Reagan: Real or Memorex?

Larry Kudlow attempts to rally the GOP by invoking cult hero Ronald Reagan on Real Clear Politics.

In other words, significant U.S. corporate tax reform would jack up wages and jobs — predominantly middle class wages and jobs. It would attract investment from all over the world. And to U.S. companies that shelter profits overseas, we’d be able to say, “Come home to America.”

 

The growth impact of significant corporate tax reform would also drive up the value of the dollar and allow the Federal Reserve to normalize interest rates much more quickly. That, by the way, was the Reagan policy. It worked for two decades, producing nearly 45 million jobs and roughly 4 percent wage growth. Lower tax rates and King Dollar. It’s a recipe for prosperity. Will any of you Republicans who claim to be Reagan followers make that case? Where is your Reagan economic voice?

The good news is Kudlow is making an actual policy proposal. The current GOP rarely does this, preferring to devote themselves to fact-challenged slams at President Obama and ginning up fake scandals. He is also at least in the neighborhood of accuracy describing Reagan’s corporate tax and regulatory policies as opposed to prevalent GOP mythology that omits the Gipper’s numerous second term tax increases and compromises with Democratic House Speaker Tip O’Neill.

Kudlow trips up by neglecting to mention that Reagan came to office in a completely different environment from the current one and his policies were responses to those conditions. In 1981, inflation, taxes and government regulation were much higher. Today inflation is negligible and taxes and government regulation have been slashed. They are as low as they have been in decades. It is debatable whether reforming corporate taxes (or eliminating them as Kudlow advocates) would result in the kind of economic growth he claims. However, arguing for thirty year old policies in a vastly different environment is not promising and lends itself to criticism of the right being stuck in the past.

Kudlow also assumes that corporations would share higher profits with employees by hiring more of them and raising wages.  He fails to mention that we are in a time of record corporate profits while employment ills remain stubborn and wages are stagnant. He seems to subscribe to right-wing gospel that “the rising tide floats all boats.” The disparity of wealth numbers suggest that lower taxes for corporations and the wealthy float those yachts quite a bit better than they do the smaller craft.

Your thoughts?

Cross-posted from The Sensible Center

http://thesensiblecentercom.blogspot.com/2014/06/reagan-real-or-memorex.html

Author: Ballard Burgher

8 Comments

  1. Kudlow has always been a lying a$$. It has been obvious almost from it’s implementation that supply side/trickle down economics simply moves wealth from the bottom to the top – a return to the guilded age. To give them some credit I imagine that was their intention all along.

  2. Agree with Ron that trickle-down was a scam. You can already hear the Reagan-wanna-be’s in the GOP who are vying for the nomination. You will be hearing a lot more about “Peace through strength” and “government not being the solution but the problem”.

    Reagan’s past economic advisers have come forward and admitted that Reaganomics would not be appropriate solutions for this economy. The problem is that the GOP has not had original thinking or even good leadership since Reagan. How can anyone face the future with a party that is so stuck in the past?

  3. The GOP/TP loves the Reagan mythology but sure as hell don’t want him back.

  4. I work for a large multinational company – 140,000 employees in over 130 countries – and recently had a chance to hear our Chief Economist speak. He has been quite accurate, positioning the company prior to the 2008 crash so they didn’t take as huge of a hit, and has been outspoken that the current investment environment in the US.

    We have been outsourcing complete job categories to Rumania and Poland from the US and India. If you want to be a buyer with the company that job is now in Poland. He was asked when jobs would be coming back to the US and his short answer was NEVER. The long answer was they would come back as soon as the US established a stable long-term economic policy that had comprehensive cover of policy for both taxes and investment/R&D. He viewed long-term as something on the order of 30 years, long enough, as he put it, to recoup the company’s initial investment, get the tax write-offs, and then make real profits from the investment before considering if they close or retool the facility.

    He said while the US is a high cost operating environment, it is also one of the most profitable areas to operate in and the company would not leave it entirely. But with economic policy subject to significant change every 4 years the company couldn’t make significant investments in the US that would pay off long-term. With the high initial costs the only time-frame that made any sense is long-term. He said if the company was going to suffer due to short-term economic policy shifts it was better off doing it in areas that the initial investment was low, hence the establishment of our numerous foreign centers.

    If the US wants high paying manufacturing jobs back, we need to be thinking of stability of policy rather than a specific policy.

  5. This idea of lowering taxes to fix everything is just so stupid. The premise is false, and the conclusions they draw from the mountains of existing data are also incorrect, yet still this entire party pushes for this policy. Non progressive taxation increases income inequality. Income inequality leads to decreased consumer spending and an economic slowdown.

    The GOP wants to thank Reagan for kickstarting the economy by lowering taxes. Funny thing, he did, but it wasn’t the taxes that did it. 3 things happened in the 80′s. Taxes were lowered, interests rates plummeted, and federal spending went way up. Of those 3 things, the lowing or interest rates and increased federal spending were for more important than the taxes. We know this, because taxes went up. Reagan raised them, Bush I raised them, Clinton raised them. Still we got better.

    Interest rates allowed for more loans, and those allow small businesses to grow, one of the most powerful factors in a good economy. Federal spending is one of the key indicators for GDP growth, and over the last 80 years mirrors GDP growth better than any other metric. Yet still, the GOP wants to insist that taxes are the driving force when clearly that is not the case. Its institutionalized stupidity like that, that affects me, that drives me away from the GOP.

    Stop preaching crap that has been proven to not work and I might begin to take that party seriously.

  6. The Congressional Research Service, a non-partisan group that researches the consequences of policy, issued a report based on decades of data that found no correlation whatsoever between tax policy and economic growth.

    The report received wide notice from media outlets and liberal and conservative policy analysts when it was released on Sept. 14. It examined the historical fluctuations of the top income tax rates and the rates on capital gains since World War II, and concluded that those fluctuations did not appear to affect the nation’s economic growth.

    Predictably, the GOP attacked the study since it undermines a core tenet of their economic theory. Sadly, they were successful at having it withdrawn.

    The Congressional Research Service has withdrawn an economic report that found no correlation between top tax rates and economic growth, a central tenet of conservative economic theory, after Senate Republicans raised concerns about the paper’s findings and wording.

    http://www.nytimes.com/2012/11......html?_r=0

    If you can’t win the game with the quality of your play, one recourse is to work the referees.

  7. STinMN,

    Thanks for sharing; that was some good stuff.

  8. STinMN,

    Your company’s economist was lying through his teeth to you. No matter what the government does your company will never bring any jobs back to the United States as long as they can’t pay peasant’s wages. That is the entire point of shipping jobs overseas.

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