Art Laffer: ‘Whole Economy is Shrinking’

“Economist Art Laffer Wednesday called the contraction in the U.S. economy “catastrophic” and predicted that it would continue to shrink without spending restraints and lower business tax rates.

“You have the whole output of the economy shrinking. Not just expanding more slowly, it`s absolutely shrinking,” Laffer told Fox News’ Eric Bolling Wednesday.

“That’s catastrophic,” the former adviser to President Ronald Reagan added.

“You can explain some of that by sequestration, and defense spending was down lot and all that. But you still have a rotten economy. And it’s still too bad. We know how to fix it, by the way, a low rate flat tax, spending restraint, sound money, free trade.”

Laffer was responding to reports Wednesday that the U.S. economy contracted 0.1 percent in the last quarter of 2012, marking the worst quarter performance since the recovery began more than two years ago.

The White House blamed the surprising slowdown on Republicans in Congress, accusing them of creating uncertainty during the fiscal cliff crisis.

But Laffer dismissed that criticism as an excuse for bad economic policies that he insisted have left businesses and consumers in a state of confusion. He agreed with most Republicans that it’s a spending problem, not a revenue problem. Yet, he declined to lay all the blame on President Barack Obama, noting that former President George W. Bush started the spending binge, which he said led to the so-called “great recession” beginning in 2008….”