Larry Kudlow was on today’s episode of The Cats Roundtable.
The Houston Chronicle has once again given space to Ed Hirs, who incorrectly attacked supply-side economics back in May, which we shared here. Today Hirs is using supply-side economics to attack the tax reform bills that will now be going to conference committee. Fair enough, but let’s not lie and make up our own facts along the way, Mr. Hirs. You will find today’s editorial by Hirs here.
Reagan, originally a New Deal Democrat, knew the benefit of Keynesian tax cuts but expediently called it supply-side economics.
Ronald Reagan attended Eureka College before the New Deal was a thing and before Keynesian economics was a thing. He had been educated in real economics, not the type of economics that would take over in left-leaning academia for the decades to follow.
If we are to take a cue from Broadway, it should be from Horace Vandergelder in “Hello Dolly,” who famously said, “Money is like manure; it’s not worth a thing unless it’s spread around encouraging young things to grow.”
Absent that spread around, trickle down, the economics of tax cuts for the rich simply do not add up.
There you go again, Ed. Anyway, feel free to enjoy the comments section where the editorial is posted.
☕ Ralph Benko’s latest for Forbes.com addresses the chaos in the West Wing and how that relates to (or not) economic growth:
But only Trump has the power to really work this out, by directing his advisors — all of them — to start focusing on the right question. How to engineer a 3% – 4% economic growth rate? Getting there is not a mulligan.
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The clashing of White House camps is an inevitable artifact of sluggish growth. All President Trump needs to do to bring about a just and lasting West Wing peace is to focus his team better. The way of producing harmony in the West Wing — and popularity in the polls — is for the President to issue a sticky note to each of his economic and political advisors that says, simply “How do we get real economic growth up from 2% to 3% or 4%, and fast?” Trump, alone, has the power to do this.
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Getting growth is an empirical, not an ideological, thing.
Worked for JFK. Worked for Reagan. Worked for Clinton.
Would work for Trump.
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Reagan supported Chairman Volcker’s wringing inflation from the economy. When that was accomplished, and Reagan’s across-the board tax rate cut was fully phased in, America enjoyed a cumulative 3.5+% economic growth rate with a spectacular 7% year. Mr. President? That was huge.
☕ Dan Mitchell also has a new post that while not strictly economic, does matter in the economic realm. As we know, money taxed away from the people is money taken out of the consumer economy.
☕ If you can get to Dallas on May 9th…
In possibly the unlikeliest of places, Art Laffer appears at the Huffington Post today:
I’ve seen such strategy work before, and I know we can do it again. In 1980, I served as an economic adviser to presidential candidate Ronald Reagan. With the unemployment rate above 7 percent and inflation rates well into double-digits, Reagan proposed tax rate cuts to boost the incentives for production, output and employment.
The results: A landslide for Reagan who had been dismissed by Democratic Party stalwart Clark Clifford as an “amiable dunce.” After Reagan’s economic reforms took effect, economic growth soared.
Growth was so great that Reagan’s economic policies won bipartisan support. After the initial cuts in 1981, his tax reforms received support from many leading Democrats, including Sen. Bill Bradley of New Jersey and Rep. Richard Gephardt of Missouri.
Nice to see Stephen Moore slip one past the editors and get this published in enemy territory, the Washington Post, aka, Pravda on the Potomac. And, you have to love the name “Laffer Curve deniers.”
In the four decades since, the Laffer Curve and its supply-side message have taken something of a beating. They’ve been ridiculed as “trickle down” and “voodoo economics” (a phrase coined in 1980 by George H.W. Bush), and disparaged in mainstream economics texts as theories of “charlatans and cranks.” Last year, even Pope Francis criticized supply-side theories, writing that they have “never been confirmed by the facts” and rely on “a crude and naive trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system.” And this year, French economist Thomas Piketty penned a best-selling back-to-the-future book arguing for a return to the good old days of 70 percent tax rates on the rich.
But I’d argue — and not just because Laffer has been a longtime friend and mentor — that his theory has actually held up pretty well these past 40 years. Perhaps its critics should be called Laffer Curve deniers.
Solid supporting evidence came during the Reagan years. President Ronald Reagan adopted the Laffer Curve message, telling Americans that when 70 to 80 cents of an extra dollar earned goes to the government, it’s understandable that people wonder: Why keep working? He recalled that as an actor in Hollywood, he would stop making movies in a given year once he hit Uncle Sam’s confiscatory tax rates.
When Reagan left the White House in 1989, the highest tax rate had been slashed from 70 percent in 1981 to 28 percent. (Even liberal senators such as Ted Kennedy and Howard Metzenbaum voted for those low rates.) And contrary to the claims of voodoo, the government’s budget numbers show that tax receipts expanded from $517 billion in 1980 to $909 billion in 1988 — close to a 75 percent change (25 percent after inflation). Economist Larry Lindsey has documented from IRS data that tax collections from the rich surged much faster than that.
From Detroit, comes another mention of Art Laffer’s newest book, a kids book he co-wrote called Let’s Chat About Economics. We mentioned this book when it came out in October, and with Christmas only 3 weeks away, maybe now is the time to get this great gift for the kids in your family. Get those kids thinking supply-side sooner, rather than later.
So it’s Christmas, and everyone is writing books for children, although most don’t deal with issues this hefty.
What sets Balconi’s book apart is her co-author — Arthur Laffer, one of the most influential economists in America and President Ronald Reagan’s economic adviser. He’s the father of supply side economics and author of the Laffer Curve, which measures the diminishing returns of higher tax rates.
Laffer’s a big deal, and children’s books aren’t his normal fare. But Balconi heard him speak at the Detroit Economic Club in 2012 and sent him a proposal. Laffer, who lives in Nashville, loved it.
“I thought it was a cool idea to touch kids in this way,” Laffer says. “It’s the basics — understanding incentives, trade-offs and other basic principles that come right from Michelle’s own family.”
Using his Forbes.com column this morning, Ralph Benko delivers a free education for us all:
Gold advocates and sympathizers from the deep past include Copernicus and Newton, George Washington, Alexander Hamilton, Thomas Jefferson, John Witherspoon, John Marshall and Tom Paine, among many other American founders; and, from the less distant past, such important thinkers as Carl Menger, Ludwig von Mises and Jacques Rueff, as well as revered political leaders such as Ronald Reagan and Jack Kemp.
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The American, and world, economy continues to teeter. Monetary reform is receiving some freshly respectful looks both here and abroad. Chatham House, the Royal Institute of International Affairs, in London has convened a task force to “re-assess the advantages and weaknesses of the current fiat currency monetary system and explore the possibility of a new role for gold.” The Street’s Alix Steel observed last month, in “4 Ways a Gold Standard Can Work,” that “A gold standard isn’t for the gold bugs and crackpots. It’s a viable money system that could save countries with runaway spending.”
Prof. Roubini, the gold standard no longer can be viewed by the capable as a refuge for lunatics and hacks. Thoughtful policy analysts will do well to consider monetary reform options, very much including the gold standard, on the merits, rather than reflexively, and sooner rather than later.