Valuetainment - Why Raising Taxes Destroys The Economy

00:00:00.000 If you tax people at work and you pay people who don't work,

00:00:03.520 don't be surprised if a lot of people decide not to work.

00:00:06.780 What causes inflation and how bad can things be

00:00:10.480 if hyperinflation takes place in the States?

00:00:12.820 The rich people who have the money taken from them

00:00:15.180 will produce a little less.

00:00:16.780 The poor people who have the money given to them

00:00:18.500 also will produce a little bit less

00:00:20.100 and you'll have a reduction in total income or output.

00:00:24.020 Ten-year bond yields are not high,

00:00:26.200 gold prices have not risen,

00:00:27.400 and the dollar has not been depreciating in the foreign exchanges dramatically.

00:00:31.160 So what concerns you the most right now?

00:00:33.880 Don't make the benefits so attractive

00:00:36.020 that you cause able-bodied people to stop working.

00:00:39.100 And now these people are not going back in the labor force

00:00:41.640 because it's more attractive being unemployed

00:00:43.980 than it is actually going back to their old jobs.

00:00:46.500 By stealing from the rich,

00:00:47.940 Robinhood literally made the poor worse off.

00:00:50.900 And that is the true story of redistribution.

00:00:57.400 You know, most people don't want to talk taxes,

00:00:59.080 but I'm one of those weird guys that loves talking

00:01:01.300 and learning about taxes.

00:01:02.940 And my guest today is an expert in that area.

00:01:05.360 I've had him on before three years ago in 2018.

00:01:08.280 We're having him back here and again.

00:01:09.300 And that's Dr. Arthur Laffer,

00:01:10.920 former member of President Reagan's

00:01:13.020 and Trump's economic policy advisor.

00:01:16.940 In 2016, he got the presidential,

00:01:19.080 I think you got the award

00:01:20.220 with the Presidential Medal of Freedom

00:01:21.500 for his work that he did with the economy.

00:01:23.400 With that being said, Arthur,

00:01:24.160 thank you so much for being a guest on Valuetainment.

00:01:25.760 My pleasure, Patrick.

00:01:27.060 Thanks for having me again.

00:01:28.400 Yeah, so from the last time you and I spoke,

00:01:30.660 you know, the Laffer Curve,

00:01:31.920 I'm driving down here from my place right now.

00:01:35.900 My camera guy, Paul's like,

00:01:37.620 I said, do you know Arthur Laffer?

00:01:38.620 He says, you know,

00:01:39.480 the only place I know Arthur Laffer from

00:01:41.580 is from a movie.

00:01:42.760 I said, which movie?

00:01:44.220 He takes the video.

00:01:45.080 You know which movie he's talking about.

00:01:47.060 Not really, but Ferris Bueller's Day Off.

00:01:48.780 That's the one he takes out with Ben Stein.

00:01:50.740 He says, do you?

00:01:51.320 And I'm like, you gotta be kidding me.

00:01:52.520 But to the person who doesn't know your background

00:01:57.160 and how you became who you became,

00:01:58.680 Arthur, do you mind taking a minute

00:01:59.620 and just kind of giving us your background?

00:02:02.020 Well, I educated Yale University undergraduate,

00:02:04.620 then Stanford MBA first.

00:02:06.540 And then I switched over to the econ department,

00:02:08.660 got my PhD in economics,

00:02:11.360 taught at the University of Chicago,

00:02:13.480 taught at USC.

00:02:15.000 I've been in government.

00:02:15.980 I was George Schultz's right-hand person in 1970

00:02:19.980 in the White House,

00:02:22.000 first chief economist at the OMB when it was formed.

00:02:25.640 And obviously from then on,

00:02:26.980 over the last 52 years,

00:02:28.260 I've been involved with the Oval Office

00:02:30.740 and with the White House and Congress

00:02:32.120 and other governments in Chile and Argentina

00:02:35.160 and in Britain, all over the world in economics.

00:02:40.040 So political economics.

00:02:41.520 And then I wrote for a long time,

00:02:43.300 a lot for the Wall Street Journal.

00:02:44.500 And I've written books and academic stuff

00:02:47.020 and blah, blah, blah.

00:02:48.420 It's all boring stuff to everyone else

00:02:50.400 except you and me, Patrick.

00:02:51.780 I think it's just important for people

00:02:52.840 to know your background,

00:02:53.820 to give you the credibility when you say stuff.

00:02:55.660 Six kids, 13 grandchildren,

00:02:57.640 four great-grandchildren.

00:03:00.600 Four great-grandchildren.

00:03:02.760 81 years old.

00:03:04.380 And you're still going.

00:03:05.600 And that's your office.

00:03:06.320 I think I was at your office three years ago

00:03:08.140 when we came down.

00:03:08.800 Is that the same office?

00:03:10.800 Same office.

00:03:11.720 Very cool.

00:03:12.140 Same one you were in.

00:03:12.740 In fact, if we turn the camera this way,

00:03:14.720 you can see Lady Thatcher's picture

00:03:16.700 between Sir Michael Hintze and my me.

00:03:19.100 And, of course, Jerry Brown on the wall here

00:03:21.900 and the President Trump and Reagan

00:03:23.840 and, you know, all the usual characters.

00:03:27.060 So let's get into it.

00:03:28.460 So what I did is,

00:03:29.700 about a couple months,

00:03:31.020 we had a guest on,

00:03:32.320 friend of mine, Byron Udell,

00:03:34.060 where we started talking about taxes.

00:03:36.220 And then they said,

00:03:36.860 you know, back in the days,

00:03:37.920 taxes were above 90% for nearly three decades.

00:03:40.420 I said, what do you mean three decades?

00:03:41.640 So yeah, Top Line was three decades.

00:03:43.720 You know, Reagan was known

00:03:45.120 for only doing two movies.

00:03:46.240 He'd make his 200 grand

00:03:47.160 and then he wouldn't do a third movie

00:03:48.240 because why would he do it?

00:03:49.200 Because he was only making $6,000

00:03:50.940 on the third movie, etc., etc.

00:03:52.720 So I went down there

00:03:53.660 and I started looking at

00:03:54.440 a bunch of stuff with taxes.

00:03:55.500 I did a video on taxes

00:03:56.500 and I got 50, 60 pages of taxes.

00:03:59.720 I watched every and any video

00:04:01.400 I can get my hands on taxes

00:04:03.220 to learn about this.

00:04:05.020 And there's a part of it

00:04:06.700 that was very interesting.

00:04:07.920 And I want to hear your thoughts on this

00:04:09.500 is when, you know,

00:04:11.120 originally the founder of the IRS

00:04:12.880 was Abraham Lincoln.

00:04:14.100 It was during his administration

00:04:15.400 that IRS got started.

00:04:16.680 So he starts and he says,

00:04:18.220 look, guys, we have the Civil War thing.

00:04:19.900 We got to go raise some money.

00:04:21.480 I think they put the taxes up 3%

00:04:23.540 for people making $500 to $10,000.

00:04:27.260 It was some tears that he had

00:04:28.460 and it was up to 6%

00:04:30.060 for people that were making more than that.

00:04:32.420 But he said, if we pay off

00:04:34.200 the debt that we've accrued

00:04:35.840 from Civil War,

00:04:37.000 we're going to stop paying,

00:04:38.900 collecting taxes,

00:04:39.920 income, ordinary income taxes.

00:04:41.520 Well, 10 years later,

00:04:42.500 they stopped having ordinary income taxes

00:04:44.820 and kind of went away.

00:04:45.740 And then comes the next round,

00:04:47.560 which is, hey, let's do it again.

00:04:48.880 And hey, you know,

00:04:50.300 we're going to just raise taxes

00:04:51.600 because we have to pay for World War I,

00:04:53.720 World War II.

00:04:55.060 But ordinary income taxes

00:04:56.440 never went away.

00:04:58.040 So, Arthur,

00:04:58.560 why is ordinary income tax

00:05:00.420 still around today?

00:05:02.500 You've got me,

00:05:03.240 but it really was that

00:05:04.200 we had the 16th Amendment,

00:05:06.560 I believe it was,

00:05:07.420 was under Taft,

00:05:09.020 was passed by all the states

00:05:10.340 and then by Congress.

00:05:11.980 And so it allowed

00:05:12.700 for a progressive income tax.

00:05:14.260 I believe the U.S. Supreme Court

00:05:17.040 really knocked it down

00:05:18.120 at least once,

00:05:19.000 maybe twice.

00:05:20.300 And this one just made it

00:05:21.880 so it had a constitutional amendment

00:05:23.300 that made it constitutional.

00:05:24.960 In 1913,

00:05:26.020 it was done by Wilson.

00:05:27.820 President Wilson,

00:05:28.460 the highest rate was 7%.

00:05:30.400 I think there were,

00:05:31.160 I think there were

00:05:32.380 400,000 total taxpayers

00:05:35.360 at that time.

00:05:36.440 Very, very small group of people.

00:05:38.440 It stayed at 7%,

00:05:39.900 the highest rate

00:05:40.780 for the next two years.

00:05:42.320 So three years at 7%.

00:05:43.740 Then it went to 15%.

00:05:45.140 Then it went to 77%

00:05:46.980 in 1918.

00:05:49.140 And then it started back down

00:05:50.660 in 1919,

00:05:51.980 73%,

00:05:53.300 where I think it stayed

00:05:54.120 for three years at 73%,

00:05:56.360 1919,

00:05:57.080 1920,

00:05:57.520 1921.

00:05:58.660 And then it tumbled down

00:05:59.860 to the 25% range

00:06:01.400 and then popped right back up

00:06:03.460 with Hoover.

00:06:04.620 He took it up from 25%

00:06:07.000 to 63%.

00:06:08.300 Then Roosevelt took it up

00:06:10.080 to 79%.

00:06:11.260 By 1945,

00:06:12.960 the highest marginal income

00:06:14.400 tax rate was 94%,

00:06:16.160 where it stayed

00:06:17.320 for a long, long time.

00:06:19.560 And then in 1981,

00:06:21.160 when the skies cleared,

00:06:22.940 the sun shone forth

00:06:23.960 in the earth,

00:06:24.500 the animals multiplied,

00:06:26.060 the trees bore fruit,

00:06:27.000 the fields turned green,

00:06:28.740 Ronald Reagan brought

00:06:29.660 that rate way down

00:06:31.420 to 28%.

00:06:32.880 And since then,

00:06:33.980 between 81% and today,

00:06:36.340 it's been about 20%,

00:06:38.480 about a little less

00:06:39.380 than 40% the whole time.

00:06:41.880 The first couple of years,

00:06:43.080 it dropped quickly,

00:06:43.920 but about a little less

00:06:45.680 than 40% in the years

00:06:47.400 from 1943,

00:06:48.340 when we had a comprehensive

00:06:49.860 income tax

00:06:50.740 months till 1981,

00:06:53.180 I think the average rate

00:06:54.700 was about 81%

00:06:55.840 at the top.

00:06:56.620 So you've had

00:06:57.680 two distinct periods,

00:06:59.600 a very high tax rate period

00:07:01.520 that was for a long time,

00:07:02.920 I mean,

00:07:03.220 38 years,

00:07:05.360 and then you have

00:07:06.020 a very low one

00:07:06.900 for a long time,

00:07:07.840 which is about 40 years,

00:07:09.700 something like that,

00:07:10.460 from 1981

00:07:11.080 to the present.

00:07:13.000 And those are

00:07:14.300 the two big periods,

00:07:15.080 but we have a lot of

00:07:15.920 bobbles and wiggles

00:07:16.500 in the middle.

00:07:17.640 But I'm pretty familiar

00:07:18.940 with all those moves

00:07:19.880 and I've got a book

00:07:20.700 coming out shortly,

00:07:22.060 which is Taxes Have Consequences,

00:07:24.420 which I'm co-authoring

00:07:25.720 with Gene Sinkfield

00:07:26.700 and Brian Dimitrovic,

00:07:29.300 both of them PhDs.

00:07:30.520 So we've got a really good book

00:07:32.600 coming out on that

00:07:33.460 and explains what the history

00:07:35.200 is of high taxes.

00:07:36.480 I'm looking forward,

00:07:37.300 and it's fascinating

00:07:38.140 the fact that you can just

00:07:39.160 spit out those numbers

00:07:40.080 as if like you,

00:07:41.060 you know,

00:07:41.320 you've got a computer

00:07:41.920 on your head,

00:07:42.400 which many people

00:07:43.360 would say you do.

00:07:44.460 But going back to it,

00:07:45.780 going back to it,

00:07:46.980 was ordinary income tax

00:07:48.640 ever created

00:07:50.020 to stick around

00:07:51.840 or was it just there

00:07:52.720 to raise money,

00:07:54.160 pay off the debt

00:07:54.800 and we don't have it anymore

00:07:55.780 until another war happens

00:07:57.500 or was it supposed

00:07:58.280 to be permanent

00:07:58.900 from day one?

00:08:00.400 Well,

00:08:00.680 for a lot of people

00:08:02.400 it was supposed

00:08:02.760 to be permanent

00:08:03.320 from day one.

00:08:04.760 In fact,

00:08:05.140 they had tried

00:08:05.680 to get it earlier

00:08:06.560 after Lincoln got rid of it,

00:08:08.120 but Lincoln got rid of it

00:08:09.140 under a threat,

00:08:09.960 by the way,

00:08:10.380 just so you know,

00:08:11.540 that the Supreme Court

00:08:12.500 did question

00:08:13.960 the validity

00:08:14.560 of the income tax.

00:08:16.780 And he did pull

00:08:18.480 that tax out

00:08:19.460 quite rightly so.

00:08:21.680 But then they wanted

00:08:22.540 to have an income tax

00:08:23.600 in there

00:08:23.940 in the early 1900 period

00:08:26.320 and that was knocked down.

00:08:28.020 It wasn't until

00:08:29.000 we got the 19th,

00:08:30.020 16th Amendment

00:08:30.840 that really allowed

00:08:32.280 the income tax.

00:08:33.200 And a lot of people

00:08:34.260 at that time

00:08:35.020 wanted it to be permanent.

00:08:36.820 The initial income tax

00:08:38.260 in 1913

00:08:39.240 did not contemplate

00:08:41.080 World War I.

00:08:42.040 It didn't.

00:08:43.120 It wasn't until

00:08:44.020 1917, 1918

00:08:45.580 that they really

00:08:46.720 pushed it way up.

00:08:47.700 Now,

00:08:48.260 in 1916,

00:08:50.320 they pushed it up

00:08:51.860 to 15%

00:08:53.340 with an inkling

00:08:54.540 of a war coming on.

00:08:56.420 But bottom line

00:08:57.480 is it was there

00:08:58.380 basically

00:08:59.060 to make sure

00:09:01.340 that the rich,

00:09:02.220 the very,

00:09:02.780 very rich,

00:09:03.140 the top,

00:09:04.040 really very small percentage

00:09:05.500 paid a lot

00:09:06.420 of the income taxes.

00:09:07.700 And it was still

00:09:08.200 a small source

00:09:09.760 of revenue

00:09:10.200 for the whole government.

00:09:11.560 So you'll see

00:09:11.940 a lot of people

00:09:12.920 more on the AOC camp

00:09:15.320 will say things like,

00:09:16.500 what's the big deal

00:09:17.100 if we take the top line

00:09:18.040 for the highest income bracket

00:09:19.280 to 90%?

00:09:20.120 We've done it before.

00:09:20.940 We did it for 30 years

00:09:21.880 or, you know,

00:09:22.680 if we've done it before,

00:09:23.500 why can't we do it again?

00:09:24.660 It's not like anybody else

00:09:25.660 is going to be affected by it,

00:09:26.700 but the only rich

00:09:27.920 who are already

00:09:28.460 making so much money,

00:09:29.500 why should they keep

00:09:30.140 all their money?

00:09:30.780 It's the infrastructure

00:09:31.440 that helped them

00:09:32.100 make this money.

00:09:33.120 What is your argument

00:09:34.080 to them?

00:09:35.500 Well,

00:09:35.600 I don't mean to make

00:09:36.180 an argument to them.

00:09:37.200 The question is,

00:09:37.920 their facts,

00:09:38.640 I think,

00:09:39.100 are really incorrect.

00:09:40.700 I mean,

00:09:40.900 when we raised taxes

00:09:42.120 in 1918 to 77%

00:09:45.660 and then lowered

00:09:46.760 those tax rates down,

00:09:47.860 now this is just

00:09:48.400 on the rich

00:09:48.880 that I talked about,

00:09:49.980 from 77% to 25%,

00:09:52.580 revenues really

00:09:54.120 increased dramatically.

00:09:55.640 The economy improved.

00:09:56.840 It was the go-go,

00:09:57.760 the roaring 20s.

00:09:59.860 As you know,

00:10:00.540 what we have found

00:10:01.420 is that when you raise

00:10:02.860 the highest rate,

00:10:04.520 number one,

00:10:05.540 revenues go down,

00:10:07.240 number two,

00:10:08.360 the rich are damaged,

00:10:10.680 number three,

00:10:11.660 to the extent

00:10:12.280 that they're not damaged,

00:10:13.380 they shelter their income,

00:10:15.180 all right,

00:10:15.580 and four,

00:10:16.680 the lower income groups

00:10:18.060 are hurt

00:10:18.700 and total tax revenues drop

00:10:21.260 and the taxes

00:10:22.320 on the lowest group,

00:10:23.640 the bottom 50%,

00:10:24.600 actually rise

00:10:25.960 with high tax rates

00:10:27.580 on the rich.

00:10:29.460 Let me go,

00:10:30.100 do you want to go

00:10:30.580 through that again?

00:10:31.040 I want you to unpack that

00:10:32.780 because I want the audience

00:10:33.540 to understand that.

00:10:33.860 Let me unpack

00:10:34.720 the first part with you

00:10:35.680 because it's really important.

00:10:37.000 From 1943

00:10:37.900 until 1981,

00:10:39.840 all right,

00:10:40.220 what is that?

00:10:40.880 That's 38 years,

00:10:42.080 something like that.

00:10:43.300 The highest tax rate

00:10:44.480 averaged a little,

00:10:45.500 about 81%,

00:10:46.640 something like that,

00:10:47.820 a very high tax period.

00:10:49.620 And without Kennedy,

00:10:50.540 it'd be much higher.

00:10:52.420 Averaged about 81%

00:10:53.940 during that period.

00:10:55.560 Revenue growth

00:10:56.420 from the top 1%

00:10:57.580 of income earners

00:10:58.460 was a little bit higher

00:10:59.820 than 1.5% per annum,

00:11:02.440 all right,

00:11:02.880 during that period.

00:11:04.140 And the economy grew slowly.

00:11:06.660 From 1981

00:11:07.880 to the present,

00:11:09.840 the average tax rate

00:11:11.160 has been a little bit,

00:11:12.640 has been a little bit less

00:11:14.060 than 40%

00:11:14.960 throughout the whole period.

00:11:16.880 And also,

00:11:18.340 revenues grew

00:11:19.000 at over 4.5%

00:11:20.940 during that period

00:11:22.340 versus 1.5%

00:11:23.560 the previous one.

00:11:25.020 And taxes,

00:11:26.420 from the rich,

00:11:27.480 the top 1%

00:11:28.600 as a share of GDP

00:11:30.180 soared

00:11:31.260 while taxes

00:11:32.400 from the bottom 50%,

00:11:33.980 not the bottom 95%,

00:11:35.440 declined dramatically

00:11:36.940 during that period.

00:11:38.240 So,

00:11:38.720 in any way

00:11:39.580 you want to cut it,

00:11:40.600 raising taxes on the rich

00:11:41.780 do hurt the rich,

00:11:42.920 they cause tax sheltering,

00:11:44.540 they cause the poor

00:11:45.380 to be worse off,

00:11:46.220 the economy

00:11:46.640 to be much poorer

00:11:48.060 as well,

00:11:48.860 and they don't collect

00:11:49.960 the money.

00:11:50.340 But other than that,

00:11:51.020 it's really a great idea,

00:11:52.320 Patrick.

00:11:52.820 So,

00:11:53.080 of course,

00:11:55.320 as simple as that sounds,

00:11:56.800 the way you put it,

00:11:57.440 how come

00:11:57.900 there is

00:11:59.380 70 million Americans

00:12:01.020 that disagree with you?

00:12:02.100 How come

00:12:02.320 maybe it's not

00:12:03.280 disagree with you?

00:12:04.280 Why is it so hard

00:12:05.240 to get the other

00:12:06.060 70 million

00:12:07.000 to see the data

00:12:07.940 and say,

00:12:08.360 that makes sense

00:12:09.260 rather than saying,

00:12:09.960 let's just raise

00:12:10.360 the taxes on everybody?

00:12:11.180 I don't know.

00:12:12.620 I mean,

00:12:12.800 maybe it's much easier

00:12:13.640 to be an accountant

00:12:14.360 than it is

00:12:14.840 to be an economist.

00:12:16.120 You would think

00:12:16.820 if you raise taxes

00:12:17.720 on the rich,

00:12:18.220 if they don't change

00:12:18.920 their behavior,

00:12:19.600 they'll pay more

00:12:20.280 and they're so rich

00:12:21.600 they can afford it.

00:12:22.680 Well,

00:12:22.900 I have a story to tell

00:12:23.840 if you have a minute.

00:12:25.580 Go for it.

00:12:26.180 I will tell you

00:12:26.960 my make-believe story

00:12:28.460 of Robin Hood

00:12:29.140 that I introduced

00:12:31.080 economics,

00:12:31.760 but it takes about

00:12:32.220 three minutes

00:12:32.780 or four minutes.

00:12:33.420 Go for it.

00:12:34.120 You know,

00:12:34.360 Robin Hood would wake up

00:12:35.320 in the morning

00:12:35.780 and, you know,

00:12:36.260 this is your mom

00:12:37.240 telling you the story

00:12:38.080 Robin Hood stole

00:12:38.780 from the rich

00:12:39.280 and he gave to the poor.

00:12:40.160 He made the poor

00:12:41.100 better off.

00:12:41.680 He was a hero,

00:12:42.360 made the rich worse off,

00:12:43.380 but they could afford it.

00:12:44.260 You remember the story.

00:12:45.800 Well,

00:12:46.000 the story starts off

00:12:46.980 with Robin Hood

00:12:47.660 and Nottingham.

00:12:48.680 He and his

00:12:49.100 get banned to marry men.

00:12:50.260 They don their

00:12:50.880 light green leisure suits,

00:12:52.080 you know,

00:12:52.220 the curly-toed shoes,

00:12:53.280 the hats with a feather

00:12:54.420 in them,

00:12:54.740 and they go running out

00:12:56.080 to the trans forest

00:12:57.020 thruway.

00:12:57.980 And when a richie

00:12:58.920 would come by,

00:12:59.840 I mean,

00:13:00.120 a really richie,

00:13:00.780 this guy didn't have

00:13:01.600 a silver spoon

00:13:02.300 in his mouth.

00:13:03.260 This guy had a golden

00:13:04.180 goblet in his throat.

00:13:05.380 All right,

00:13:05.620 right there.

00:13:06.360 They would jump out

00:13:07.200 of the bushes on him.

00:13:08.380 They'd steal everything

00:13:09.220 the guy had.

00:13:09.940 They'd let him run

00:13:10.460 naked out of the forest

00:13:11.340 back to his castle.

00:13:12.460 But don't worry.

00:13:13.760 That guy has so much

00:13:14.860 left of the castle

00:13:15.620 he can afford it

00:13:16.460 and do that.

00:13:17.720 If a guy came

00:13:18.580 through the forest

00:13:19.360 was doing really well

00:13:20.580 but not a super richie,

00:13:22.240 they'd take a large

00:13:23.160 chunk of what he had

00:13:24.160 but not all of it.

00:13:25.160 If a normal,

00:13:25.860 everyday,

00:13:26.260 average merchant

00:13:26.820 came through the forest,

00:13:27.840 they'd just take a token

00:13:28.960 from that guy.

00:13:30.100 In the vernacular

00:13:31.220 of the modern-day society,

00:13:32.840 Patrick,

00:13:33.580 they had a progressive

00:13:34.480 stealing structure

00:13:35.300 from the merchants

00:13:35.960 when they came

00:13:36.780 through the forest.

00:13:37.520 You with me?

00:13:38.160 At the end of the day,

00:13:39.800 Robin Hood

00:13:40.220 and his band

00:13:41.300 of merry men

00:13:41.860 would go running

00:13:42.540 back into Nottingham.

00:13:43.620 They'd wander the streets

00:13:44.700 of Nottingham

00:13:45.320 if they found some guy

00:13:46.260 who was down out.

00:13:46.960 Some guy with nothing.

00:13:47.820 I mean,

00:13:47.940 just nothing.

00:13:48.760 They'd give him

00:13:49.120 a whole pile of goodies.

00:13:50.640 If they found

00:13:51.240 an ordinary sort of

00:13:52.220 working poor guy,

00:13:53.560 they'd give him

00:13:54.100 a smaller bundle of goodies.

00:13:55.220 You know,

00:13:55.400 the more you make,

00:13:56.100 the less they give you.

00:13:56.860 The less you make,

00:13:57.460 the more they give you.

00:13:58.660 If you found a normal,

00:13:59.580 everyday,

00:14:00.000 average citizen

00:14:00.680 walking along the streets

00:14:01.640 in Nottingham,

00:14:02.640 what they do is say,

00:14:03.560 hi,

00:14:03.880 my name's Robin Hood.

00:14:05.220 I want to tell you

00:14:05.880 I'm the local

00:14:06.320 redistributionist agent

00:14:07.440 around here.

00:14:08.140 I just want you to know

00:14:08.840 we love you.

00:14:09.640 Here's five bucks.

00:14:10.480 Take the wife out to dinner.

00:14:11.840 Have a good time.

00:14:12.480 It's on me.

00:14:13.560 And by the way,

00:14:14.280 if they bumped into

00:14:14.840 someone rich in Nottingham,

00:14:16.020 they just might steal

00:14:16.760 from him too, okay?

00:14:18.460 Now,

00:14:18.920 that's the story.

00:14:20.540 Now,

00:14:20.880 let me just imagine

00:14:21.860 bringing economics

00:14:22.740 back into your life,

00:14:23.940 all right?

00:14:24.460 This is going to now become,

00:14:25.960 instead of a moral story,

00:14:27.200 an economic story.

00:14:28.820 Imagine you were a merchant

00:14:30.020 back in the ancient days

00:14:31.820 of Nottingham.

00:14:33.420 How long would it take you

00:14:34.980 to learn not to go

00:14:36.040 through the forest?

00:14:37.860 One trip,

00:14:38.600 maybe?

00:14:39.440 One trip?

00:14:39.820 That's all I would say.

00:14:40.160 Now,

00:14:40.280 those merchants,

00:14:41.020 those merchants who were

00:14:42.020 really rich,

00:14:42.720 who had the golden goblets

00:14:43.600 in the throat,

00:14:44.320 they had their armed guards

00:14:45.500 to take them through the forest.

00:14:46.640 Now,

00:14:46.800 we call those armed guards

00:14:47.780 today lawyers,

00:14:48.940 accountants,

00:14:49.400 deferred income specials,

00:14:50.540 lobbyists,

00:14:51.060 favor grabbers,

00:14:52.020 all of that stuff.

00:14:53.080 But they were really

00:14:53.820 hell of expensive back then

00:14:54.960 as they are now.

00:14:56.360 The merchants who couldn't

00:14:57.340 have formed the armed guards,

00:14:58.660 they'd go around the forest.

00:14:59.820 Now,

00:14:59.940 the route around the forest

00:15:00.840 to trade was full of rocks,

00:15:02.340 bumps,

00:15:02.780 logs,

00:15:03.140 holes,

00:15:03.440 et cetera.

00:15:04.140 It cost them a lot more

00:15:05.200 to trade with the

00:15:05.880 neighboring villages.

00:15:06.880 It increased the cost

00:15:08.160 of trade dramatically,

00:15:09.360 both the armed guards

00:15:10.140 and the circuitous routes

00:15:11.640 around there.

00:15:12.600 So they had to sell

00:15:13.340 their products

00:15:13.840 at higher prices.

00:15:14.700 At the end of the day,

00:15:16.000 Robin Hood had no

00:15:16.840 contraband whatsoever

00:15:17.980 because all the guys

00:15:19.120 were so heavily armed

00:15:19.880 he couldn't rip them off.

00:15:21.140 He went back

00:15:21.820 into Nottingham

00:15:22.440 with nothing in his hands

00:15:23.440 to give the poor

00:15:24.200 the disenfranchised at all,

00:15:26.120 and they had to face

00:15:27.020 much higher prices

00:15:27.940 by stealing from the rich.

00:15:29.880 Robin Hood literally

00:15:30.840 made the poor worse off.

00:15:32.900 And that is the true story

00:15:34.820 of redistribution.

00:15:36.500 And that is what exactly

00:15:37.840 happens in this society today.

00:15:39.780 Now,

00:15:40.040 I try to tell that story

00:15:41.280 because I think

00:15:41.860 it's pretty understandable,

00:15:42.740 isn't it, Patrick?

00:15:43.440 Very simple.

00:15:46.120 The challenge isn't about

00:15:47.300 how simple it is.

00:15:48.080 The challenge is

00:15:48.860 what method needs

00:15:51.660 to be taken

00:15:52.100 for the other side

00:15:52.840 to say,

00:15:53.860 okay,

00:15:54.100 this kind of makes sense

00:15:55.000 in this part.

00:15:55.600 Raising tax is not

00:15:56.420 going to be the solution.

00:15:57.420 Let me understand.

00:15:57.860 I've got the data.

00:15:59.080 I've got the data.

00:15:59.960 I mean,

00:16:00.400 they can duplicate the data.

00:16:02.320 Has the Biden administration

00:16:03.560 at all reached out to you

00:16:04.600 or no?

00:16:05.580 No.

00:16:06.340 Okay.

00:16:07.120 What do you think

00:16:08.000 about the tax plan

00:16:09.220 that they are proposing

00:16:10.040 currently right now?

00:16:11.380 Well,

00:16:11.560 I'm not really sure

00:16:12.300 of what it is

00:16:13.000 and what it's going

00:16:13.540 to be completely,

00:16:14.500 but I think they want

00:16:15.720 to raise the income

00:16:16.580 tax rate to 40%.

00:16:17.860 I think they want

00:16:19.100 to raise the capital

00:16:19.780 gains tax rate to 43%.

00:16:21.660 I think they want

00:16:22.780 to raise the corporate

00:16:23.560 rate from 21% to 28%.

00:16:25.360 These are the things

00:16:26.560 and they've got a gas tax

00:16:27.680 and they've got

00:16:28.200 other deductions,

00:16:29.660 exemptions,

00:16:30.180 and exclusions

00:16:30.840 they want to eliminate

00:16:31.740 and all of that stuff.

00:16:33.600 If they did that,

00:16:34.920 I think it would be

00:16:36.000 basically a reversing

00:16:37.160 the Trump tax cuts

00:16:38.320 of 2017.

00:16:40.720 And as such,

00:16:41.360 those tax cuts

00:16:42.300 extended the boom

00:16:43.040 for quite some time.

00:16:44.380 They led to much

00:16:45.280 lower unemployment rate

00:16:46.420 of the poor,

00:16:46.940 the minority,

00:16:47.480 the disenfranchised,

00:16:48.340 record lows,

00:16:49.520 a record low

00:16:50.260 in U.S.

00:16:50.780 poverty measures.

00:16:52.260 And also,

00:16:53.260 the tax revenues

00:16:54.020 rose as a result

00:16:55.740 of the Trump tax bills.

00:16:57.660 I mean,

00:16:58.080 the two years

00:16:58.720 after Trump's tax bill

00:17:00.280 had a faster growth

00:17:01.760 in revenue

00:17:02.240 than did the two years

00:17:03.380 before or the four years

00:17:04.560 to two years before.

00:17:05.740 So there was an acceleration

00:17:06.840 in revenue growth

00:17:07.960 on the federal government.

00:17:08.680 Now,

00:17:09.200 not in corporate taxes.

00:17:10.900 Okay,

00:17:11.220 duh.

00:17:11.900 I have to say that

00:17:12.660 to everyone.

00:17:13.380 No,

00:17:13.620 corporate taxes went down,

00:17:14.720 but all the other taxes

00:17:15.860 went up

00:17:16.680 as a result

00:17:17.340 of the corporate taxes

00:17:18.260 going down.

00:17:19.260 And if they reversed it,

00:17:20.280 I think they'd get

00:17:20.900 the reverse results,

00:17:22.820 and I think it would be

00:17:23.460 damaging to the country.

00:17:26.540 Who would take

00:17:27.260 the biggest hit?

00:17:27.900 Would it be more

00:17:28.380 the employer,

00:17:29.060 the employee,

00:17:29.940 the middle America?

00:17:31.580 Who would take

00:17:32.140 the biggest hit?

00:17:32.960 I don't really know

00:17:34.120 who would,

00:17:34.560 but my guess is

00:17:35.440 it's always the poor,

00:17:36.480 the minority,

00:17:36.960 the disenfranchised,

00:17:38.020 the people

00:17:38.820 on the lowest echelon

00:17:39.980 of the ladder

00:17:40.560 almost always

00:17:42.240 are the ones

00:17:42.740 fired first.

00:17:44.240 I mean,

00:17:44.440 Benjamin Hooks

00:17:45.160 put it very clearly,

00:17:46.300 Patrick,

00:17:46.660 and I quote him.

00:17:47.960 He was head of the NAACP,

00:17:49.420 if you'll remember.

00:17:50.240 And he said,

00:17:50.920 blacks are hired last

00:17:52.020 and fired first.

00:17:53.340 The only way

00:17:54.000 we're ever going to get jobs

00:17:55.120 and keep those jobs

00:17:56.140 is if there's so damn

00:17:57.040 many jobs required

00:17:58.560 that we get employed

00:17:59.780 and never get laid off.

00:18:01.400 And I think

00:18:01.960 if you have a slowdown

00:18:02.900 in this economy,

00:18:03.620 you're going to have it

00:18:04.660 hit the minorities

00:18:05.440 and the poor

00:18:06.140 inner city dwellers

00:18:07.680 those people

00:18:08.520 living in the hollows

00:18:09.380 of Kentucky

00:18:09.840 much more

00:18:11.000 than other people.

00:18:12.640 Arthur,

00:18:12.820 you've been studying

00:18:13.700 economy for how long now?

00:18:15.080 I mean,

00:18:15.400 you gave your age

00:18:16.680 to everybody.

00:18:17.260 How long would you say

00:18:17.900 you've studied?

00:18:18.680 I would assume

00:18:19.560 you're reading

00:18:19.920 all the books

00:18:20.360 that are out there.

00:18:20.800 How long have you

00:18:21.240 been studying economy?

00:18:22.540 Oh,

00:18:22.760 probably 50 years,

00:18:24.380 50 years.

00:18:24.720 Five years.

00:18:25.340 So from your experience,

00:18:26.900 what causes inflation?

00:18:29.680 Because right now

00:18:30.340 you're hearing a lot of talks.

00:18:31.300 Market crash was last year.

00:18:32.960 Hey,

00:18:33.080 it's coming.

00:18:33.520 It's coming.

00:18:33.900 You're hearing Michael Burry

00:18:34.840 talk about the biggest

00:18:35.880 market crash is coming.

00:18:37.200 He came back on Twitter

00:18:38.080 and finally said it again,

00:18:39.620 I think last week.

00:18:40.760 But you're hearing more talks

00:18:42.100 right now about inflation.

00:18:44.500 What causes inflation

00:18:45.980 and how bad can things be

00:18:48.540 if hyperinflation takes place

00:18:50.080 in the States?

00:18:51.400 Yeah,

00:18:51.660 let me start off

00:18:52.320 about the cause of inflation.

00:18:53.380 I wrote a piece

00:18:54.000 in the Wall Street Journal

00:18:54.840 1974,

00:18:56.560 which was

00:18:56.900 the bitter fruits

00:18:57.620 of devaluation.

00:18:59.100 The U.S. dollar

00:19:00.100 had devalued

00:19:00.820 gone off gold

00:19:01.800 and by that

00:19:03.260 we devalued

00:19:04.000 against other countries'

00:19:05.000 currencies.

00:19:05.440 I forecasted

00:19:06.200 double-digit inflation.

00:19:07.360 I was criticized

00:19:07.960 roundly at the time

00:19:09.060 and the double-digit

00:19:10.400 inflation did come

00:19:11.540 because we devalued

00:19:12.960 the currency

00:19:13.480 versus the numeraire,

00:19:15.260 which is gold

00:19:15.880 and the other countries.

00:19:17.900 We don't have

00:19:18.820 anything like that today.

00:19:21.280 My view is

00:19:22.220 that that model

00:19:23.060 I used back then

00:19:24.200 no longer is applicable

00:19:25.360 because we aren't

00:19:26.340 pegged to gold.

00:19:27.200 We aren't pegged

00:19:27.740 to other currencies at all.

00:19:29.080 What you will see,

00:19:31.440 of course,

00:19:31.820 is if inflation does hit,

00:19:33.600 it will show up

00:19:34.540 in the U.S. dollar,

00:19:35.840 which is not falling.

00:19:37.700 It will show up

00:19:38.560 at the 10-year bond yield,

00:19:39.960 which is not rising,

00:19:41.660 and it will show up

00:19:42.740 in gold prices,

00:19:43.740 which are not rising.

00:19:45.880 So all today,

00:19:47.660 I mean, Patrick,

00:19:48.220 very seriously,

00:19:49.100 I don't see

00:19:50.340 any reason why

00:19:51.900 specifically

00:19:53.540 we should expect

00:19:55.300 higher inflation

00:19:56.260 in the near term.

00:19:57.800 10-year bond yields

00:19:58.660 are not high,

00:19:59.980 gold prices

00:20:00.520 have not risen,

00:20:01.820 and the dollar

00:20:03.060 has not been depreciating

00:20:04.400 in the foreign exchanges

00:20:05.360 dramatically.

00:20:06.060 So I am not

00:20:07.480 currently terribly

00:20:08.920 panicked about inflation.

00:20:10.880 But if inflation

00:20:12.000 were to come back,

00:20:13.380 it would have

00:20:14.120 no constraints.

00:20:14.960 There's no reserve

00:20:15.980 requirement constraints

00:20:17.220 that would hold

00:20:18.480 that inflation back.

00:20:19.660 So my thought

00:20:20.680 right now is

00:20:21.320 I don't see inflation

00:20:22.300 on the horizon,

00:20:23.620 but if it were to come,

00:20:25.660 there are no constraints

00:20:26.840 operating out there

00:20:27.820 that would stop it.

00:20:29.100 I hope that's okay.

00:20:31.000 No, no, I'm curious.

00:20:32.220 You're the brains here

00:20:33.220 with this.

00:20:33.600 This is your world.

00:20:34.560 I want to learn from you.

00:20:35.360 I'm wrong a lot of times,

00:20:36.840 Patrick.

00:20:37.080 That's totally fine.

00:20:37.920 Yeah, I want to hear

00:20:38.520 your perspective.

00:20:39.340 But never deliberately.

00:20:40.320 So what causes gold

00:20:41.760 to go up?

00:20:42.560 What causes gold

00:20:43.260 to go up?

00:20:43.660 Gold is the first

00:20:44.500 refuge of the cautious.

00:20:45.600 Okay.

00:20:46.120 You know,

00:20:46.620 when things are going bad,

00:20:47.660 people move to gold

00:20:48.420 because it's high,

00:20:49.100 valuable,

00:20:49.600 easily assailable.

00:20:51.000 Over the centuries,

00:20:52.040 it has been the one

00:20:53.280 go-to thing

00:20:54.100 in times of crisis.

00:20:56.140 In the 1970s,

00:20:57.720 everyone went into gold.

00:20:59.080 And of course,

00:20:59.480 you had the price of gold

00:21:00.280 go from $35 an ounce

00:21:01.920 to $900 an ounce.

00:21:04.540 You know,

00:21:04.820 in the 1930s,

00:21:06.420 everyone went into gold,

00:21:07.800 but gold was fixed in value.

00:21:09.540 So the price level

00:21:10.460 dropped dramatically.

00:21:11.760 The reason the price level

00:21:13.040 dropped dramatically

00:21:13.880 is because the real value

00:21:14.980 of gold had to increase.

00:21:16.620 So when you look at gold,

00:21:18.240 it is the first refuge

00:21:19.300 to the cautious.

00:21:20.100 And so far,

00:21:21.160 there's not been a run,

00:21:23.140 a rush into gold.

00:21:24.440 It just hasn't happened.

00:21:26.940 That doesn't mean it won't.

00:21:29.120 Yeah.

00:21:29.660 And there was a minute it did,

00:21:31.640 but then it was back down

00:21:32.560 to a normal range

00:21:34.620 that it was at.

00:21:35.440 What's your biggest concern?

00:21:37.180 Like if I'm speaking

00:21:38.900 with you off camera,

00:21:39.920 we're talking,

00:21:40.500 I'm saying,

00:21:40.760 listen, Arthur,

00:21:41.360 you know,

00:21:41.520 there's a lot of stuff

00:21:42.180 you're hearing on the news

00:21:42.960 right now,

00:21:43.340 market crash,

00:21:44.240 you know,

00:21:44.400 inflation,

00:21:45.760 you know,

00:21:46.220 regulation,

00:21:48.160 you know,

00:21:48.420 all this,

00:21:48.940 the taxes,

00:21:50.060 what concerns you

00:21:51.020 the most right now?

00:21:53.040 Financially.

00:21:54.120 There are a bunch of things

00:21:55.040 that,

00:21:55.260 I mean,

00:21:55.380 obviously these tax things

00:21:56.620 bother me a great deal,

00:21:57.800 Patrick.

00:21:58.400 I mean,

00:21:58.800 I think we're in a bad

00:22:00.240 situation in taxes.

00:22:01.860 I think this deficit

00:22:03.000 spending is crazy.

00:22:04.280 I mean,

00:22:04.860 you know,

00:22:05.140 when you have,

00:22:05.980 when you have

00:22:07.320 huge transfer payments,

00:22:09.960 can I go through

00:22:10.780 transfers with you

00:22:11.540 a little bit slowly?

00:22:12.740 And,

00:22:12.880 you know,

00:22:13.520 when you transfer,

00:22:15.100 when you're transferring

00:22:16.260 income,

00:22:16.560 you take from someone

00:22:17.360 who has a little bit more,

00:22:18.420 and you give to someone

00:22:20.520 who has a little bit less.

00:22:21.640 You with me on that?

00:22:22.400 Yeah.

00:22:23.380 That's what really

00:22:24.280 is redistribution

00:22:25.200 or transfer payment there.

00:22:27.260 Now,

00:22:27.400 whenever you take from someone

00:22:28.560 who has a little bit more,

00:22:30.360 you reduce that person's

00:22:31.800 incentives to produce.

00:22:33.740 And that person

00:22:34.680 will produce

00:22:35.180 a little bit less.

00:22:36.700 Okay.

00:22:37.780 Likewise,

00:22:38.220 when you give to someone

00:22:39.360 who has a little bit less,

00:22:41.340 that person

00:22:42.500 finds an alternative

00:22:43.800 source of income

00:22:44.640 other than working

00:22:45.620 for receiving income.

00:22:47.120 So that person too

00:22:48.880 will produce

00:22:50.120 a little bit less.

00:22:51.340 He can make money

00:22:51.980 by not working.

00:22:53.800 All right.

00:22:55.140 The theorem here

00:22:56.380 is really simple.

00:22:57.680 Whenever you redistribute

00:22:58.860 an income,

00:22:59.400 whenever you do,

00:23:00.300 you always reduce

00:23:01.400 total income.

00:23:02.340 Always.

00:23:03.280 It's not a debate.

00:23:04.940 The rich people

00:23:05.680 who have the money

00:23:06.320 taken from them

00:23:07.040 will produce

00:23:07.560 a little less.

00:23:08.540 The poor people

00:23:09.260 who have the money

00:23:09.740 given to them

00:23:10.360 also will produce

00:23:11.180 a little bit less,

00:23:11.960 and you'll have

00:23:12.660 a reduction

00:23:13.160 in total income

00:23:14.700 or output.

00:23:15.640 To see it really clearly,

00:23:17.160 if you tax people

00:23:18.020 who work

00:23:18.440 and you pay people

00:23:20.200 who don't work,

00:23:21.940 don't be surprised

00:23:22.880 if a lot of people

00:23:24.140 decide not to work.

00:23:26.080 All right.

00:23:26.340 Now,

00:23:26.880 the lemma

00:23:27.340 from this theorem

00:23:28.160 is delicious.

00:23:30.500 And the lemma

00:23:31.500 is very simply

00:23:32.320 is the more

00:23:33.640 you redistribute,

00:23:34.880 the greater

00:23:35.780 will be the decline

00:23:36.760 in total income.

00:23:38.400 And that should be

00:23:39.300 self-evident

00:23:39.920 from the theorem itself.

00:23:42.020 So the limit function

00:23:43.060 of this theorem

00:23:43.740 I just delight in

00:23:45.240 because it's so clear.

00:23:46.940 And this is just math.

00:23:48.180 It's nothing else.

00:23:49.180 It's not left-wing.

00:23:50.020 It's not right-wing.

00:23:50.720 It's not liberal.

00:23:51.400 It's not conservative.

00:23:52.160 We're Republican.

00:23:53.060 It's just plain math.

00:23:55.240 The limit theorem

00:23:56.440 is if you were able

00:23:57.660 to redistribute

00:23:58.380 all income

00:23:58.940 so that everyone

00:24:00.320 came out

00:24:00.800 exactly the same,

00:24:02.100 Patrick,

00:24:02.280 if everyone came out

00:24:03.200 exactly the same,

00:24:04.460 there will be

00:24:05.180 no income whatsoever.

00:24:07.560 And let me

00:24:08.100 hit that intuitively

00:24:09.120 to you.

00:24:10.480 To get everyone

00:24:11.640 to come out the same,

00:24:12.540 what you have to do

00:24:13.200 is tax everyone

00:24:14.000 who earns above

00:24:14.700 the average income

00:24:15.560 100% of the excess.

00:24:18.480 And what you also

00:24:19.120 have to do

00:24:19.540 is everyone below

00:24:20.220 the average income,

00:24:21.520 you have to subsidize

00:24:22.520 them up to the average income.

00:24:24.880 Now,

00:24:25.260 if you actually did that,

00:24:26.260 if you actually taxed

00:24:27.940 everyone above

00:24:28.560 the average income

00:24:29.260 100%

00:24:29.940 and actually subsidized

00:24:31.620 everyone below

00:24:32.160 the average income

00:24:32.860 up to the average income,

00:24:34.000 I'll stipulate today,

00:24:35.380 counselor,

00:24:37.200 everyone will come out

00:24:38.880 exactly the same

00:24:39.760 at zero income.

00:24:41.320 That's what bothers me a lot.

00:24:42.980 We've increased

00:24:43.620 government spending

00:24:44.480 through these

00:24:45.100 quote-unquote

00:24:46.760 stimulus packages

00:24:47.760 incredibly large,

00:24:50.060 and it's working

00:24:51.100 very much

00:24:51.700 to the detriment

00:24:52.240 of this economy

00:24:53.000 in this country,

00:24:53.820 my view.

00:24:55.360 Arthur,

00:24:55.840 how do you view,

00:24:56.980 you know,

00:24:57.340 you've been around

00:24:57.820 when there was no crypto

00:24:58.760 and then it barely came

00:24:59.960 and people kind of like,

00:25:00.880 well,

00:25:00.940 what's this all about?

00:25:01.740 And then now a lot of people

00:25:03.020 who were not,

00:25:03.820 you know,

00:25:04.680 believers

00:25:05.100 and they were doubters

00:25:06.040 now are becoming believers.

00:25:07.160 They're saying,

00:25:07.440 you know what,

00:25:07.720 I don't think this thing's

00:25:08.420 going away.

00:25:08.880 What's your position

00:25:09.520 with cryptocurrency

00:25:10.120 and Bitcoin?

00:25:11.280 I think you're probably right.

00:25:13.660 I do.

00:25:14.540 I did a podcast

00:25:15.300 with Kathy Wood.

00:25:16.380 Now,

00:25:16.540 you may know

00:25:17.020 who Kathy Wood is.

00:25:18.360 She was my student

00:25:19.160 at the University

00:25:19.760 of Southern California

00:25:20.720 and I'm involved

00:25:21.880 with her and ARC as well.

00:25:23.120 We did a podcast,

00:25:24.080 I think,

00:25:24.260 four or five years ago

00:25:25.180 on Bitcoin.

00:25:26.520 I think it was Bitcoin

00:25:27.240 we did it on,

00:25:28.040 but cryptocurrencies

00:25:28.760 in general.

00:25:30.160 And my general view

00:25:31.700 is that while

00:25:32.820 they may not be

00:25:33.640 a substitute

00:25:34.180 for the transactions

00:25:35.280 medium called money,

00:25:37.300 they sure are

00:25:38.320 a medium

00:25:40.080 for the wealth

00:25:41.340 concept of money.

00:25:43.420 You know,

00:25:43.640 I think that

00:25:44.320 cryptocurrencies

00:25:44.980 for sure

00:25:46.440 and Bitcoin

00:25:47.500 for sure

00:25:48.360 is a replacement

00:25:50.200 for,

00:25:50.740 let's say gold,

00:25:51.560 which I talked about

00:25:52.400 with you earlier.

00:25:53.060 I think this is

00:25:54.580 a synthetic gold

00:25:55.600 that frankly

00:25:56.980 will satisfy

00:25:58.780 some of the needs

00:25:59.600 that the gold market

00:26:00.440 does.

00:26:03.480 Got it.

00:26:03.780 Okay.

00:26:04.680 I think it's here to stay.

00:26:05.980 I mean,

00:26:06.240 I don't...

00:26:06.720 It's not going away.

00:26:07.660 Now,

00:26:07.860 are you in it?

00:26:08.600 Are you somebody

00:26:09.060 that's a believer

00:26:09.620 to the point

00:26:10.080 where you're putting

00:26:10.580 your money

00:26:11.220 where your mouth is

00:26:11.820 and you're investing

00:26:12.320 as well

00:26:12.640 or not yourself?

00:26:13.860 Well,

00:26:14.060 let me just say

00:26:14.560 to the extent

00:26:15.080 I have an equity

00:26:15.940 interest in ARC,

00:26:17.080 which is the

00:26:17.680 Kathy Wood Company,

00:26:18.800 which I do,

00:26:19.520 than I am.

00:26:20.920 But separately,

00:26:21.820 no,

00:26:22.040 I'm not a personal investor.

00:26:23.660 I'm just an old man,

00:26:25.280 Patrick.

00:26:25.760 I mean,

00:26:26.080 I'm 81 years old.

00:26:27.540 I have cryptocurrencies.

00:26:28.700 I don't even have

00:26:30.280 a computer.

00:26:31.660 I don't do emails.

00:26:32.940 I have a flip phone.

00:26:33.940 I mean,

00:26:34.360 you know,

00:26:34.640 how can I do cryptocurrencies?

00:26:36.120 Come on.

00:26:37.140 But I love them.

00:26:38.540 I love them.

00:26:39.740 You love them,

00:26:40.260 but...

00:26:41.260 So,

00:26:42.160 how do you...

00:26:43.760 Like,

00:26:43.880 you know,

00:26:44.500 there's a guy

00:26:45.720 named Anthony Pompliano.

00:26:47.180 Pump on Twitter.

00:26:48.020 He's a big

00:26:48.380 Bitcoin guy.

00:26:50.320 Massive voice.

00:26:51.140 He's everywhere.

00:26:52.120 Everybody's interviewing.

00:26:52.800 We had him on

00:26:53.240 a couple months ago.

00:26:54.000 Great guy.

00:26:54.440 Good conversation with him.

00:26:56.040 He called out

00:26:56.940 Warren Buffett,

00:26:57.660 and he says,

00:26:58.060 you know,

00:26:58.220 these guys are not outdated.

00:26:59.460 You know,

00:26:59.660 Warren Buffett is going out there,

00:27:01.280 and, you know,

00:27:01.580 they have to kind of comment

00:27:02.520 on Bitcoin,

00:27:03.160 what's going to happen,

00:27:03.680 all this other stuff.

00:27:05.200 What are your thoughts?

00:27:06.200 Like,

00:27:06.460 when you were coming up,

00:27:08.400 who was the person

00:27:09.620 when you were 35 years old

00:27:11.160 coming up with ideas,

00:27:12.340 and these 80-year-olds

00:27:13.160 were saying,

00:27:13.520 Arthur has no clue

00:27:14.260 what the hell he's talking about.

00:27:15.580 He's lost his mind.

00:27:16.680 We're around.

00:27:17.380 We have experience.

00:27:18.160 We know what we're seeing.

00:27:19.520 But you at 35,

00:27:20.480 you the 80-year-old

00:27:21.320 that criticized your ideas.

00:27:23.440 Well, you know,

00:27:24.160 at 35,

00:27:24.680 I was a huge fan

00:27:25.820 of Bob Mundell's,

00:27:27.440 who very recently passed away.

00:27:29.100 We did the global stuff.

00:27:30.220 Now,

00:27:30.520 our world was

00:27:31.700 a very different world

00:27:32.900 than the world today,

00:27:33.960 but Bob Mundell

00:27:35.280 and I both believed

00:27:36.120 that money was global in scope,

00:27:37.880 not country in scope.

00:27:39.880 We both believed

00:27:40.780 very much

00:27:41.320 in a sound price rule,

00:27:43.080 the gold standard,

00:27:43.940 not some sort of

00:27:45.140 monetary-based standard

00:27:47.400 as exists

00:27:48.680 in the 70s and 80s.

00:27:51.080 We also believed

00:27:52.580 very much

00:27:53.120 in the power

00:27:53.660 of cutting tax rates.

00:27:54.740 Now,

00:27:55.320 when we argued

00:27:56.160 our stuff in,

00:27:57.000 well,

00:27:57.220 1930,

00:27:58.520 when I was 35,

00:27:59.420 that was 1975.

00:28:01.320 I had done

00:28:02.080 my big Kemp Roth

00:28:03.200 tax cut

00:28:03.960 already across the board,

00:28:05.320 which brought

00:28:06.080 the highest rate

00:28:06.800 down to 35%.

00:28:08.200 Everyone said

00:28:09.900 I was crazy,

00:28:10.640 not only politically,

00:28:11.640 but economically.

00:28:12.780 It was crazy.

00:28:13.680 Bob Mundell,

00:28:14.540 of course,

00:28:14.800 was right there

00:28:15.400 at the time,

00:28:16.000 and we were pilloried

00:28:18.000 by everyone,

00:28:19.220 but lo and behold,

00:28:20.300 it happened,

00:28:21.140 and you can see

00:28:21.700 what happened.

00:28:22.220 He had the greatest

00:28:22.760 boom ever

00:28:23.260 with Ronald Reagan,

00:28:24.360 and the price level

00:28:25.580 tumbled.

00:28:27.240 Inflation stopped

00:28:28.260 immediately after

00:28:29.000 Jimmy Carter,

00:28:29.880 and the dollar soared

00:28:31.080 in the foreign exchange market,

00:28:32.480 and, you know,

00:28:33.420 as I said,

00:28:34.340 the animals multiplied,

00:28:35.640 the children danced

00:28:36.460 in the streets.

00:28:37.140 Do you think

00:28:38.700 certain principles

00:28:39.880 economically

00:28:40.860 are evergreen

00:28:42.280 that are always

00:28:42.900 going to be around,

00:28:43.640 or do you think

00:28:44.160 almost every philosophy

00:28:45.360 is changing

00:28:46.100 because we're living

00:28:46.920 in times we've

00:28:47.580 never seen before?

00:28:48.520 I mean,

00:28:48.700 things are,

00:28:49.560 technology is moving

00:28:50.440 rapidly,

00:28:51.180 decentralized systems,

00:28:52.520 you know,

00:28:52.680 you're talking about,

00:28:53.600 you know,

00:28:54.380 crypto,

00:28:55.040 NFT,

00:28:55.620 it's almost like

00:28:56.480 there's so much

00:28:57.220 to take in

00:28:58.080 where some of the

00:28:59.420 way of thinking

00:29:00.000 in 1970

00:29:00.900 may not apply today,

00:29:02.000 or no,

00:29:02.900 it's evergreen,

00:29:04.000 many of those

00:29:04.500 apply still today.

00:29:06.340 Well,

00:29:06.420 obviously the specifics

00:29:07.560 are brand new.

00:29:09.240 I mean,

00:29:09.480 you know,

00:29:09.740 we had our technologies

00:29:10.780 back in the 1970s,

00:29:12.600 we had our technologies

00:29:13.680 back in the 1920s,

00:29:15.140 these are new technologies,

00:29:16.900 I mean,

00:29:17.200 all sorts of things

00:29:18.440 are happening,

00:29:19.500 and I told you

00:29:20.380 tax rates are very different

00:29:21.480 now than they were

00:29:22.360 in the 30s and 40s

00:29:23.440 and 50s and 60s

00:29:24.440 and 70s,

00:29:25.180 so that these are

00:29:26.260 all different things,

00:29:27.020 but the principles,

00:29:28.020 I think,

00:29:28.260 are pretty much the same.

00:29:29.640 Now, you know,

00:29:30.780 very simply,

00:29:31.620 people respond to incentives,

00:29:32.880 and if you make

00:29:34.240 something attractive

00:29:35.100 through regulatory policy

00:29:36.600 or through spending programs

00:29:38.120 or whatever,

00:29:38.620 they'll do more of it.

00:29:39.920 If you make something

00:29:40.700 unattractive through taxes

00:29:42.000 or through regulatory policy,

00:29:43.460 they'll do less of it,

00:29:44.300 so the government can,

00:29:45.840 through the manipulation

00:29:46.500 of incentives,

00:29:47.900 change the results

00:29:49.080 that occur in the economy,

00:29:50.660 and unfortunately,

00:29:51.680 they don't understand it,

00:29:52.760 they're not very well educated,

00:29:54.180 they're not very well motivated,

00:29:55.940 and as a result,

00:29:57.100 they make things a lot worse.

00:29:58.740 They've made the poverty

00:29:59.720 situation in America

00:30:00.820 a lot worse.

00:30:02.000 The minimum wage

00:30:02.920 at $15 an hour

00:30:04.140 would hurt the poor,

00:30:05.800 the minority,

00:30:06.440 the disenfranchised the most.

00:30:08.260 It would just destroy

00:30:09.200 their futures

00:30:09.860 and their lives,

00:30:10.960 but, you know,

00:30:11.440 they really are into politics

00:30:13.020 more than they are

00:30:13.800 humanitarian efforts.

00:30:15.040 Why would it destroy

00:30:16.100 their lives?

00:30:17.240 Well, because you get

00:30:18.040 some of these people

00:30:19.000 who just don't have

00:30:20.440 the requisite skills

00:30:21.400 at present,

00:30:22.060 they're young,

00:30:22.640 they're not well educated,

00:30:23.760 they haven't had

00:30:24.700 the experience of internships

00:30:26.060 and all that,

00:30:27.120 and they can't get

00:30:28.120 that first job

00:30:29.000 at $15 an hour,

00:30:30.280 after being unemployed

00:30:31.660 for a year or two.

00:30:33.240 Sooner or later,

00:30:33.760 they become unemployable,

00:30:35.040 Patrick,

00:30:35.540 and then after being

00:30:36.460 unemployable for years,

00:30:38.000 they become frustrated

00:30:38.920 and angry,

00:30:39.660 and then you have to spend

00:30:40.640 a fortune protecting

00:30:41.460 yourself from them.

00:30:42.920 You know,

00:30:43.140 you've created this

00:30:44.040 underculture of

00:30:45.000 underemployed,

00:30:46.060 poverty-stricken people

00:30:47.180 who are not sharing

00:30:49.020 in the prosperity

00:30:49.720 that you and I have,

00:30:50.680 and, you know,

00:30:51.740 they have just the rights

00:30:52.780 to it as we do.

00:30:54.220 I mean,

00:30:54.400 they're human beings too.

00:30:55.580 It's only that the government

00:30:56.600 has kept them down.

00:30:57.580 I mean,

00:30:58.020 we have welfare payments,

00:30:59.500 Patrick.

00:30:59.740 That are withdrawn

00:31:01.020 once they hit

00:31:01.740 a certain level.

00:31:03.120 So, you know,

00:31:03.660 if you took out,

00:31:04.400 now this is four years ago data,

00:31:06.340 a single mother

00:31:07.320 with two children

00:31:08.140 in Philadelphia

00:31:09.120 making $29,000 a year income.

00:31:11.940 If you take out

00:31:12.840 all the taxes

00:31:13.560 and that $29,000,

00:31:14.920 so you have her net income there,

00:31:16.560 then you add in

00:31:17.560 the economic value

00:31:18.820 of all of the social welfare

00:31:20.120 spending she's eligible for.

00:31:21.820 You get the total amount

00:31:22.980 she is,

00:31:23.300 which is a little over

00:31:23.920 $53,000.

00:31:25.740 Now,

00:31:26.260 if that woman

00:31:26.720 goes from $29,000

00:31:28.100 to $79,000

00:31:29.860 income,

00:31:30.360 read,

00:31:30.740 because the taxes

00:31:32.400 go up so much

00:31:33.160 and because all the welfare

00:31:34.140 benefits drop so much,

00:31:35.760 she's literally

00:31:36.520 the same way off

00:31:37.860 at $79,000

00:31:40.640 as she was

00:31:41.600 at $29,000.

00:31:43.060 And, you know,

00:31:43.720 it's 100% tax rate

00:31:45.140 on her earnings.

00:31:45.880 That's called

00:31:46.620 a welfare poverty trap.

00:31:48.160 So, you combine

00:31:49.240 those two things,

00:31:50.160 the minimum wage

00:31:50.980 and that,

00:31:51.820 and you've created

00:31:52.560 a massive

00:31:53.660 enterprise zone

00:31:55.060 destruction package

00:31:56.760 on the poor,

00:31:57.740 the minorities,

00:31:58.360 the disenfranchised.

00:31:59.340 And it just disgusts

00:32:00.780 me to the core.

00:32:01.980 And what we need to do

00:32:03.100 is have tax-free zones

00:32:04.640 in our country

00:32:05.260 for 15 years.

00:32:07.100 Anyone located

00:32:07.940 in the enterprise zone

00:32:08.700 whose principal residence

00:32:09.480 is there,

00:32:10.420 who's got a job

00:32:11.360 in the enterprise zone,

00:32:12.240 no income tax,

00:32:13.200 no payroll tax,

00:32:14.420 nothing.

00:32:15.100 Minimum wage

00:32:15.780 abolished in that area

00:32:17.300 until they get back

00:32:18.300 up on their feet

00:32:18.980 and get going.

00:32:19.980 And then they have

00:32:20.780 the requisite skills

00:32:21.680 to become productive

00:32:22.940 members of our society.

00:32:24.800 But, you know,

00:32:25.680 Patrick,

00:32:26.280 when you look

00:32:26.740 at the income tax codes,

00:32:28.480 70,000 pages

00:32:29.620 and all this stuff,

00:32:30.620 you need to have

00:32:31.640 a lawyer,

00:32:32.240 you need to have

00:32:32.880 an accountant,

00:32:33.320 you need to have

00:32:33.780 a deferred income special,

00:32:34.840 you need to have

00:32:35.360 a favor grabber,

00:32:36.300 you need to have

00:32:36.960 lobbyists,

00:32:37.440 you need to have

00:32:37.920 all those to make it.

00:32:39.140 Some guy in the inner city

00:32:40.380 or wherever,

00:32:41.500 you know,

00:32:41.820 just as a simple

00:32:42.880 basketball player,

00:32:44.600 comes out there,

00:32:45.560 great basketball player,

00:32:46.480 makes a lot of money,

00:32:47.300 but doesn't know

00:32:47.860 how to do the gimmicks

00:32:49.240 and tricks of the tax codes

00:32:51.940 and he's just hammered down.

00:32:54.200 And that's why

00:32:54.680 you find all these guys,

00:32:55.760 once they retire,

00:32:56.520 they go right into poverty.

00:32:58.200 And, you know,

00:32:58.960 that's just wrong,

00:33:00.100 wrong, wrong

00:33:00.680 for us in society

00:33:01.600 to do that.

00:33:02.460 So you're not

00:33:03.460 for minimum wage,

00:33:04.600 raising minimum wage.

00:33:06.100 Do you believe

00:33:07.120 automation is coming here

00:33:08.680 and it's already here,

00:33:09.500 but even at the highest level,

00:33:10.640 like automation is coming?

00:33:11.780 Well,

00:33:12.020 automation comes in

00:33:14.960 because of the minimum wage.

00:33:16.440 And if you go to McDonald's

00:33:17.560 and some of these other places,

00:33:18.780 they have these little screens

00:33:19.980 now that you pop there.

00:33:21.160 They have hamburger flipping things

00:33:22.740 that can flip 60 hamburgers

00:33:24.060 at a time

00:33:24.380 and they're done perfectly.

00:33:26.060 They've got all these others.

00:33:27.340 Have you seen

00:33:27.820 these new robots

00:33:28.840 that go around

00:33:30.040 delivering packages

00:33:31.060 all over the place

00:33:31.680 without a person?

00:33:32.460 That's all because

00:33:33.680 of the minimum wage

00:33:34.680 being so damn high

00:33:35.940 that it's worthwhile

00:33:37.440 for them

00:33:38.080 to technologically

00:33:39.120 replace these low-wage workers

00:33:41.160 and make sure

00:33:41.940 they never do anything.

00:33:43.280 If there weren't

00:33:43.700 a minimum wage,

00:33:44.420 these kids would get

00:33:45.060 fine jobs at $10 an hour.

00:33:47.080 They'd be there,

00:33:47.840 they'd be doing this,

00:33:48.800 and they'd soon

00:33:49.360 work their way up

00:33:50.140 to higher wages.

00:33:51.580 But no,

00:33:52.240 that's not what

00:33:52.840 our society is doing for them.

00:33:54.140 So you are saying

00:33:55.320 automation is inevitable

00:33:56.400 because these companies

00:33:57.300 have to figure out

00:33:58.100 a way to save money.

00:33:59.040 So we just invested

00:34:00.240 into software,

00:34:01.860 took us two years

00:34:03.040 to build,

00:34:03.500 all in $5 million.

00:34:04.820 It helped us

00:34:05.620 not need 10 jobs

00:34:08.440 that we currently have

00:34:09.180 right now

00:34:09.480 because the software

00:34:10.140 is doing it automatically,

00:34:11.180 right?

00:34:11.940 But do you think

00:34:13.100 automation is happening

00:34:14.840 whether they raise

00:34:15.840 the minimum wage or not?

00:34:17.120 Wouldn't the company

00:34:17.840 do automation

00:34:18.560 no matter what?

00:34:19.700 Well, to some extent,

00:34:21.040 but no,

00:34:21.380 the automation,

00:34:22.120 if you raise

00:34:22.520 the minimum wage,

00:34:23.520 that incentivizes you

00:34:24.800 to automate

00:34:25.420 in that area.

00:34:27.380 You know,

00:34:27.680 in other areas

00:34:28.340 that you have

00:34:28.780 high-paid workers,

00:34:30.180 you automate there

00:34:31.260 because you're saving

00:34:32.060 the money of those

00:34:32.740 high-paid workers.

00:34:33.480 Well,

00:34:33.600 there's a shortage

00:34:34.240 of those people,

00:34:35.340 but there's not

00:34:36.040 a shortage

00:34:36.440 of low-wage workers.

00:34:37.820 And so what you want

00:34:38.580 to make sure you do

00:34:39.400 is that the automation

00:34:40.340 is tilted

00:34:41.460 towards places

00:34:43.020 where there's a shortage

00:34:45.640 of high-paid workers

00:34:46.720 and not to the people

00:34:48.360 who desperately need jobs.

00:34:50.320 Patrick,

00:34:50.700 and that's what

00:34:51.440 they've done

00:34:51.840 is the minimum wage

00:34:52.840 puts a government bounty

00:34:54.180 on low-wage workers

00:34:56.400 to make sure

00:34:57.600 that companies

00:34:58.520 that would hire them

00:34:59.740 now use automation.

00:35:02.420 So then,

00:35:03.760 are you also,

00:35:05.180 if we're saying

00:35:06.020 automation is

00:35:06.740 no matter what's coming,

00:35:07.800 we're there.

00:35:08.320 Automation,

00:35:08.760 no matter what is coming,

00:35:10.680 let's just say

00:35:11.200 minimum wages,

00:35:12.560 you know,

00:35:12.880 it is what it is.

00:35:13.840 Pick a number,

00:35:14.480 leave it there.

00:35:15.840 Are you also,

00:35:16.900 you know,

00:35:17.220 the one word

00:35:18.180 that created

00:35:18.560 a lot of momentum

00:35:19.500 this last time around

00:35:20.360 was UBI.

00:35:21.000 You kept hearing

00:35:21.360 now UBI,

00:35:21.960 UBI,

00:35:22.380 UBI,

00:35:22.760 UBI with

00:35:23.380 Andrew Yang

00:35:24.620 and he says,

00:35:25.300 well,

00:35:25.980 Milton Friedman

00:35:26.700 tried to do it.

00:35:27.400 He talked about UBI

00:35:28.260 even though he was,

00:35:29.120 Milton Friedman's idea

00:35:29.900 was negative,

00:35:30.700 you know,

00:35:30.860 it was a complete

00:35:31.360 different system.

00:35:32.100 You kind of briefly

00:35:32.660 talked about it today.

00:35:34.060 He says,

00:35:34.420 well,

00:35:34.560 MLK wanted to do this.

00:35:35.840 What's wrong

00:35:36.200 with us doing UBI,

00:35:37.240 right?

00:35:37.860 If automation

00:35:38.760 is inevitable

00:35:39.540 and we're going

00:35:40.320 in that direction,

00:35:41.080 do you think UBI

00:35:42.040 is also inevitable?

00:35:44.080 You know,

00:35:44.680 the basic income concept

00:35:46.880 where you give a payment

00:35:48.320 will hurt jobs output

00:35:50.780 and employment.

00:35:52.080 That is not my way

00:35:53.580 of solving the world.

00:35:55.500 What I would not do,

00:35:57.080 and let me just say

00:35:57.900 it really explicitly,

00:35:59.020 Patrick,

00:35:59.900 Milton Friedman's

00:36:01.040 minimum wage,

00:36:02.000 the UBI,

00:36:02.820 all of these say

00:36:03.620 if you earn higher incomes,

00:36:05.580 you get taxed on that

00:36:07.240 from the base level on.

00:36:09.380 That is a disincentive

00:36:10.900 all the way there.

00:36:12.760 I would,

00:36:13.160 what I would do

00:36:14.000 very simply

00:36:15.000 is I'd do a low rate

00:36:17.100 broad base flat tax.

00:36:18.320 Just like I did

00:36:19.680 for Jerry Brown

00:36:20.460 when he ran

00:36:21.020 for president

00:36:21.620 in 1992.

00:36:23.540 You replace

00:36:24.280 all federal income taxes,

00:36:26.160 all federal taxes

00:36:27.460 of all sorts

00:36:28.480 with two low rate

00:36:30.200 broad base taxes.

00:36:32.580 You want the lowest rate

00:36:33.520 to provide people

00:36:34.360 with the least incentives

00:36:35.420 to evade or avoid

00:36:36.860 or otherwise

00:36:37.380 not report taxable income.

00:36:39.080 And you want

00:36:39.680 the broadest base

00:36:40.660 so they have

00:36:41.140 the least places

00:36:41.840 they can stick their income

00:36:42.960 and thus avoid paying taxes.

00:36:44.980 If you replaced

00:36:46.020 all federal taxes

00:36:47.280 with two low rate

00:36:48.840 broad base tax,

00:36:50.420 one on value added

00:36:51.420 or what Republicans

00:36:52.500 call business net sales

00:36:54.260 and one on personal

00:36:55.720 and adjusted gross income.

00:36:57.380 So it's on the first dollar

00:36:58.360 to the last dollar.

00:36:59.360 You could match

00:37:00.260 all federal revenues today,

00:37:01.880 all of them,

00:37:02.820 with two flat rate taxes

00:37:04.300 of 12%,

00:37:05.460 no payroll taxes,

00:37:07.440 no Medicare,

00:37:08.200 no Medicaid,

00:37:09.080 no excise taxes,

00:37:10.960 no corporate taxes,

00:37:12.200 no personal income taxes,

00:37:13.640 no capital gains taxes,

00:37:14.760 no death taxes,

00:37:16.060 all federal taxes gone

00:37:17.460 except for sin taxes,

00:37:18.860 which are a teeny tiny portion.

00:37:20.720 All of that could be replaced

00:37:21.940 by this

00:37:22.380 without even assuming

00:37:23.640 a Laffer curve.

00:37:25.040 I mean,

00:37:25.220 that's what Jerry Brown ran down.

00:37:26.600 We went from eighth

00:37:27.460 in the race

00:37:27.940 in the Democratic primary

00:37:29.020 in 92

00:37:29.580 to second in the race.

00:37:31.440 And I think we would have

00:37:32.380 won the race

00:37:33.280 if Jerry hadn't picked

00:37:34.800 his vice president

00:37:35.480 the way he did.

00:37:36.800 If we did that,

00:37:37.980 I mean,

00:37:38.200 you would have that lower.

00:37:39.140 Can you imagine?

00:37:40.420 You pay,

00:37:41.140 you're paid 100 bucks,

00:37:42.480 Patrick,

00:37:43.260 and what you have to do

00:37:44.380 is send in 13 bucks

00:37:47.500 and you get to keep 87.

00:37:49.220 Or better yet,

00:37:50.100 your employer gives you 87

00:37:51.480 and they send in 13 before you.

00:37:53.160 You don't even have to file

00:37:54.200 a tax return

00:37:54.880 for goodness sakes.

00:37:56.240 I mean,

00:37:56.460 that's what we should have

00:37:57.560 as taxes.

00:37:58.500 So we have a complete,

00:37:59.920 if you want to help people

00:38:01.360 who don't have income,

00:38:03.060 who are in some sense

00:38:04.460 dire circumstances,

00:38:05.760 okay,

00:38:06.620 write them a check.

00:38:08.660 You know,

00:38:08.920 what does an income tax credit do?

00:38:12.480 To a mother with kids

00:38:13.580 who doesn't file a tax return?

00:38:16.200 Nothing.

00:38:17.500 You know,

00:38:17.980 what you want to do

00:38:18.760 is write them a check

00:38:19.860 so they get the check clear

00:38:21.580 and you're not confusing

00:38:22.720 the tax system

00:38:24.000 with a spending system.

00:38:25.020 What was the biggest pushback

00:38:25.940 Jerry got

00:38:26.460 when you guys pitched

00:38:27.500 that tax plan?

00:38:29.500 Well,

00:38:29.800 the only pushback we got

00:38:31.220 was we kept getting better

00:38:32.440 and better and better

00:38:33.100 in the votes.

00:38:34.040 I mean,

00:38:34.180 we came in with

00:38:34.800 the second most number

00:38:35.560 of delegates

00:38:35.960 in the Democratic primary

00:38:37.620 with a flat tax.

00:38:38.880 Huh?

00:38:39.320 How's that for cool?

00:38:40.360 And he would have won

00:38:41.600 three weeks out of the New York.

00:38:43.200 We just won the kinetic primary

00:38:44.720 and we just won

00:38:45.720 the Oregon primary.

00:38:46.460 We're coming into New York

00:38:47.640 and California

00:38:48.240 and he announces

00:38:49.500 Jesse Jackson

00:38:50.300 as his running mate.

00:38:52.040 It stopped,

00:38:52.960 but you know,

00:38:53.800 look it,

00:38:54.320 that's Jerry Brown.

00:38:55.260 I mean,

00:38:55.540 I love the guy dearly,

00:38:57.080 but he loves to stir the pot.

00:38:59.500 But we still got

00:39:00.280 the second most number

00:39:01.160 of delegates

00:39:01.580 in the Democratic primary

00:39:02.640 with a complete flat tax,

00:39:04.860 not with a UBA,

00:39:06.280 not with a negative income tax,

00:39:08.640 with just a flat rate tax.

00:39:10.040 And then when you want

00:39:11.160 to help someone,

00:39:11.900 write him a damn check.

00:39:13.380 You're familiar

00:39:13.680 with Jordan Peterson?

00:39:15.420 No.

00:39:16.220 Jordan Peterson is,

00:39:17.400 you know,

00:39:18.280 wrote a book,

00:39:19.020 12 Rules for Life,

00:39:20.220 very renowned author.

00:39:21.880 He was a clinical psychologist

00:39:23.340 at University of Toronto.

00:39:25.440 He became...

00:39:26.880 Oh, I have heard of him.

00:39:27.800 Yes, I have.

00:39:28.360 I've watched him on TV once.

00:39:30.000 He's really pretty amazing.

00:39:31.420 Fascinating guy.

00:39:32.200 Genius.

00:39:32.780 Brilliant guy.

00:39:33.520 People love the way he thinks

00:39:35.580 and what he says about.

00:39:36.300 So one of the things

00:39:37.120 he talks about,

00:39:37.800 he says,

00:39:38.180 about 10% of America

00:39:40.040 has an IQ below 83,

00:39:42.880 which is a net negative

00:39:44.140 to society, right?

00:39:45.340 About 10% of America

00:39:46.540 has got an IQ less than 83.

00:39:49.500 Net negative to society.

00:39:51.300 So we're talking about,

00:39:52.680 you know,

00:39:53.040 fiscal responsibility.

00:39:54.440 Great.

00:39:54.840 You know,

00:39:55.160 hey,

00:39:55.800 take care of your money.

00:39:56.680 Go to work.

00:39:57.280 Take care of your money.

00:39:57.900 Save your money.

00:39:58.820 Put it on a Roth.

00:39:59.680 Put it in an IRA.

00:40:00.560 Put it away.

00:40:01.300 Match the 401k.

00:40:02.480 Whatever.

00:40:03.220 Take care of your family.

00:40:04.960 Some people are saying

00:40:06.020 that there's a 10%

00:40:07.820 that no matter

00:40:09.260 how we set up the economy,

00:40:11.000 that 10% is not going away.

00:40:12.880 Meaning,

00:40:13.480 if there's that 1%

00:40:14.860 at the top

00:40:15.400 that's going to find a way

00:40:16.180 to make their millions

00:40:16.900 and then there's a 1%

00:40:18.060 of the 1%

00:40:18.660 that's going to be billionaires,

00:40:20.100 the same way

00:40:20.760 is the bottom 10%

00:40:21.720 that no matter

00:40:22.220 what you do with taxes,

00:40:23.640 there's going to be

00:40:24.100 10% of people

00:40:24.800 that are going to need

00:40:25.380 to help

00:40:25.840 to have the government

00:40:27.480 or an organization

00:40:28.520 help them out.

00:40:29.860 So,

00:40:30.760 how do you process that

00:40:32.360 where we have to be

00:40:33.260 fiscally responsible?

00:40:34.440 Yes,

00:40:35.240 but there is a small

00:40:36.740 percentage of community

00:40:37.680 that maybe

00:40:38.920 doesn't have the capability

00:40:40.580 as others do

00:40:41.220 what some of these experts

00:40:42.180 are implying.

00:40:43.660 What are your thoughts

00:40:44.360 on that

00:40:44.640 where we have to also be

00:40:45.740 socially responsible

00:40:47.300 to take care of those folks?

00:40:49.200 I do agree with it 100%.

00:40:51.000 I mean,

00:40:51.340 you know,

00:40:51.660 I am completely in accord

00:40:53.720 with helping those

00:40:54.940 who can't help themselves

00:40:56.000 and not only help them,

00:40:58.180 but,

00:40:58.700 you know,

00:40:58.780 we as a society

00:40:59.680 just can't afford

00:41:00.500 to allow these people

00:41:01.680 to live in pain

00:41:02.440 and suffering.

00:41:03.080 It's just not right.

00:41:04.760 But now what you want

00:41:05.600 to make sure, Patrick,

00:41:06.720 and it's a balancing act here,

00:41:09.400 is you want to make sure

00:41:10.580 that you don't make

00:41:11.480 the benefits,

00:41:13.240 the social welfare benefits

00:41:14.380 so attractive

00:41:15.740 that you cause people

00:41:17.480 to become poor

00:41:18.400 because they get paid

00:41:19.640 for being poor.

00:41:21.000 Now,

00:41:21.180 what I would do

00:41:21.920 in this sort of thing

00:41:22.860 is I would surely have

00:41:25.200 soup kitchens,

00:41:26.580 housing for the people

00:41:27.980 who really,

00:41:28.820 you know,

00:41:28.940 the people living under bridges

00:41:30.000 and all that stuff.

00:41:30.980 Just give them physical things

00:41:32.540 that they desperately need

00:41:33.960 and want

00:41:34.840 and have it there.

00:41:35.480 I'd love,

00:41:36.060 I would have health clinics

00:41:37.620 for the poorest,

00:41:39.080 but that's it.

00:41:40.400 I mean,

00:41:40.620 that's pretty much

00:41:41.300 what you do to them.

00:41:42.560 If you have any institutions

00:41:43.960 that these people

00:41:44.640 are doing self-harm,

00:41:46.540 there can be,

00:41:47.240 you know,

00:41:47.640 all of those things

00:41:48.600 to protect our society.

00:41:49.960 I would really encourage

00:41:51.520 religious organizations

00:41:53.120 and other groups

00:41:53.940 to make sure

00:41:54.840 they step in as well.

00:41:56.480 But,

00:41:56.800 you know,

00:41:57.380 you don't want

00:41:58.800 to kill everything

00:41:59.820 to help the one.

00:42:02.020 And that's what

00:42:02.580 you really got

00:42:03.100 to make sure

00:42:03.680 you don't make

00:42:04.760 the benefits

00:42:05.860 so attractive

00:42:06.720 that you cause

00:42:07.480 able-bodied,

00:42:08.580 good,

00:42:09.260 productive people

00:42:09.960 to stop working

00:42:10.800 and now do.

00:42:11.660 You've seen that

00:42:12.400 with the $300

00:42:13.560 unemployment benefits

00:42:15.380 that extended

00:42:16.400 additional unemployment benefits.

00:42:18.580 These people

00:42:19.080 are not going back

00:42:19.920 in the labor force

00:42:20.700 because it's more attractive

00:42:21.860 being unemployed

00:42:23.180 than it is actually

00:42:24.220 going back

00:42:24.700 to their old jobs.

00:42:25.460 That is when

00:42:26.720 welfare state

00:42:27.800 has gone crazy.

00:42:28.880 But I have

00:42:29.740 nothing whatsoever

00:42:31.000 against helping

00:42:32.520 those who can't

00:42:33.240 help themselves

00:42:33.800 and doing it

00:42:35.100 in the most

00:42:35.480 generous fashion

00:42:36.220 possible.

00:42:38.060 Yeah,

00:42:38.600 it's just how

00:42:39.520 we go about

00:42:40.080 doing that,

00:42:40.640 you know.

00:42:40.940 And it's tough.

00:42:41.740 You know,

00:42:42.060 it's a tough call.

00:42:43.520 You say 83 IQ.

00:42:45.200 I don't think

00:42:45.880 I would use that.

00:42:46.860 By the way,

00:42:47.180 I don't think

00:42:47.560 I'd use the IQ measure

00:42:48.660 at all

00:42:49.440 because,

00:42:50.160 you know,

00:42:50.260 some people

00:42:50.680 with low IQs

00:42:51.380 are damn great

00:42:52.280 at calculating

00:42:52.880 and raising

00:42:53.420 their own kids

00:42:54.040 and all that stuff.

00:42:55.120 I mean,

00:42:55.300 I watched Tom Hanks

00:42:56.400 and what was it?

00:42:58.460 Saving Private Ryan

00:42:59.300 or which one

00:43:00.040 are you talking about?

00:43:00.540 No,

00:43:00.680 no,

00:43:00.940 the movie.

00:43:02.380 What was the movie?

00:43:03.940 Forrest Gump.

00:43:04.920 Yeah.

00:43:05.180 He raising the kid there.

00:43:06.320 I mean,

00:43:06.500 he did made it for.

00:43:07.280 Yeah,

00:43:07.480 Forrest Gump

00:43:07.980 Saving Private Ryan.

00:43:08.940 Yeah,

00:43:09.120 Forrest Gump.

00:43:09.740 I wouldn't,

00:43:10.580 I wouldn't,

00:43:11.320 I wouldn't always

00:43:12.080 just assign

00:43:12.900 a characteristic

00:43:13.680 because you see

00:43:14.740 these people

00:43:15.200 can really do well.

00:43:16.480 But what you want

00:43:17.120 to do is watch

00:43:17.780 and maintain

00:43:18.320 and make sure

00:43:19.240 that that,

00:43:20.180 that doesn't go

00:43:21.020 to where the people

00:43:22.140 are living

00:43:22.500 and aren't,

00:43:23.240 I mean,

00:43:23.560 pain and suffering.

00:43:25.160 That's just not

00:43:25.800 what we're about.

00:43:27.320 You know,

00:43:27.700 years ago,

00:43:28.880 late 70s,

00:43:30.120 you were working

00:43:30.980 on some policies.

00:43:32.840 I think it was

00:43:33.280 Prop 13 in California

00:43:34.840 when it was the,

00:43:36.300 was it a property tax

00:43:38.040 or something like that?

00:43:38.980 Yes,

00:43:39.280 it was.

00:43:39.820 Property tax limit.

00:43:40.960 Yes.

00:43:41.240 What approach,

00:43:41.840 so what was it

00:43:42.760 and what approach

00:43:43.620 did you take

00:43:44.340 to drastically change

00:43:45.440 the property taxes

00:43:46.300 in California in 78?

00:43:48.220 Well,

00:43:48.820 I first place

00:43:49.400 didn't do the proposition

00:43:50.360 that was done

00:43:50.900 by Paul Gann

00:43:51.740 and Howard Jarvis.

00:43:53.100 It was called

00:43:53.540 the Jarvis Gann

00:43:54.280 initiative.

00:43:54.800 It was their

00:43:55.200 fourth or fifth attempt

00:43:56.840 and when I read

00:43:57.980 about it,

00:43:58.420 I did my analysis

00:43:59.340 of supply set economics.

00:44:01.120 The property taxes

00:44:02.020 at that time

00:44:02.540 were 2.7%

00:44:03.920 of market value,

00:44:06.000 Patrick,

00:44:06.380 and what the Prop 13

00:44:08.020 would do

00:44:08.540 was drop it to 1%.

00:44:09.500 So there'd be a huge

00:44:11.400 cut in property tax rates

00:44:12.740 and I thought

00:44:13.780 this would be

00:44:14.280 extremely attractive

00:44:15.300 to bring businesses

00:44:16.120 back into California jobs.

00:44:18.200 You know,

00:44:18.400 the poor and the minorities

00:44:19.400 in California

00:44:20.080 don't move to,

00:44:21.500 let's say,

00:44:21.800 Tennessee to get jobs.

00:44:23.420 If the jobs

00:44:24.000 don't come into California,

00:44:25.140 they don't get the jobs.

00:44:26.060 So I argued

00:44:27.200 that the jobs

00:44:27.860 would flow into California,

00:44:29.340 prices of housing

00:44:30.420 would rise,

00:44:31.460 that incomes would rise,

00:44:32.680 that the welfare payments

00:44:34.040 would fall so dramatically

00:44:35.220 because people

00:44:35.740 would have jobs locally

00:44:36.780 that it would actually

00:44:38.100 in due course

00:44:39.160 pay for itself,

00:44:39.920 which took it a year

00:44:40.700 and a half

00:44:41.100 to completely pay for itself.

00:44:42.900 I also talked

00:44:44.000 with the then governor,

00:44:45.360 the one I was just talking

00:44:46.440 about a minute ago,

00:44:47.240 Jerry Brown.

00:44:48.180 I went up

00:44:48.960 and he called me

00:44:49.760 and asked me

00:44:50.260 to come up to Sacramento.

00:44:51.760 I came up

00:44:52.460 and spent three days

00:44:53.460 with him in Sacramento

00:44:54.340 on how to implement

00:44:55.700 Prop 13

00:44:56.400 to make it work.

00:44:57.620 Jerry Brown

00:44:58.000 was just spectacular.

00:44:59.520 He and his cabinet

00:45:00.260 were just spectacular

00:45:01.780 and what they did

00:45:03.160 was they did subventions.

00:45:04.460 Now,

00:45:04.620 property taxes

00:45:05.460 only impacted

00:45:07.620 only impacted

00:45:08.920 cities,

00:45:09.820 counties,

00:45:10.040 and local districts.

00:45:11.240 The state

00:45:11.820 did not have

00:45:12.360 a property tax,

00:45:13.140 had an income tax

00:45:13.980 and all these others,

00:45:14.940 but not that.

00:45:15.960 So what he did

00:45:16.640 was he subvened

00:45:17.960 five billion dollars

00:45:19.180 of state funds

00:45:20.120 to the cities,

00:45:21.160 counties,

00:45:21.420 and local districts

00:45:22.180 to make sure

00:45:23.040 that they didn't have

00:45:23.860 a shortage of police,

00:45:25.220 fire,

00:45:25.700 libraries,

00:45:26.420 schools,

00:45:26.880 all of that stuff.

00:45:28.000 He made damn sure

00:45:28.980 that happened

00:45:29.640 and did a great job

00:45:31.020 and we pulled through it

00:45:32.120 and in the next decade

00:45:33.340 we were the fastest

00:45:34.160 growing state

00:45:34.760 in the nation

00:45:35.280 our property values

00:45:37.240 more than doubled

00:45:38.300 relative to the rest

00:45:39.260 of the nation.

00:45:40.100 Unemployment rate

00:45:40.720 just tumbled

00:45:41.440 in California

00:45:42.160 and we just prospered

00:45:43.660 as never before.

00:45:44.440 We grew

00:45:45.080 by a tire

00:45:46.220 Massachusetts

00:45:47.160 in that 10 years,

00:45:48.920 that next 10 years.

00:45:49.900 It really worked

00:45:51.080 and that's one

00:45:52.100 of the things

00:45:52.540 I'm really very proud of

00:45:53.760 even though I didn't

00:45:54.640 author that thing.

00:45:55.920 It was just a great idea

00:45:57.100 and I'm so glad

00:45:58.000 I came out

00:45:58.520 and supported it

00:45:59.200 and I think

00:45:59.960 it really made

00:46:00.640 for a period

00:46:01.360 of prosperity

00:46:01.960 in California

00:46:02.640 unparalleled

00:46:03.780 on this planet.

00:46:04.540 Well,

00:46:04.940 good for you

00:46:05.300 for giving credit

00:46:05.940 to something

00:46:06.380 you're saying

00:46:06.820 you didn't write.

00:46:08.240 So you just mentioned

00:46:10.060 California.

00:46:10.700 When I was with you

00:46:11.300 in Tennessee,

00:46:11.640 I think at that time

00:46:12.580 they were saying

00:46:13.940 the lowest

00:46:14.560 all-in taxes

00:46:16.180 in all of America

00:46:17.700 out of all the 50 states

00:46:18.680 is Tennessee.

00:46:19.400 Tennessee was number one

00:46:20.300 when I was visiting.

00:46:21.280 It was

00:46:21.480 lowest,

00:46:22.100 number lowest.

00:46:23.140 Lowest,

00:46:23.500 yeah,

00:46:23.680 meaning the best

00:46:25.100 to be in,

00:46:25.660 the best climate

00:46:26.260 to be in,

00:46:26.780 right?

00:46:27.440 And at the time,

00:46:28.240 California was the highest.

00:46:29.300 I think New York

00:46:29.820 is now the highest.

00:46:30.600 I think New York

00:46:30.980 just passed California

00:46:31.820 with the $4.3 billion

00:46:32.900 bill that just passed.

00:46:34.020 Wonderful victory.

00:46:35.020 But here's a question

00:46:35.980 for you.

00:46:36.480 So COVID,

00:46:38.340 I lived in LA

00:46:39.340 24 years

00:46:40.240 minus the time

00:46:40.900 I was in the military,

00:46:41.800 you know,

00:46:42.000 Fort Campbell,

00:46:42.460 Kentucky,

00:46:42.900 but I was in California

00:46:44.100 24 years.

00:46:45.180 I was in Dallas

00:46:46.020 for five years

00:46:46.920 and I've been in Florida

00:46:47.880 now for five months.

00:46:48.880 I'm moving to Florida.

00:46:49.840 I have one of my companies

00:46:50.640 I kept in Dallas

00:46:51.420 and I got another company

00:46:52.840 I'm running right now

00:46:53.500 that's in Florida.

00:46:54.760 During the pandemic,

00:46:55.800 we saw a lot

00:46:56.820 of moving parts.

00:46:57.700 We saw how California

00:46:58.620 policies were pushing

00:46:59.620 people out of California.

00:47:01.400 A bunch of names

00:47:02.000 I don't need to give them to you.

00:47:02.880 You've read them,

00:47:03.400 you know them

00:47:03.900 and the list will be

00:47:05.060 a long list.

00:47:05.740 Whether a lot of the folks

00:47:07.160 from California,

00:47:07.900 if they could,

00:47:08.540 they moved their business

00:47:09.180 to Nevada,

00:47:09.900 no state taxes

00:47:11.100 or they moved

00:47:12.440 straight up to Texas

00:47:13.660 because it's a better

00:47:14.440 business friendly place.

00:47:15.800 And you saw a lot of people

00:47:16.580 from New York,

00:47:18.040 DC,

00:47:18.980 all Connecticut

00:47:20.140 moving to Florida

00:47:21.460 and now a lot of guys

00:47:22.380 are saying,

00:47:22.760 I'm not moving back

00:47:23.320 to New York.

00:47:23.820 I kind of like staying

00:47:24.480 in Florida here.

00:47:26.780 From your experience,

00:47:28.100 you said 50 years

00:47:28.900 you've been studying economy.

00:47:30.920 Has Florida

00:47:31.620 always been Florida?

00:47:33.080 Has Texas

00:47:34.040 always been Texas

00:47:35.100 where it's a

00:47:35.640 pro business friendly place

00:47:37.260 or did California

00:47:39.100 used to be Texas

00:47:40.280 and New York

00:47:41.100 used to be Florida

00:47:41.900 and they flipped?

00:47:43.680 I don't know

00:47:44.040 if you understand

00:47:44.460 the question I'm asking.

00:47:45.240 I know I got the question.

00:47:46.740 Let me just say

00:47:47.660 that relative tax rates

00:47:49.380 have always attracted

00:47:51.540 to people

00:47:52.560 to the lower states,

00:47:53.780 lower tax states

00:47:54.560 from the higher tax.

00:47:55.640 That's always been true.

00:47:56.780 And let me,

00:47:57.020 if you have two locations,

00:47:58.680 A and B,

00:48:00.280 if you raise taxes in B

00:48:01.800 and you lower them in A,

00:48:03.180 people and jobs

00:48:04.140 and producers

00:48:04.820 and income

00:48:05.620 will move from B to A.

00:48:07.860 That will happen.

00:48:09.640 California had a huge advantage

00:48:11.720 in the 60s.

00:48:13.080 I mean,

00:48:13.440 I moved there in the 60s

00:48:14.760 because of the huge advantages

00:48:16.540 that California had

00:48:17.580 on all sorts of job prospects growth.

00:48:19.780 It was where the earth began.

00:48:21.540 But as the years have gone on,

00:48:23.680 tax rates have become

00:48:24.860 much, much more important

00:48:26.460 as to how they do it.

00:48:27.840 Now,

00:48:28.180 there have been 11 states

00:48:29.420 that introduced

00:48:30.020 the income tax

00:48:30.960 since 1960.

00:48:32.640 Those 11 states

00:48:33.740 started in 1961

00:48:35.800 with West Virginia.

00:48:37.100 It ended up

00:48:37.920 with Connecticut

00:48:39.240 in 1991.

00:48:41.120 You know,

00:48:41.320 it had states

00:48:41.900 like Rhode Island

00:48:42.620 and Maine

00:48:43.120 and New Jersey

00:48:43.800 and Pennsylvania

00:48:44.640 and Indiana

00:48:45.380 and Ohio

00:48:46.100 and Illinois

00:48:46.760 and Michigan

00:48:47.540 and Nebraska.

00:48:48.680 All of them put in

00:48:49.520 the income tax.

00:48:50.240 All of those states

00:48:51.240 that introduced

00:48:51.800 an income tax

00:48:52.560 have declined dramatically

00:48:54.280 relative to the rest

00:48:55.320 of the nation.

00:48:56.060 I mean,

00:48:56.360 dramatically.

00:48:58.080 It's still nine states

00:48:59.420 in the U.S.

00:48:59.960 have no income tax,

00:49:01.080 no earned income tax.

00:49:02.420 We just got rid

00:49:03.260 of our earned income tax

00:49:04.320 and the states

00:49:05.660 with no income tax

00:49:06.580 way outperformed

00:49:07.700 those that have

00:49:08.740 the highest income taxes.

00:49:10.420 I guess

00:49:10.580 the question

00:49:11.600 I was asking you is

00:49:12.560 originally

00:49:13.780 when New York

00:49:14.340 and California

00:49:14.880 became New York

00:49:15.500 and California,

00:49:16.220 what attracted everybody

00:49:17.420 to move to New York

00:49:18.280 and California?

00:49:18.980 Was it low income taxes?

00:49:20.500 Was it a big business?

00:49:21.400 No, it was not

00:49:21.600 low income taxes.

00:49:22.720 I mean,

00:49:23.120 the taxes did not stop.

00:49:25.320 I'm sorry,

00:49:25.360 low state taxes.

00:49:26.700 No, I understand.

00:49:27.460 I understood exactly

00:49:28.420 what you meant.

00:49:29.380 No, New York

00:49:29.960 was a place of opportunity.

00:49:31.420 It was growing

00:49:31.920 and building up.

00:49:32.840 But once it had built up

00:49:33.920 and all of that

00:49:34.620 advantage had occurred.

00:49:36.500 In Florida

00:49:37.240 in 1947

00:49:38.800 was nothing.

00:49:40.280 I mean,

00:49:40.920 it was Arkansas.

00:49:42.280 I mean,

00:49:42.520 excuse me,

00:49:42.880 I don't mean to insult Arkansas,

00:49:44.300 but it was really

00:49:45.120 a disaster.

00:49:46.380 California in 1939

00:49:47.900 was nothing.

00:49:48.900 I mean,

00:49:49.580 it was World War II

00:49:51.220 that really got

00:49:52.220 California up and going.

00:49:53.700 I mean,

00:49:53.820 all the troops

00:49:54.440 going over there

00:49:55.220 and to fight

00:49:56.160 in the Far East

00:49:56.960 and it really built

00:49:58.000 California up to huge size.

00:49:59.940 So all of these states

00:50:01.140 had a lot

00:50:01.880 of natural advantages.

00:50:03.440 Let me just say

00:50:04.080 this really clearly,

00:50:05.760 Patrick,

00:50:06.160 that taxes

00:50:06.860 are not everything.

00:50:08.300 They're far,

00:50:09.240 far, far from it.

00:50:10.740 Lots of other things

00:50:11.680 matter besides taxes,

00:50:13.200 but taxes are important

00:50:15.380 and taxes are one

00:50:17.640 of the items

00:50:18.500 that people look to

00:50:19.780 when they move.

00:50:21.020 Now,

00:50:21.280 if you look at just taxes,

00:50:22.920 you will not get

00:50:23.720 every person's move.

00:50:24.840 Some people move

00:50:25.480 because their girlfriends

00:50:26.240 in a different state.

00:50:27.120 Some people move

00:50:27.800 because their company moved.

00:50:29.160 I mean,

00:50:29.580 all these things happen,

00:50:31.000 but taxes

00:50:31.480 are the common systematic

00:50:32.860 boom,

00:50:33.540 ba-ba-boom,

00:50:34.220 ba-ba-boom.

00:50:35.080 And if you look at tax rates

00:50:36.640 amongst the states,

00:50:37.620 you will map out

00:50:38.820 the fast-growing states

00:50:39.900 and the slow-growing.

00:50:40.580 You'll see that Michigan

00:50:42.040 is declining like mad.

00:50:43.760 Detroit in 1950

00:50:46.140 had 1.85 million people.

00:50:48.680 Today,

00:50:48.980 it's below 600,000.

00:50:51.240 Miami in 1950

00:50:52.960 had no one.

00:50:54.020 Now it's bazillions.

00:50:55.320 I mean,

00:50:55.800 you know,

00:50:56.120 all of these things

00:50:57.000 are moving.

00:50:57.800 I mean,

00:50:58.060 just St. Louis

00:50:58.900 and Kansas City

00:50:59.780 and Cleveland, Ohio

00:51:00.680 and Detroit

00:51:01.420 and Chicago

00:51:02.420 and all these cities

00:51:03.560 that are just collapsing

00:51:04.600 before our eyes

00:51:05.480 in the high-tech state.

00:51:07.040 Look,

00:51:07.280 compare them with Dallas

00:51:08.300 and Houston

00:51:08.940 and San Antonio

00:51:10.160 and these other,

00:51:11.020 you know,

00:51:11.300 it is a huge monumental

00:51:12.900 earth movement,

00:51:13.980 earthquake

00:51:14.340 that's taken,

00:51:15.720 driven in large part

00:51:17.200 by taxes

00:51:17.900 and free market regulations

00:51:19.380 and pro-growth policies

00:51:21.620 that are really making

00:51:23.220 a big difference.

00:51:23.960 Last question here.

00:51:24.760 Can what happen

00:51:25.380 to Detroit, Michigan,

00:51:27.420 you know,

00:51:27.820 where they went,

00:51:28.520 like you said,

00:51:28.800 1.85 million

00:51:29.620 to less than 600,000

00:51:30.700 and, you know,

00:51:31.540 regulation after regulation

00:51:32.800 after regulation

00:51:33.520 where more government jobs

00:51:34.620 are being offered

00:51:35.220 than free enterprise.

00:51:36.060 Finally,

00:51:36.260 the other guys are like,

00:51:36.940 listen,

00:51:37.180 we're out of here.

00:51:38.020 It's a mess

00:51:38.500 to be working here.

00:51:39.180 Can what happened

00:51:40.360 to Detroit

00:51:41.100 happen to New York

00:51:42.520 or, you know,

00:51:43.840 Illinois, Chicago

00:51:44.720 or LA, California?

00:51:47.000 Yes, it can.

00:51:48.240 Now, Detroit,

00:51:49.100 it was easier to do.

00:51:50.480 I mean,

00:51:50.660 in 1950,

00:51:51.580 Detroit was the Paris

00:51:52.600 of North America.

00:51:53.820 I mean,

00:51:54.260 the train station there,

00:51:55.280 my mom and dad

00:51:55.960 used to take me

00:51:56.560 by train up to Detroit.

00:51:58.140 The train station there

00:51:59.340 in Detroit

00:51:59.680 was the Taj Mahal.

00:52:00.800 I mean,

00:52:00.900 it was just an amazing building.

00:52:03.140 It can,

00:52:03.900 but it takes a long time

00:52:05.180 to destroy the capital stock

00:52:06.600 and it takes a long time

00:52:08.480 to rebuild it.

00:52:09.580 And the problem is

00:52:10.380 that once you've done

00:52:11.340 those taxes,

00:52:12.300 the first five years

00:52:13.940 you get rid of those taxes,

00:52:15.000 you'll get no revenues

00:52:15.880 because no one's coming back

00:52:16.960 until they feel really certain

00:52:18.160 about the long run.

00:52:19.780 And that's the problem

00:52:20.900 is it's like a ratchet.

00:52:22.100 You can't undo it

00:52:23.160 once you've done it.

00:52:24.700 Two guys,

00:52:25.680 two guys,

00:52:26.480 one's a two pack a day smoker.

00:52:28.620 The other guy's

00:52:29.160 never smoked a cigarette.

00:52:30.780 Both of those guys

00:52:31.660 have to go the next three months

00:52:32.820 without any cigarettes.

00:52:33.820 The guy who's never smoked

00:52:35.540 says,

00:52:35.840 okay, fine.

00:52:36.500 What's the big deal?

00:52:37.900 The smoker goes,

00:52:38.720 ah!

00:52:40.000 Goes to delete.

00:52:41.100 That's what happens

00:52:41.900 when you try to remove taxes,

00:52:44.040 the income tax.

00:52:44.980 It's almost impossible

00:52:46.180 because you'll have

00:52:46.740 huge shortfalls of revenue

00:52:48.360 for the next three

00:52:49.320 or four or five years.

00:52:50.520 Your schools will have problems

00:52:51.660 and all of that will.

00:52:52.760 Now,

00:52:52.980 if you never adopted income tax,

00:52:55.400 you'll do really well forever.

00:52:57.440 And the problem is

00:52:58.320 is undoing the damage

00:52:59.520 that these guys put in.

00:53:00.880 One state

00:53:01.680 has removed its income

00:53:03.780 tax.

00:53:04.380 And that was Alaska.

00:53:05.560 I was up there with them

00:53:06.380 when they discovered oil.

00:53:08.020 They had this huge revenue surge

00:53:09.780 and they were able

00:53:10.400 to use those revenues

00:53:11.480 to get rid of the income tax

00:53:12.580 and the sales tax.

00:53:13.720 But other than that,

00:53:14.440 I've never seen any state

00:53:15.540 get rid of it.

00:53:16.380 But that's a different story.

00:53:17.260 I mean,

00:53:17.480 Alaska is not a,

00:53:18.340 it's not a duplicatable story.

00:53:19.820 It's not applicable.

00:53:20.860 Yeah.

00:53:21.320 Yeah.

00:53:21.660 You're right.

00:53:22.340 Totally right.

00:53:23.120 Final thoughts I'll give you here,

00:53:24.580 Arthur,

00:53:24.860 you know,

00:53:25.060 my,

00:53:25.540 and the topic I would want to hear

00:53:27.340 from you on the final thoughts is,

00:53:28.960 are you still as optimistic

00:53:30.640 as the idea of America

00:53:33.300 for the average guy

00:53:34.520 to work their tails off,

00:53:35.980 have their dreams become a reality?

00:53:37.800 The fact that this is still

00:53:39.360 5,

00:53:39.800 10,

00:53:40.000 15,

00:53:40.320 20,

00:53:40.560 30 years from now

00:53:41.200 is going to be the greatest country

00:53:42.240 in the world.

00:53:42.660 Or we've reached a point where,

00:53:44.500 you know,

00:53:45.320 look,

00:53:45.820 we're a couple bad decisions

00:53:47.000 away from ruining

00:53:47.800 a great idea

00:53:49.140 that we put together

00:53:50.120 in 1776.

00:53:51.360 Where are you at with that?

00:53:52.480 Look,

00:53:52.700 I'm 81 years old,

00:53:53.900 Patrick.

00:53:54.460 You know,

00:53:55.020 30 years from now

00:53:55.880 is a little bit long for me,

00:53:57.320 but I'll still play

00:53:58.380 with that one.

00:53:59.340 Let me just say that,

00:54:00.820 you know,

00:54:02.560 a lot of these things

00:54:03.580 are pessimistic for me.

00:54:04.800 I sometimes wake up

00:54:05.900 on the grumpy side

00:54:06.800 of the life

00:54:07.400 and I'm not optimistic.

00:54:09.660 But when I stop

00:54:10.820 and think about it

00:54:11.660 for a second,

00:54:12.880 in 1945,

00:54:16.180 the highest marginal income

00:54:17.440 tax rate in the U.S.

00:54:18.380 was 94%.

00:54:19.420 Today it's 37%.

00:54:21.760 That's not bad.

00:54:23.300 When Jack Kennedy

00:54:24.100 took office,

00:54:24.860 the corporate rate,

00:54:25.540 the highest corporate rate

00:54:26.400 was 52%.

00:54:27.420 Now it's 15%.

00:54:30.140 That's not too shabby.

00:54:32.140 You know,

00:54:32.360 if you look at

00:54:32.900 the state income tax,

00:54:34.540 state death taxes,

00:54:36.480 in 1976,

00:54:37.800 one state alone

00:54:39.340 did not have a death tax.

00:54:40.820 That was Nevada.

00:54:42.240 Today,

00:54:42.960 I think 38 states

00:54:44.100 have gotten rid

00:54:44.600 of their death taxes.

00:54:46.060 In 1957,

00:54:47.940 I think,

00:54:48.920 1957,

00:54:50.000 two states

00:54:50.540 had right to work.

00:54:51.580 That was Arkansas

00:54:52.320 and Florida.

00:54:53.060 Today,

00:54:53.700 half the states

00:54:54.600 have right to work,

00:54:55.300 which is wonderful.

00:54:56.400 We've got the deregulation

00:54:58.520 in the stock market.

00:55:00.000 In 1973,

00:55:01.280 it cost you 30 cents

00:55:02.400 to trade a share of stock.

00:55:04.200 Today,

00:55:04.480 it's zero.

00:55:06.000 And Jimmy Carter

00:55:06.880 deregulated airlines.

00:55:08.900 Totally.

00:55:09.660 Now you've got

00:55:10.160 much lower costs

00:55:11.220 of air travel,

00:55:11.940 a lot more people traveling,

00:55:13.080 and it's safer.

00:55:14.440 They decontrolled

00:55:15.300 trucking as well.

00:55:18.240 They not only

00:55:18.780 decontrolled trucking as well,

00:55:20.180 but they've done a lot

00:55:21.100 on negotiating discount.

00:55:22.700 It used to be

00:55:23.860 against the law

00:55:24.560 to sell products

00:55:25.260 at a discount.

00:55:26.280 Now we've got

00:55:26.920 Walmart and Costco

00:55:28.120 and all these other

00:55:28.920 places to do discounts.

00:55:29.940 It's an amazingly

00:55:30.940 better world.

00:55:32.160 I mean,

00:55:32.360 if you look at

00:55:33.060 some of the wildlife,

00:55:34.760 I mean,

00:55:35.000 the bald eagle's back,

00:55:36.120 the black-footed ferret's back,

00:55:37.820 Cuyahoga,

00:55:38.980 Cleveland, Ohio

00:55:39.800 is pollution-free.

00:55:41.180 Well,

00:55:41.300 not quite pollution-free,

00:55:42.440 but the Hudson River.

00:55:44.300 I mean,

00:55:44.500 if you look at

00:55:45.100 the L.A. Basin,

00:55:46.840 when I lived there,

00:55:47.880 you couldn't see

00:55:48.700 Mount Baldy

00:55:49.400 99% of the time.

00:55:51.760 Now you can see it everywhere.

00:55:52.900 You used to have

00:55:53.280 three-stage smog alerts

00:55:54.480 all the time.

00:55:55.560 You know,

00:55:55.740 we're making huge progress

00:55:57.460 in a positive direction,

00:55:58.800 and government

00:55:59.500 is part of the solution.

00:56:01.920 It's not just a problem.

00:56:04.000 It's thinking about

00:56:05.240 government correctly

00:56:06.460 that will allow us

00:56:07.440 to use government

00:56:08.500 as a tool

00:56:09.580 to create prosperity.

00:56:11.480 You know,

00:56:12.540 you want to collect

00:56:13.440 your taxes

00:56:14.000 in the least damaging fashion,

00:56:15.960 and you want to spend

00:56:17.100 your money

00:56:17.480 in the most beneficial fashion.

00:56:19.620 When the damage done

00:56:20.680 by the last dollar

00:56:21.580 of taxes collected

00:56:22.460 is a bit less

00:56:24.280 than the benefit done

00:56:25.680 by the last dollar spent,

00:56:27.180 stop already.

00:56:29.080 Any spending higher

00:56:30.060 than that is too much,

00:56:31.160 but any spending lower

00:56:32.360 than that is too little.

00:56:33.640 There is a correct role

00:56:35.000 for government.

00:56:36.020 These guys think

00:56:36.820 that if good government's good,

00:56:38.660 God,

00:56:39.000 you should increase it tenfold.

00:56:40.680 No.

00:56:41.860 I mean,

00:56:42.140 a little bit of salt

00:56:42.980 on your eggs

00:56:43.460 in the morning is great,

00:56:44.300 but a whole pile of salt

00:56:45.540 on it really tastes awful.

00:56:47.620 And they need

00:56:48.740 limitations on this,

00:56:49.960 and that's what I'm hoping

00:56:50.820 we discover

00:56:51.480 as we move forward.

00:56:53.100 I'm really hopeful

00:56:54.480 if that will be the case.

00:56:55.680 I hope Jerry Brown's story

00:56:58.140 inspires the Biden administration

00:56:59.980 to contact,

00:57:00.800 even for some counsel

00:57:02.280 on what could work

00:57:03.100 and what can't work,

00:57:03.880 because if those ideas

00:57:04.780 almost worked

00:57:05.500 back in the days,

00:57:06.820 minus the VP

00:57:07.500 who would have chosen,

00:57:08.700 I think some of those ideas

00:57:09.820 many people would like

00:57:10.820 to see presented

00:57:11.760 to the president.

00:57:13.120 The name is Dr. Lanfer.

00:57:14.820 If you haven't read his book,

00:57:16.240 Return to Prosperity,

00:57:17.300 we're going to put

00:57:17.740 the link below.

00:57:18.900 Dr. Arthur Lanfer,

00:57:20.080 thank you once again

00:57:20.980 for being a guest

00:57:21.640 on Valuetainment.

00:57:22.960 My pleasure.

00:57:23.660 Thank you very much, Patrick.

00:57:25.020 Very different angles, right?

00:57:26.260 Taxes, economy, future,

00:57:27.640 how he feels about Bitcoin,

00:57:28.840 cryptocurrency, gold,

00:57:30.580 inflation,

00:57:31.320 not really an inflation.

00:57:32.640 I thought it was fascinating.

00:57:34.000 Want to know

00:57:34.300 what you took away from it?

00:57:35.240 Comment below.

00:57:35.720 And if you enjoyed this interview,

00:57:36.840 my part one

00:57:37.840 with Arthur Lanfer

00:57:39.300 was right here in 2018.

00:57:41.100 We went a complete

00:57:41.780 different angle.

00:57:42.340 If you've not seen that,

00:57:43.220 click over here.

00:57:44.260 Or another video

00:57:44.860 I did a month ago

00:57:45.540 titled The History of Taxes,

00:57:47.120 where I went very deep

00:57:48.400 in the history of taxes.

00:57:50.140 You may want to watch that as well.

00:57:51.420 Take care, everybody.

00:57:52.100 Bye-bye.

Valuetainment - June 25, 2021

Why Raising Taxes Destroys The Economy - Arthur Laffer

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