Today’s Brew 12-15-14

Ralph Benko is great reading  this morning with his column:

The Yellen Tug Of War

For the rest of us, getting it right — as did Chairman Volcker and (during his first two terms), Greenspan is crucial to the creation of a climate of equitable prosperity in which jobs are created in abundance.  39 million jobs were created during the “Great Moderation.” We haven’t seen anything remotely like that since.

Getting it right is crucial to economic mobility — raises, bonuses, and promotions — to let us workers climb the ladder to decent affluence. Thus, just when to raise rates is much less important than the bedrock issue.

For over a decade now job creation has been poor. Poor, too, has been economic mobility.  The left is very much on record as calling for extended ease — keeping interest rates down.  The right has been critical over the Fed’s “zero interest rate policy.” Yet the real tug of war is over whether the Fed should follow a monetary rule or exercise discretion; and, if a rule is preferable, what rule?

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It is my guess that Janet Yellen reaches out to the social-democratic left because it represents her native intellectual milieu. They speak her language.  Many progressives simply find the right foreign, our language alien. (Memo to Yellen: If all I knew about my team was what I read from Paul Krugman I, too, would disdain me. The mainstream media portrayal of the right is a grotesque caricature.  We’re not the way we are portrayed.  We are, however, skeptical of the efficacy of central planning.  For good reason. And, Dr. Yellen? America is a center right nation.)

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In a way, it’s “Yellen vs. Volcker.” Contrast a statement by Madam Yellen with one made by former (and iconic author of the Great Moderation) Fed Chairman Paul Volcker, reprised in an earlier column:

Madame Yellen [at hearing of the House Financial Services Committee chaired by Chairman Jeb Hensarling earlier this year] stated that “It would be a grave mistake for the Fed to commit to conduct monetary policy according to a mathematical rule.” Contrast Madame Yellen’s protest with a recent speech by Paul Volcker in which he forthrightly stated: “By now I think we can agree that the absence of an official, rules-based cooperatively managed, monetary system has not been a great success. In fact, international financial crises seem at least as frequent and more destructive in impeding economic stability and growth. … Not a pretty picture.”

Also, from Twitter:

Today’s Brew 10-15-14

The first book review we’ve seen for The Pillars of Reaganomics edited by Brian Domitrovic and featuring some of the collected works or Dr. Arthur Laffer. If you find other reviews, please let us know, we’d like to link to them.

New Laffer book details Reagan prosperity recipe

That’s where the famous Laffer Curve comes in. In the book, Domitrovic describes it:

“The Laffer Curve is a simple theoretical diagram, a bell curve…that compares tax revenues that are gained under all tax rates between 0 percent and 100 percent. At one end (the 0 percent tax rate), tax revenues are zero, at the other (the 100 percent rate), tax revenues are also zero, because no one chooses to earn money when the government confiscates every penny. In between there is a bulge. And at one point, that bulge peaks — implying that any tax rate increase beyond it will result in lower revenue….

“Laffer…had used the curve often in the classroom, as a teaching tool. Then in December 1974, he sketched the curve on the restaurant napkin before two high staffers of the Gerald Ford administration, Donald Rumsfeld and Richard B. Cheney, along with his friend, Wall Street Journal editorialist Jude Wanniski.”

Alas, Ford did not embrace supply-side tax cuts, the economy continued to stagnate and in 1976, voters canned him for Jimmy Carter.


Editorial note: we made one correction to the quote above, there was a repetitive use of a word.

Today’s Brew 11-10-10

Ralph Benko appears at the Washington Examiner today:

Schramm’s Law reveals key to restoring America’s economic growth

Economist Dr. Arthur Laffer’s famous curve provided an earlier era with the recipe for prosperity. It was a simple, irrefutable, axiom, showing that too high tax rates, by throttling economic activity, would stifle government revenue. (President Kennedy made the identical point.)

The Laffer Curve powered America out of the horrible stagflation of the 1970’s—an economy even worse than today’s.

We now enter a new political epoch. It demands a fresh axiom, Schramm’s Law: “The single most important contributor to a nation’s economic growth is the number of startups that grow to a billion dollars in revenue within 20 years.”

We seek to emerge from the Great Recession while the incumbent administration flounders about with ineffectual and counterproductive remedies.  President Obama squandered so much political capital that the voters gave his entire party a “shellacking” (his word).Voters gave the Republicans a new and massive majority in the House — the constitutional source of taxing and spending.