiners noted that he and his fellow Republicans coordinated with the Oberlin College Democrats and did not intend for the debate to rouse any political tension.

“[Laffer and Bernstein] weren’t speaking past each other,” Reiners noted. “They don’t hold any animosity toward each other.”

Bernstein seemed to think that Laffer, who vacillated between over-simplified analogies and esoteric terminology, was relying on theory to support his claims, while the data showed something very different.

“Art Laffer — hate the curve, love the man — puts so much emphasis on the tax system,” Bernstein remarked during the event. “While a lot of it makes sense, if you look at it in the real world you simply cannot find these kinds of relationships.”

According to Bernstein, income inequality is directly linked to economic prosperity. For Laffer, the data demonstrated something very different. Ultimately, Laffer stated, the goal is not to make the rich poorer, but rather to make the poor richer.

Visiting Professor of Economics Edward McKelvey, OC ’68, framed the issue in terms of a private-public distinction. “The quick answer is that Laffer [maintains] a much stronger faith in the private sector to function properly and get the right outcome. Bernstein has much more skepticism on that. Laffer never answered anything about market failure because he doesn’t really believe in market failure,” McKelvey said.

Disagreements aside, the debate seemed to strike an affable chord. “A lot of people reacted positively,” McKelvey added. “Any time you can put humor into economics it’s a good thing.”

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