Amid a White House claim that federal spending grew at the slowest rate in 60 years under President Obama, the relationship between government outlays and economic growth was being debated.
Art Laffer, chairman of Laffer Associates, criticized Obama for being just as bad as his predecessor.
“Frankly, he’s no different than George W. Bush. They both ruined the economy, in my mind,” he said on CNBC’s “The Kudlow Report.” “It’s not liberal or conservative, left-wing or right-wing, it’s economic policies, and spending is the problem.”
Laffer co-authored a Wall Street Journal op-ed article taking Obama and Bush to task for federal spending.
“Sadly for fiscal conservatives, the biggest surge in government spending came during the last two years of President George W. Bush's eight years in office (2007-2008),” he wrote. “A weakened Republican president dealing with a strident Democratic Congress, led by then-House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, resulted in an orgy of spending.”
Laffer saved his praise for President Bill Clinton, who was “great on spending,” adding that he cut spending as a percentage of GDP from 23.5 percent to 19.5 percent.
“It was a great period, and I think he was a great president,” he said.
Joseph Stiglitz, Nobel Prize winner and author of “The Price of Inequality,” pointed out one flaw in the argument linking spending and growth.
“Correlation doesn’t prove causation. There was a lot going on. I agree with Art on one thing: Clinton was a great president,” he said.
“It wasn’t the spending cut. One of the things that we were the beneficiary of was the fruits of the technology of government investment in the Internet, which was the basis of some of the most spectacular innovations that the private sector brought to market,” he said. “This was a really good example of the interaction between good public spending and dynamic private sector.”
Asked by host Larry Kudlow whether he would increase government spending, Stiglitz was clear.
“Yes I would, especially government spending on investments that would provide the basis of our future long-term growth,” he said. “We’ve underinvested in infrastructure. We’ve underinvested in technology.”
While nations with growing economies such as China, Brazil and India have been spending heavily on infrastructure, the United States was estimated to be $2 trillion short in rebuilding roads, bridges, public works and electrical grids nearing the end of their lifespans, according to a study by the Urban Land Institute.
Meanwhile, Laffer took the opposite position.
“Government doesn’t create resources, Larry. It redistributes them. It takes them from workers and producers and gives them to people based upon some characteristic other than work effort,” he said. “It does not create jobs. It destroys jobs, this stimulus spending, even at less than full employment.”
"The Kudlow Report" airs weeknights at 7 p.m. ET.
Questions? Comments, send your emails to: email@example.com