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Affluent Christian Investor | October 22, 2017

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What ‘JFK And The Reagan Revolution’ Reveals About Trump

Ronald Reagan gives a televised address from the Oval Office, outlining his plan for Tax Reduction Legislation in July 1981

Ronald Reagan gives a televised address from the Oval Office, outlining his plan for Tax Reduction Legislation in July 1981

Remember prosperity? Want it back? Here’s the secret formula, which has always worked and would work again: Cut marginal tax rates and restore integrity to the dollar.

Donald Trump is campaigning on meaningful marginal tax rate cuts and implying, with his offstage praise of the gold standard, a solid instinct for monetary integrity and how to produce it. One hopes so as it requires both together.

Here’s the brief. Lawrence Kudlow and Brian Domitrovic have just published what deserves to be the most important book of the 2016 presidential election cycle: JFK and the Reagan Revolution: A Secret History of American Prosperity. It provides a solid understanding of the key issue of the 2016 race — the economy.

Reagan made “Supply-Side” famous by campaigning on and then enacting most of the Kemp-Roth 30% across-the-board tax rate cut. But John F. Kennedy was the original Supply-Sider. The book’s Big Reveal: Jack Kemp designed this tax cut as a direct copy of Kennedy’s own.

American memories are short. Most have forgotten the truly lousy economic growth of the 91%-top-tax-rate Eisenhower era (a rate for which Candidate Sanders expressed nostalgia). Most have forgotten Kennedy’s campaign promise to “get America moving again.” Most have forgotten his initial embrace of the Neo-Keynesian formula of high taxes, “easy” money from the Fed, and big spending infrastructure projects. And the failure of all that.

We forget JFK’s decisive pivot toward big marginal tax rate cuts while defending the dollar as defined by a fixed weight of gold. We only dimly remember the rip-roaring job creation that promptly followed the enactment of Kennedy’s tax rate cut after his assassination.

Remember prosperity? Want it back? Here’s the secret formula, which has always worked and would work again: Cut marginal tax rates and restore integrity to the dollar.

Donald Trump is campaigning on meaningful marginal tax rate cuts and implying, with his offstage praise of the gold standard, a solid instinct for monetary integrity and how to produce it. One hopes so as it requires both together.

Here’s the brief. Lawrence Kudlow and Brian Domitrovic have just published what deserves to be the most important book of the 2016 presidential election cycle: JFK and the Reagan Revolution: A Secret History of American Prosperity. It provides a solid understanding of the key issue of the 2016 race — the economy.

Reagan made “Supply-Side” famous by campaigning on and then enacting most of the Kemp-Roth 30% across-the-board tax rate cut. But John F. Kennedy was the original Supply-Sider. The book’s Big Reveal: Jack Kemp designed this tax cut as a direct copy of Kennedy’s own.

American memories are short. Most have forgotten the truly lousy economic growth of the 91%-top-tax-rate Eisenhower era (a rate for which Candidate Sanders expressed nostalgia). Most have forgotten Kennedy’s campaign promise to “get America moving again.” Most have forgotten his initial embrace of the Neo-Keynesian formula of high taxes, “easy” money from the Fed, and big spending infrastructure projects. And the failure of all that.

We forget JFK’s decisive pivot toward big marginal tax rate cuts while defending the dollar as defined by a fixed weight of gold. We only dimly remember the rip-roaring job creation that promptly followed the enactment of Kennedy’s tax rate cut after his assassination.

Kudlow writes with first-hand authority. He is a distinguished front lines veteran of the Reagan “Supply-Side” wars as Reagan’s Associate Director for Economics and Planning in the Office of Management and Budget. Domitrovic, a historian, professor, and author of the authoritative history of Supply-Side economics, Econoclasts, also writes with authority.  He is also a regular contributor to Forbes.com.

The bottom line?  Government, though airbrushed by the media, is a very sloppy, confusing business. As Herman Wouk perceptively wrote in the first chapter of his novel Inside, Outside, “[T]he longer I’m in Washington the more I realize that most people in this town tend to act with the calm forethought of a beheaded chicken.”

I’ve been in Washington far longer than Wouk’s protagonist and the “calm forethought of a beheaded chicken” observation remains true to this day. While acknowledging the full catastrophe that is politics, let’s keep firmly in mind that underneath all the sound and fury resides the real deal: the policy mix. Yet therein lies the key to prosperity.

I found the most fascinating parts of this book to be those that reveal how prestige economists and elite government officials perennially embrace historically discredited Big Government policies. And the stories of the recurring fights by a vastly outnumbered and Death Starred Supply-Side Rebel Alliance who, against all odds, vanquish the Emperor.

The Rebel Alliance has won, in part, because it was coached and guided by Jedi Grandmasters. The Yoda of this movie, to whom Kudlow and Domitrovic pay tribute, was the Nobel Prize-winning maverick economist Robert Mundell. Mundell, to whom I have attributed the increase in the world GDP from $11T/year to, as of last year, ~$73T/year. While not adjusted for inflation or population growth, that’s a stunning increase.

Prof. Mundell, who I consider worthy of the Nobel Peace Prize, now has been sidelined by health issues. Yet his legacy prescription of low marginal tax rates and high integrity money lives on in the veterans of the Supply-Side wars such as Kudlow and Mundell’s Obi-Wan, Arthur Laffer.

The right policy mix, as Kudlow and Domitrovic show, takes us up the stairway to economic Heaven. The wrong mix leads us into economic Hell.

Economists call embracing faith-based thinking “strong priors.” That’s a fancy phrase for dogmatism, and dogma besets the policy elites. The electorate – on the receiving end of policy – typically displays more common sense than does our most distinguished experts.

Elites persist in a faith-based adherence to Neo-Keynesian policies of big spending Big Government, high tax rates, and “easy” money. I’ve said before and it bears repeating: Keynes, who was certainly no Neo-Keynesian, wrote in his General Theory of Unemployment, Interest, and Money (chapter 24, part V):

Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.

Read JFK and the Reagan Revolution: A Secret History of American Prosperity. Learn the Secret History of the Supply-Side Rebel Alliance and its never ending battle for economic opportunity and growth. Then, whether you vote Republican, Democrat, Libertarian or Green, demand that whoever gets elected adopt low tax rates and high integrity money policies.

Such policies are not partisan. They inevitably lead to massive job creation and upward income mobility for all.

 

Originally published on Forbes.

 

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