Somerset — For Dr. Arthur Laffer, the current economy is no laughing matter.“All spending is taxation,” the noted economist told the Commonwealth Journal on Friday night. “The reason we’ve had such a bad economy is all the outrageous spending in the last two years of (President George W.) Bush and the first two years of (President Barack) Obama.”

That’s why Laffer is excited about what his friend, Somerset’s own Congressman Harold “Hal” Rogers, chairman of the nation’s appropriations committee, and the new crop of Republicans in Washington spurred by the “Tea Party” movement can do. The current GOP leadership is tasked with employing billions of dollars in federal spending cuts through a new bill on Capitol Hill.“I’m delighted,” said Laffer, before adding, “I’m scared. When they do all these shenanigans like they’re doing in Wisconsin, or the lame duck session (of Congress), it’s scary. It bothers me. You never like to be put in a position where you feel uncomfortable.”

Laffer certainly wasn’t uncomfortable at the 34th annual Lincoln Club banquet Friday at the cafeteria of Pulaski County High School — there, he was among like-minded individuals. The Pulaski County Lincoln Club is an organization for local members of the Republican Party, and the annual dinner always brings out a who’s who list of politicians, candidates, and interested parties for food, fellowship, and compelling keynote speakers.Laffer certainly fits that latter description. As the key economic policy advisor for Reagan, Laffer’s ideas helped shape the economic boom that the country experienced during the 1980s and early ‘90s. A native of Ohio (and current resident of Tennessee), Laffer has a BA in Economics from Yale and an MBA and PhD from Stanford, and is the founder and CEO of Laffer Associates, a Nashville research and consulting firm. He was a member of the Reagan/Bush finance committee in 1984, and also advised British Prime Minister Margaret Thatcher on her country’s fiscal policies in the ‘80s.

Laffer’s theory known as the “Laffer Curve” defined Reagan’s policies regarding “supply-side” economics, essentially stating that lowering tax rates can have the effect of actually raising tax revenue, by encouraging new or expanded enterprise without the yoke of a heavy tax burden.“There are two effects taxes have on revenues,” said Laffer. “If you raise tax rates, you collect more revenue per dollar of the tax base, but the secondary effect is that you discourage people from doing an activity, and you get a smaller tax base. Sometimes when you raise tax rates, you do get more money, and sometimes you get less money, but you never get as much money as you think you will. In the same breath, when you cut tax rates, you never lose as much money as you think you will.”

In essence, Laffer’s message is simple: Economics is all about incentives. He conveyed the idea that if you make something less attractive, people will do less of it, and if it’s made more attractive, people will do more of it.“That’s all there is to economics,” said Laffer. “It’s very much common sense. If you tax people who work and pay people who don’t work, don’t be surprised if there are a lot of people not working. If you tax rich people and give money to poor people, you’re going to get lots and lots of poor people and no rich people. If you want to make poor people rich, you don’t make rich people poor.”

Laffer’s speech to the crowded cafeteria outlined a detailed five-point plan for economic prosperity, including:• Low tax rates. “People don’t like paying taxes,” noted Laffer to great applause. “You want the lowest possible tax rate out of the largest possible tax base.” He added that the first principle of a “good government” is a low-rate flat tax.

• Spending restraints. “We must bring (federal) spending down,” said Laffer. “It’s not going to hurt the economy. By reducing spending, it will make the economy grow faster, not slower.”• Making sure the dollar is sound to prevent inflation. “You can’t have the printing press (for money) running like we have over the last few years,” said Laffer. “You’ve got to guarantee the value of currency so that we all know in five, 10, 20, 30 years that the dollar will be worth what it is today, so that we can all trade with each other. ... If you print too much money, you’re going to get inflation.”

• Free trade. “There are some things we do better than foreigners and some things foreigners do better than we do,” said Laffer. “It’s a win-win situation. You’ve got to have free trade.“We would be foolish if we didn’t sell them those things we make better than we do (and vice versa),” he added “You don’t want to have greenhouses in the frozen tundra of Minnesota (to grow bananas) just because they don’t want to trade with Costa Rica. All of this is common sense.”

• Minimize regulations. “You’ve got to have some regulations ... (but) you have to make sure you don’t go overboard with regulations and cause collateral damage to the overall economy.”Laffer pointed to his chief problem with Obama’s health care bill, a.k.a. “ObamaCare” — not that it runs up the deficit, but that it destroys incentive and promotes irresponsible health care treatment. “Whenever you get something for free, (people) overuse it and misuse it,” he said.

Laffer’s ideas were certainly popular with those in attendance, and while he acknowledged that “you’re never certain you’re right in this world, you think you know what the right path is, and I feel much more certain today than in 1980 when I worked with Reagan because back then, no one had done this before.”Laffer is one of the most important national figures to attend the Lincoln Banquet in recent years, and Rogers is to thank for that. “Rogers asked me to (come speak, and) that’s all I needed,” said Laffer. The two men share a kinship, in that both came to Washington alongside Reagan in ‘81 — Laffer on the Economic Policy Advisory Board, and Rogers as a first-time member of the U.S. House of Representatives, part of a fresh crop of Republicans that helped push Reagan’s policies into law.

Other business at the banquet included recognizing candidates for statewide political offices, including governor and treasurer (Former UK basketball star and agriculture commissioner Richie Farmer, a candidate for Lt. Governor on the ticket with Kentucky Republican Senate leader David Williams, was in attendance), and the installation of Lincoln Club officers for 2011-12.Officers for this year include president Todd Wood, the county sheriff; secretary Resa Flynn; treasurer Brenda Ham; and area vice presidents Ron Woodson (north), Bonami Halcomb (south), Lois Hansford (east), Marshall Todd (west) and Steve Kelley (city).

Rogers also spoke, trumpeting the Republicans’ bill to cut $61 billion in federal spending as part of his “new chore” in Washington D.C.“It is a real thrill to be in a body now that is controlled by our party,” said Rogers, referencing the GOP’s election victories in November to claim the U.S. House. “If we can pass this bill, the economy will do much better. Employers will hire people and get the economy back on track.

“Lots of programs need to be cut,” he added. “There are a lot of good people involved in those programs, but we just can’t afford it. ... It’s not fun, but it’s got to be done.”