Trump’s pro-growth policies delivering results, optimism builds heading into 2026

Economic Performance Under Trump & Biden: A Discussion with Art Laffer & Steve Moore

Key Concepts:

• Laffer Curve: The relationship between tax rates and tax revenue, positing that beyond a certain point, increasing tax rates can decrease revenue.
• Incentives: The motivation for economic actors to behave in a certain way, heavily emphasized as a driver of economic growth.
• Trump Derangement Syndrome: A pejorative term used to describe perceived irrational opposition to Donald Trump and his policies.
• Regulation: Government rules and laws impacting business operations, seen as a hindrance to economic growth when excessive.
• Empiricism: A theory that all knowledge is derived from sense-experience.
• 401(k) & IRA: Retirement savings plans with tax advantages.
• Russell 2000: A stock market index representing small-cap U.S. companies.

I. Failure of Economic Forecasts & the Role of Incentives

Art Laffer and Steve Moore critique the consistent failure of mainstream economic forecasts, particularly regarding inflation and growth under the Trump and Biden administrations. Laffer argues the core issue is a fundamental misunderstanding of economics, specifically the importance of incentives. He contends that taxing work and subsidizing non-work disincentivizes productivity. He poses a rhetorical question: “Which would you prefer, giving money to people who don’t work or cutting tax rates on people who do work?”

Laffer specifically points to the inaccurate predictions regarding the impact of Trump’s tax cuts, which were expected to lead to slower growth. He highlights Trump’s positive economic policies, including making tax cuts permanent and the deduction of interest on car loans, as having a “very positive and massive stimulus effect.”

II. Texas as a Case Study in Pro-Business Policies

Steve Moore references the experience of Texas under Governor Rick Perry during the 2008-2010 financial crisis. While many states struggled, Texas maintained a relatively stable economy. Perry’s explanation, according to Moore, was simple: “You make it cheaper and easier to do business and you’ll get more business.” This illustrates the principle that reducing barriers to economic activity fosters growth.

III. Recurring Patterns of Forecast Errors & Ideological Bias

Moore emphasizes a recurring pattern: economic forecasters consistently predicted recession during Trump’s presidency, mirroring similar inaccurate predictions during the Reagan administration. He questions whether this is due to ideological bias ("Trump Derangement Syndrome") or a fundamental inability to understand the impact of pro-growth policies. He asserts that cutting taxes, reducing regulations, and securing favorable trade deals lead to positive economic outcomes.

IV. Performance of Small & Medium-Sized Businesses (Russell 2000)

The discussion highlights the positive performance of small and medium-sized businesses, as reflected in the 12% increase in the Russell 2000 index over the past year. Laffer and Moore emphasize that these businesses are crucial for job creation and are particularly sensitive to the burdens of over-regulation and high taxes, unlike larger corporations with resources for legal and accounting mitigation.

V. Historical Tax Rate Analysis & the Laffer Curve

Laffer revisits the historical example of the top tax rate, dropping from 73% to 25%. He argues that this reduction led to a surge in revenue from the top 1% of income earners, supporting the principles of the Laffer Curve. He dismisses the idea that a 73% top tax rate maximizes revenue, stating, “What a bunch of hooey.” He notes that high earners utilize tax shelters and avoidance strategies, rendering high tax rates ineffective.

VI. Consumer & Saver Benefits: 401(k) Performance

Moore presents data from Unleash Prosperity regarding the performance of 401(k) plans. He states that the average 401(k) holder experienced a real, inflation-adjusted gain of 15% in the past year, compared to a negative 15% return over the full four years of the Biden administration. He notes that approximately 60% of American adults have retirement savings invested in the stock market through 401(k)s or IRAs. Specifically, average 401(k) funds increased by approximately $22,000 after inflation in one year, while decreasing by $22,000 under Biden’s four years.

VII. The Importance of Empirical Evidence & Adaptability

The conversation references Tom Sowell, a free-market economist who transitioned from Marxism to his current position based on empirical evidence. This underscores the importance of adapting one’s beliefs in light of factual data. John Maynard Keynes is quoted: “When the facts change, I change my mind.” This highlights the need for economists to be flexible and responsive to real-world outcomes.

Notable Quotes:

• Art Laffer: “Because I understand economics and they don’t, David. Just joking. But it's true. They don't believe in incentives.”
• Rick Perry (as recounted by Steve Moore): “It ain’t rocket science. You make it cheaper and easier to do business and you’ll get more business.”
• John Maynard Keynes (as quoted by Steve Moore): “When the facts change, I change my mind.”

Conclusion:

Laffer and Moore present a consistent argument that mainstream economic forecasting has been repeatedly inaccurate, largely due to a failure to recognize the power of incentives and the benefits of pro-growth policies like tax cuts and deregulation. They emphasize the importance of empirical evidence and adaptability in economic analysis, contrasting this with what they perceive as ideological rigidity among many economists. The data presented, particularly regarding 401(k) performance and the Russell 2000 index, supports their claim that the economic policies of the Trump administration fostered greater prosperity for both businesses and individual savers.