U.K. Prime Minister Liz Truss repudiated the economic growth plan fashioned by her original Chancellor of the Exchequer Kwasi Kwarteng. Her dismissal of Kwarteng brought to my mind what former Chancellor, later Prime Minister, Winston Churchill termed "An appeaser is one who feeds a crocodile — hoping it will eat him last." Good luck to her!
Truss' former chief rival, Rishi Sunak, recently said: "Borrowing your way out of inflation isn't a plan ... it's a fairy tale." "Fairy tale" is a slur reminiscent of "voodoo economics."
Before the Truss flinch, The London Times, in "Incredible or insane? Reagan's economists give their verdict on Trussonomics," invited David Stockman to vent:
"'Trickle down' is, he says, a fairy tale. ... 'I'm surprised that after 40 years that there is a conservative faction in the western world that still believes that complete nonsense.'"
Well. Supply-side never, ever, truckled with trickle down. And it's not nonsense.
The fairy tale? Anticipating a happily-ever-after-ending from a high-tax-rates-and-soggy-money.
Today's libels of supply-side are as foolish as were then-President Jimmy Carter's. Per Carter's August 28, 1980, speech: "This is no time for an excessive stimulus program, nor is it a time for inflationary tax reductions."
Inflationary tax reductions? Carter therein claimed, "Inflation has fallen sharply."
In 1980, under Carter, per InflationData.com, inflation fell from about 14% to… around 12%. Some "sharply!"
When the Reagan tax rate cuts of around 23%, yes financed (insert ominous organ spike here) with borrowing were fully phased in, in 1984, inflation, per the Bureau of Labor Statistics, fell to around 4%.
Carter, not Reagan, proved the fabulist. Supply-side dropped inflation from 12% to 4%. Yet the fantabulous indictment by the political and media establishments of supply-side as inflationary is a "fairy tale" that won't die.
Won't die?
We're voodoo? Then let's call the Establishment's policy formulation that has mired us in stagnation "Zombie Economics."
Today's "Jimmy Carter Tories" are sadly befuddled.
Both sides of the Atlantic harbor a folie à deux, a delusion shared by two. Our Republicans neglect Milton Friedman's declaration: "Inflation is always and everywhere a monetary phenomenon."
The Democrats have forgotten John Maynard Keynes' "The Economic Consequences of the Peace": "There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."
Both U.S. parties are merrily committing heresy against their philosophical icons. The Pachyderms blame inflation on big federal spending (which they conveniently forget, or assume we forget, was initiated by Republicans). The Donks blame greedy corporations notwithstanding how history shows that corporations have been greedy since they were invented around 1606, greed constrained by powerful market competition, not high taxes or government busybodies.
Back to the UK, Tories are wallowing in economic policy nonsense. They would do better to reread their very own Adam Smith. And Kwarteng.
Meanwhile, Labour, stirring in its sleep from its secure undisclosed location, really ought to refresh its understanding of Keynes' legacy shrewd counsels of pragmatism.
With insincere apologies for ruining a good Tory Story with facts, Jon Decker and I recently, before the Truss flinch, observed in The Economic Standard, "Trussonomics, Credible and Sane":
"The supply-side formula of lower marginal tax rates on a robust base, a steady currency that serves as good money and moderate regulation drove the Dow, which stood at 814 on the day in November 1979 on which Reagan declared for the presidency to its current commanding heights.
"Is the market currently in bear territory? You bet. That said, that "bear territory" is almost 10X, give or take, higher than the pre-supply-side baseline of 814, inflation adjusted, equivalent to 3352.
"Americans are now almost twice as wealthy than we were in 1979, real per capita GDP rising from $30,000 to nearly $60,000. U.S. GDP [gross domestic product] for 1979, per the St. Louis Fed, was then about $2.7T. It's now, not inflation or population adjusted but you get the drift, at $24T.
"Other nations followed Reagan's lead in cutting tax rates. Everyone benefited from the stabilization of the dollar, the world's reserve currency.
"World nominal GDP soared, also not adjusted for inflation or demographics but you get the picture, from $11T then to $96T today. Voodoo economics rescued over a billion souls from abject poverty."
I, one of the last of the practicing high priests of Voodoo Economics, declare that prospering by Voodoo (classical liberalism), a historically validated "fairy tale," is better than staying poor, although "respectable," in the Establishment's Zombie Apocalypse.
Policies of equitable prosperity are the right stuff. And good politics.
My prediction? Prepare to welcome Kwarteng back.
The electorate desires equitable prosperity. Bring it on!
Ralph Benko, co-author of "The Capitalist Manifesto" and chairman and co-founder of "The Capitalist League," is the founder of The Prosperity Caucus and is an original Kemp-era member of the Supply-Side revolution that propelled the Dow from 814 to its current heights and world GDP from $11T to $94T. Read Ralph Benko's reports — More Here.
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