Laffer Learning the Economics of Seeking Office

For Arthur B. Laffer, his quixotic and troubled first try at elective office is a matter as plain as--what else?--economics.

Becoming a candidate for the Republican nomination to the U.S. Senate to begin with, economist Laffer explains, was an act of diversifying. After all, his priceless political connections as Ronald Reagan’s trusted economic adviser are due to expire at the end of 1988 when a new president is elected, and “I saw my window on Washington closing.”

And then it was just plain cash-flow problems that Laffer blames for bedeviling him from the start. In debt after raising--and spending--$1 million, Laffer’s campaign apparently cannot be competitive in broadcast advertising during the crucial few weeks before the June 3 primary. He looks back wistfully: “If I only knew then what I know now. . . .”

But not to fret. Laffer, at age 45, is already talking about the long-range investment he made in electoral politics. “This is not the last, dying gasp of someone. It’s just another step,” he said of his struggling campaign.

For now, wags bitingly refer to a “New Laffer Curve” and wonder if it’s going anywhere.

Even by his own admission, a surprise turnaround will be required to propel Laffer past a field of a dozen rivals and into the November general election against Democratic incumbent Sen. Alan Cranston.

Polls have not shown him catching fire with GOP activists or rank-and-file voters. Only in recent weeks has he paid mind to the volunteer women’s club luncheons and candidate debates and other forums that are the gristmill of primary election politics. And his policy proposals, although often bold, have come across as complicated and have failed to spark the California imagination. Laffer is still pained that when he announces a press conference, the press doesn’t automatically show up in droves.

“Politics is an exclusive club with a very large entry fee that no one can pay for you,” he said. “The experience that it takes (to be a successful candidate) is almost impossible to get from someone else.

“If I’d started 1 1/2 years ago with the knowledge I have now, I could have put this race away--it wouldn’t even be a race. I’d know how to raise the money,” he added, with bluster that seemed as much for his own benefit as the listener’s.

Although many in California politics find it hard to imagine that voters would intentionally elect an economist to the U.S. Senate, Laffer’s admirers look at his campaign so far as a story of squandered potential--a problem of tactics, not ideas.

“He came in with tremendous assets,” recalled one associate. “But he didn’t like the kind of digging in you have to do to attract people to a campaign. He’s just not comfortable in that role.”

When he announced his candidacy in the summer of 1985, Laffer was one of the few economists in the world with a reputation that reached beyond the halls of government, business and academia. He was known as not just a talker but a doer when it came to championing the conservative doctrine that taxes are a drag on progress. President Reagan and California tax-buster Howard Jarvis are among those who cheerfully return Laffer’s phone calls.

As the story goes, Laffer’s doodling on a cocktail napkin helped give rise to the controversial premise behind Reagan’s 1981 Economic Recovery Act. This is the famous and much-disputed Laffer Curve of supply-side economics that asserts that cutting taxes stimulates business activity and actually increases government revenues.

Closer to home, Laffer has been involved in almost every California tax-cut drive, both successful and unsuccessful, since the landmark 1978 ballot measure Proposition 13, which made property taxes more or less affordable and stirred a national tax revolt.

Laffer thinks he is a victim of his own success.

“When the economy is in really good shape, it’s not the time people focus on the ideas of an economist,” he lamented.

Despite his ability to reduce economic theory to an easily grasped concept like a curve on a napkin and despite his reputation as a high-spirited public speaker, Laffer has yet to show himself as a confident or inspiring campaigner.

A self-described expert on the federal budget, for instance, Laffer was caught at his announcement without a ready answer to a question that is central to the supply-side economic argument that he espouses--what to do about the federal budget deficit. (Now he calls for a combination of federal spending reductions and a more efficient delivery of government services).

Then, at the behest of hired consultants, he tried for a while to attract attention in the Senate race by attacking local liberal congressmen district by district for their records on spending. Hardly anyone noticed. And then for long periods, Laffer left California altogether, raising money where he could as he maintained his busy and lucrative schedule on the national speaking tour.

Fund-Raising Strategy

“Whenever possible,” Laffer said, he attempted to raise money by arranging campaign events to coincide with his main business interests, which are making speeches and selling economic forecasts. This has given him the most geographically diverse list of contributors, but it also means that many of his financial supporters are from out of the state and are unable to vote for him.

His top-heavy fund-raising organization was designed to raise $2.5 million with an overhead of about $1 million. What has been achieved so far is the $1 million overhead with not quite enough in contributions to cover it, according to the most recent campaign finance disclosure reports.

“We raised enough to run a credible race. It was a successful operation. The trouble is we spent it too early, money that could be used now.”

Back to the Basics

For the remaining weeks of the primary election campaign, Laffer promises to devote much more time to California and back-to-basics politics.

He and his handlers are enthusiastic about his recent progress in adding vision and trimming minutiae and jargon from his economics lectures for the benefit of political audiences.

His message now explodes with enthusiasm about the benefits of incentive economics.

How to create inner-city jobs? With an enterprise zone that offers business incentives to locate where jobs are needed.

How to keep the economy booming? A flat tax to maintain incentives to achieve.

How to combat terrorism? Big enough bounties on terrorists will fill our jails with them.

What about the flood-tide of illegal immigrants? Open the borders and let competition reign because, Laffer explains, the vibrant economies of the world are in those places where immigrants have the incentive go, not where they are turned back.

Plan for Condors

He even told an interviewer that incentives are the way to save the endangered California condor. Put a price on the bird’s survival, he explains, and they’ll be so plentiful we’ll all be “eating condor cacciatore.”

Not so certain is Laffer about his own political prospects this June. He is behind and knows it, and he talks about it good-naturedly. But he also takes heart in the fact that none of the other GOP candidates on the ballot have broken out of the pack either.

“I think I’ve still got a shot,” he says. “I don’t have nearly the shot I should have. But there’s more to this race than raising money and running TV and radio commercials.”

Laffer talks openly about gaining from the experience even if he loses.

“I didn’t hit the toilet the first time I tried, either. . . .,” he says. “One thing you’ll never find me doing is giving up. I’ll be in this process until I’m old and gray. I have now paid my dues in campaign politics, and the future is literally wide open, whether helping someone else run or running myself.”