In light of the above, it’s no surprise that the 1970s were a relatively unhappy time for the U.S. electorate. With economic policy explicitly anti-production, growth wilted and Americans properly sulked. History is in many ways repeating itself in the 21st century. As Larry Kudlow and Brian Domitrovic write in their essential new book, JFK and the Reagan Revolution: A Secret History of American Prosperity, “Fifteen-plus years into the twenty-first century, Americans are in a sour mood. They are cranky. Unhappy.”
It’s no mystery why. As Kudlow and Domitrovic note, since 2000 economic growth in the U.S. has been subpar to say the least. Democrats and Republicans have seemingly forgotten the basics to prosperity. In writing their book, the authors set out to remind readers that life – and by extension economic growth – isn’t that complicated. It’s as basic as a low tax/sound money policy mix. Years ago Kudlow’s teaching of the correct policy mix was broadened to include free trade and light regulation, and that hasn’t changed. He still believes that, as does Domitrovic. But in their first co-authored endeavor the authors have correctly decided to hammer away on taxes and money. Their explicit point is that our sour mood needn’t be permanent. They’re very right.
With an eye on bringing life to the policy mix of economic growth that they view as “human,” “impressive,” “fulfilling,” and “good,” the authors first bring the reader back to the 1960s and John F. Kennedy’s (JFK) presidency. Though JFK was a Democrat, and was historically associated with American-style “liberal” policies, he’s experienced a modern revival in the eyes of many on the right owing to his stances in favor of tax cuts in concert with maintenance of a strong dollar.
The authors should be cheered for what they’ve done. While it’s increasingly known that JFK swung more to the right than has been broadly reported by the mainstream, up until JFK and the Reagan Revolution there hadn’t really been any book expressly written to focus on the supply-side (all demand begins with production first, so “supply side” is all about reducing the tax, regulatory, trade and monetary barriers to production) history of JFK’s presidency. The latter is important on its own, but with the future in mind, it’s crucial: somewhere along the way the focus on growth became a partisan issue as Democrats and Republicans fought over what is obvious. Kudlow and Domitrovic have done the essential whereby they’ve shown that growth isn’t a partisan concept; that a Democrat and a Republican (Ronald Reagan) adopted similar policies to great, economy enhancing effect.
The authors assert that "Both Kennedy and Reagan identified substantially cutting income tax rates and getting the dollar strong and stable as the specific policy mix that would let the private sector, which is to say the real economy, thrive.” Life is once again, very simple. So is economic growth.
Let’s not forget that an economy is but a collection of individuals. Broken down to the individual we can easily see that no individual is made more prosperous if more and more of his income is confiscated through taxation. And as individuals take money in return for their production, their prosperity is surely not enhanced by devaluation of the very dollars, Pounds, euros, yen, and yuan they earn. Economists in the discredited economics profession have for the longest time believed in high taxes, and they still believe devaluation is great. The authors are too kind to give the economics profession the shellacking it deserves, but they implicitly do.
Indeed, in their book non-economists like Douglas Dillon, JFK, Jude Wanniski, Robert Bartley, Jack Kemp and Ronald Reagan are the heroes. Economists like Paul Samuelson, Robert Solow, James Tobin, and Walter Heller are not. No doubt credentialed economists of the heterodox variety such as Arthur Laffer and Robert Mundell get their proper due as intellectual forces behind the growth revolution chronicled, but the fact that Kudlow and Domitrovic properly lionize them is yet another implicit indictment of the economics profession. That is so simply because Laffer and Mundell’s views were well outside the low-growth economics mainstream of the 1960s and 1970s. Kudlow and Domitrovic are celebrating common sense in JFK and the Reagan Revolution, they’re celebrating a removal of needless governmental barriers to production, and most of all they’re celebrating the dynamic human action that is always and everywhere the result of smaller government. This is important simply because modern economics is all about charts and equations. Thankfully there’s nothing of the sort in the book being reviewed. The authors are implicitly concluding that economics as practiced by the credentialed is a sham. Amen.
Kudlow and Domitrovic’s history begins with the situation inherited by John F. Kennedy. Economic growth in the 1950s had been very much stop & go, and Kennedy was eager to find a way out. Interesting about the time in question was that the top tax rate on income was 91 percent.