One day in 1974 economists Arthur Laffer sat in a Washington restaurant with some prominent journalists and politicians. He took out a napkin and drew a figure on it to show how tax rates affect tax revenue. It looked much like. Laffer then suggested the United Staes was on the downward-sloping side of this curve. Tax rates were so high he argued that reducing them would actually raise tax revenue. Most economists were skeptical of Laffer’s suggestion. The idea that a cut in tax rates could raise tax revenue was correct as a matter of economic theory but there was more doubt about whether it would do so in practice. There was little evidence for Laffer’s view that U. S. tax rates had in fact reached such extreme levels. Nonetheless the laffer curve (as it became known) captured the imagination of Ronald Reagan. David Stockman budget director in the first Reagan administration offers the following story. When Reagan ran for president in 198...