Despite Big Real Challenges, The Economy Is In Good Shape & Getting Better | Dr. Art Laffer

Adam Taggart | Thoughtful Money® Aug 26, 2026

Summary

Laffer ties soft GDP to a 4.5M-person immigration swing, not economic weakness — saying today's apples are not yesterday's oranges.

He expects Kevin Warsh to deliver zero inflation via a price rule, comparing his potential to Volcker's 21.5%-to-4.5% rate cut.

Laffer's five pillars: flat tax, spending restraint, sound money, minimal regulation, free trade — get out of the way after.

He calls Treasury's Operation Twist a market-arbitraged gimmick likely to weaken the dollar and lift gold prices.

He urges commission-based pay tied to GDP for politicians — arguing aligned incentives beat virtue signaling.

Top takeaway Laffer calls Warsh the single best Fed chairman he has measured against Burns, Martin, Volcker, Greenspan, Bernank, Yellen, and Powell on credentials and balance sheet, predicting he will materially shape policy for the next quarter century.
He expects Warsh to pursue a price rule targeting 0% inflation - not the Feds stated 2% - using Warshs prior board experience and social skill to align the FOMC around that goal.
Laffer contrasts Warsh (long-term Fed chair) with Treasury Secretary Bessent (Trump appointee), arguing Warsh would resist jawboning or thumb-on-the-scale interventions even when Bessents Operation Twist pressures market signals.

Top takeaway Laffer argues the US economy is in great shape and the lower reported GDP/labor growth is purely a population-counting artifact - a swing from ~3.5M inbound migrants under Biden to ~1M utbound under Trump - not a productivity or demand problem.
He lays out his five pillars of prosperity: a broad-based flat tax with all deductions removed, spending restraint, sound money, minimal regulations, and free trade - calling them the test against which any bill should be judged.
Laffer opposes Californias wealth tax as anathema, arguing the right fix is a low-rate broad-based flat tax that captures unrealized gains (his Jerry Brown 1992 plan would have set a 13% top rate).
He dismisses Treasurys Operation Twist as something that did not work in 1963 under Tobin and will not work now, warning that the dollar has weakened, gold has risen, and the near-term inflation/interest-rate outlook has worsened.
Laffer sees Kevin Warshs Fed as the biggest future catalyst - and analogizes the Treasurys yen intervention to a floor support system that risks degrading the dollar to Japanese monetary-policy standards rather than forcing Japan to contract its balance sheet.

Top takeaway Laffer discusses Buffetts 2010 New York Times tax letter - Buffett paid ~$7M ~52.5B of real income because of charitable deductions and unrealized Berkshire Hathway gains - as proof the rich game the existing code.
He rejects Buffetts politician-pay-by-GDP-growth proposal as a directionally right idea with the wrong economics, joking that Munger should have switched roles with Warren because Buffett does not understand economics beyond Berkshire.