Brian Domitrovic, author of “Econoclasts, the Rebels Who Sparked The Supply-side Revolution and Restored American Prosperity,” says another such revolution may be necessary to get the U.S. economy humming again.
“The supply-side revolution is a means of conquering economic crisis,” Domitrovic told Dan Mangru of Newsmax TV.
“It arose in response to income taxes and the Federal Reserve, both of which began in 1913 and caused economic crises the likes of which Americans had never seen before.”
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Supply-side economics is a strategy for restraining those two things in order to solve economic crises, Domitrovic explains.
He credits Andrew Mellon, who was Treasury secretary under Warren Harding in 1921, with originating supply-side economics.
“He was the one who implored the Fed to stop fooling around with its deflation-inflation spiral and just keep prices stable, and then he arranged for a 50 percent tax cut from Congress,” Domitrovic notes.
“That initiated the Roaring Twenties, ending the worst peacetime recession America had ever had.”
Supply-side economics isn’t meant to be applied all the time, Domitrovic pointed out.
“It’s supposed to be done once and then let the economy run,” he says.
“But if we’re going to have the Federal Reserve continue to flood the market with dollars, and if we’re going to have tax increases up to 40 percent of the marginal rate with the 8 percent small business charge plus 10 percent state rates, then we’re going to have to have another supply-side revolution.”
Domitrovic says that applying supply-side brings instantaneous positive results.
“As soon as you apply the solution of tight money coupled with tax cuts, the economy booms from the get-go.”
Though Ronald Reagan is popularly supposed to be the first U.S. president to practice supply-side economics, Domitrovic says that honor goes to a Democrat — John F. Kennedy.
“Historians have been really negligent in this,” he observes.
“If you look at the documents, say in the Kennedy Library, it’s clear that his Council of Economic Advisors wanted to … loosen money and raise taxes.”
Kennedy, however, finally put his foot down, insisting on tightening money and cutting taxes — after which the incredible boom of the 1960s ensued.
Domitrovic doubts the American economy will experience outright disaster because “it’s too great, too flexible, and stocked with too many entrepreneurs.”
However, he says it’s quite possible we can go to the brink if the present administration continues it policies.
“If you’re going to devalue the dollar, like these deficits imply, and just sit back and watch tax rates go to 60 percent — and that’s what Obama’s talking about with the 8 percent small business charge — then you can approximate the conditions of the 70s if not the 30s,” he says.
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