One of Mark’s guests is Charles Payne of Fox Business who mentions Modern Monetary Theory. We don’t hear enough about this theory regarding unlimited government spending. Glenn Beck in his book ‘The Great Reset” describes in very clear detail exactly what Modern Monetary Theory is and why it is so dangerous. (Chapter 4, starting on page 111 of The Great Reset)
Some sage economic advice from 1980 for the next President.
Nearby today readers will notice excerpts from a memo written to Ronald Reagan by his economic advisers between his November 1980 election and inauguration. We share the memo because it shines a historical perspective on our own economic dilemmas as the Presidential race hits its Memorial Day turn.
The memo was sent to us by George Shultz, who later became the Gipper’s Secretary of State but had served previous stints at Treasury, Labor and the White House budget office. The signers include some of the last century’s most consequential economic figures, notably the great Milton Friedman, tax-cut evangelist Jack Kemp and former Treasury Secretary William Simon.
One lesson is how similar current economic problems are to those Reagan faced when he took office. The late-1970s were also a time of great economic anxiety fed by runaway government. Spending was out of control, taxes were too high, regulation too burdensome and energy too expensive. The big difference is that inflation today is lower, though food and energy prices have climbed fast until recently.
But the cause for optimism is that if the problems are similar, the solutions can also be similar. The memo is a tacit rebuttal of the White House talking point that today’s Republicans are more radical than Reagan. Today’s policy debates are remarkably similar to those 32 years ago. The Gipper’s advisers wanted to reduce the cost of capital by cutting capital-gains taxes, for example, while Jimmy Carter thought like Mr. Obama that taxes don’t much matter to economic growth.
A second lesson is the imperative for consistent policy that focuses on the long term: “The need for a long-term point of view is essential to allow for the time, the coherence, and the predictability so necessary for success.”
An economy recovering from recession or other turmoil needs a steady, consistent hand. This gives business and entrepreneurs the confidence to invest and take risks, and it helps to build a durable recovery as Americans conclude a President isn’t going to change policy every month for political reasons.
Reagan took his advisers’ advice and focused on implementing his reforms his first year, then rode out various storms confident his policies would work in the long run. They resulted in a boom that added an economy the size of Germany’s to U.S. GDP.
This is the opposite of President Obama’s approach, which has been marked by the helter-skelter of temporary tax cuts, stimulus after stimulus, housing bailout upon housing rescue, favoritism for some industries over others, and arbitrary regulation that may or may not be mitigated if the White House feels enough political pressure. This is one reason in our view that the current recovery has been so lackluster.
The same lesson applies to monetary policy, even if inflation today isn’t running at 13%. The Federal Reserve’s policy fits and starts since 2008 have also contributed to economic uncertainty, as markets have had to absorb quantitative easing, Operation Twist and an unprecedented cacophony of Fed voices preaching greater ease or not. The next Fed Chairman would do well to heed the memo’s advice of “conducting monetary policy in a steady manner” with the principal goal of price stability.
Perhaps the best reason to read the memo is as a reminder that, however large and insoluble today’s problems seem, we have seen worse and solved them. The key is the right leadership with the right policies.
Individuals should be free to decide what to produce and consume, and their decisions should be made within a predictable policy framework based on the rule of law.
As this election year begins, a lot of people are wondering what we can do to restore America’s prosperity and create more jobs. Republican presidential candidates are offering their ideas, and at his State of the Union message on Tuesday President Obama presented his. I believe the fundamental answer is simple: Government policies must adhere more closely to the principles of economic freedom upon which the country was founded.
At their most basic level, these principles are that families, individuals and entrepreneurs must be free to decide what to produce, what to consume, what to buy and sell, and how to help others. Their decisions are to be made within a predictable government policy framework based on the rule of law, with strong incentives derived from the market system, and with a clearly limited role for government.
Getty ImagesRonald Reagan: He and advisers such as George Shultz shunned the idea of stimulus and agreed on ?the need for a long-term point of view.? (more…)
In this clip from the 1980 Free To Choose, socialist Frances Fox Piven tangles with Milton Friedman and Thomas Sowell. Sowell, in particular, is incisive with his discussion of “process” versus aspiration — concluding that whatever the purported social goals, liberty suffers
This is the Weekly Standard article that was mentioned in the Uncommon knowledge video interview with Representative Paul Ryan that is posted following this article.
Obamacare’s individual mandate—requiring that all Americans purchase government-approved health insurance beginning in 2014—has always been the law’s most vulnerable provision. It is incredibly unpopular, and not just among conservatives. Polls consistently show that a large majority of the electorate opposes it, including a good portion of registered Democrats.
It is not hard to see why. Conservatives worry that the mandate, which compels all Americans to buy a particular product whether they want to or not, involves an unprecedented assertion of federal power. Many middle-of-the-road voters don’t trust the federal government to do anything well, much less decide for one and all the kind of health insurance everyone must purchase.
And liberals can see that the provision creates a guaranteed marketplace for precisely the private health insurers that the president has spent so much time demonizing as greedy, profit-hungry, and patient-abusing miscreants. The president could have used the heavily Democratic Congress of 2009 and 2010 to push through any number of items on the liberal wish list. But he chose to deplete his entire political capital securing a permanent, guaranteed customer base for shareholder-owned private health insurance companies. Ironic indeed. (more…)
Some people actually believe government can create jobs by taxing and borrowing from people with jobs and then giving that money to people without jobs. They call this demand stimulus. To make matters worse, other people think these demand-stimulus ideas warrant a serious response.
Government taxes cigarettes to stop people from smoking, not to get them to smoke. Government fines speeders so they won’t speed, not to encourage them to drive faster. And yet contrary to common sense, it seems perfectly natural to some people that government would tax people who work or companies that are successful only to give that money to people who don’t work and to bail out losing companies. The thought never crosses their minds that these policies are the very reason why our economy is in such bad shape.
I’m beginning to think that Irving Kristol was correct when he wrote, “It takes a Ph.D. in economics not to be able to understand the obvious.” It shouldn’t surprise anyone why the economy isn’t getting better.
If the U.S. wants prosperity, government doesn’t need to do something, it needs to undo much of what it already has done. Here is one area where, in the spirit of the late Congressman Jack Kemp, President Obama and I could agree.
African-Americans are suffering inordinately in the Obama aftermath of the Bush Great Recession. While overall U.S. unemployment stands at 9.1%, black unemployment has jumped to 16.7%. Black teenage unemployment is bordering on 50%, and that figure doesn’t even take into account “discouraged” workers, “involuntary” part-time workers and “underemployed” workers. But even these numbers don’t tell the real story. They represent real people who are suffering deeply and have been suffering for a long, long time. (more…)
“If I’m in, I’ll be all in,” says Rep. Michele Bachmann of Minnesota, artfully dodging my question of whether she’s running for president. Given that she just hired campaign strategist Ed Rollins, whose past clients include Ross Perot and Mike Huckabee, rumors abound. “We’re getting close,” she says, “and if I do run, like all my races, I will work like a maniac.”
That’s pretty much how she does everything, and it helps explain how the relatively junior congresswoman has become a tea party superstar—and uniquely adept at driving liberals bonkers.
After spending a good part of two days with her in Washington as she scurries from one appointment to another, I have no doubt that Ms. Bachmann will announce her presidential bid soon. And it would be a mistake to count her out: She’s defied the prognosticators in nearly every race she’s run since thrashing an 18-year incumbent in the Minnesota Senate by 20 points in 2000. Says Iowa Congressman Steve King, “No one has electrified Iowa crowds like Michelle has.”
Ms. Bachmann is best known for her conservative activism on issues like abortion, but what I want to talk about today is economics. When I ask who she reads on the subject, she responds that she admires the late Milton Friedman as well as Thomas Sowell and Walter Williams. “I’m also an Art Laffer fiend—we’re very close,” she adds. “And [Ludwig] von Mises. I love von Mises,” getting excited and rattling off some of his classics like “Human Action” and “Bureaucracy.” “When I go on vacation and I lay on the beach, I bring von Mises.” (more…)
Milton Friedman warned that government spending cancels out higher-return private investment.
By STEPHEN MOORE
Words matter in politics, which is why the federal government no longer “spends” (and wastes) money, but rather “invests” it. According to Barack Obama’s State of the Union address, nearly every penny of the $2.5 trillion domestic budget—for installing solar paneling on the roofs of libraries, funding lavish teacher retirement funds, building high-speed rail lines to nowhere, erecting billboards advertising the stimulus plan—is a high-return “investment” in America’s future.
This is all spin. It’s a variation on the theme that brought us the $814 billion stimulus two years ago. That spending—er, investment—was going to create three million jobs. Those jobs never showed up.
As part of the counterattack against Republican plans to cut $100 billion out of the domestic budget, the White House claims that America has been under-investing in infrastructure, education, science, research, transportation, environmental protection, green energy and so on. But if you examine the actual funding record of these programs, you see that there’s been no spending drought. There’s been a deluge. (more…)
