John F. Kennedy campaigned for president in 1960 targeting 5% real economic growth. After he was elected, he achieved that goal, doubling the slow growth of the Eisenhower 1950s.
His successful economic policies included roughly 23% across-the-board income tax rate cuts and a restrained monetary policy for a stable, strong dollar. The dollar was still on the gold standard then, convertible at $35 per ounce. Kennedy led the nation to keep that rate inviolable.
At 5% real growth, the economy doubles every 14 years. After another 14 years, it doubles again, making 4 times the original start. After another 14 years, it doubles again, growing the economy eight times over the previous 42 years. That is the kind of repeated growth throughout American history that made the U.S. the dominant economic and military power in the world.
But Kennedy didn’t go straight to those successful policies. He spent the first year trying the Keynesian economics of Hillary Clinton and Barack Obama, seeking economic growth through increased government spending. That didn’t work any better then than it has today, or than it did when Eisenhower tried to spend his way to growth through highway and defense spending.
Yet that is the same shopworn policy Hillary Clinton is running on today: economic growth through increased government spending. She calls that “investment,” struggling with plain English. But increasing government spending to increase growth has never worked, and can’t work. We have 85 years of experience now demonstrating that.
Hillary, however, has her own school of economics, to the left of Keynes, where tax rate cuts inexplicably cause recessions. She has no concept of how to promote economic growth and prosperity.
Her increased government spending is the true trickle-down economics. The government taxes and borrows money out of the economy and spends it, and that is supposed to trickle down and promote growth. If you vote for that, don’t complain when your kids never get a job or leave the house, and growing poverty and longer-term stagnation sink permanent roots into the fabric of America.
Just the opposite of Kennedy’s tax rate reductions, Clinton is proposing to increase the capital gains rate by up to 66% and the death tax rate by 44%, under pressure from socialist Bernie Sanders. She is offering no relief from America’s burden of the highest corporate income tax rates in the world. She is leading Democrats to the left of Obama.
Presidents Nixon and even Johnson soon departed from the successful Kennedy policies, increasing taxes and supporting increasingly wild, destabilizing monetary policy. Nixon fatefully abolished the dollar’s link to gold in 1971.
The predictable result was the double-digit inflation in the 1970s, with the same repeating, continually worsening recessions as in the 1950s. That inflation/recession long-term stagnation was supposed to be impossible under the logic of then-prevailing Keynesian economics.
This history is recounted in detail in the new book by Larry Kudlow and Brian Domitrovic, “JFK and the Reagan Revolution: A Secret History of American Prosperity.” The authors explain how Reagan explicitly left Keynesian economics and its increased-government-spending prescriptions to stimulate growth for dead, embracing instead the same successful Kennedy policies of tax rate cuts and restrained monetary policy for a strong, stable dollar. Reagan also emphasized reducing regulatory burdens and barriers as an additional component of pro-growth economics.
Those policies quickly killed the 1970s inflation by 1983, never to be heard from again, and launched a historic, 25-year economic boom, from late 1982 to late 2007. During the 1980s alone, Reagan’s booming growth effectively added the entire economy of West Germany, third-largest in the world at the time, to America’s economy.
Reagan’s growth ended only when his pro-growth policies were abandoned, just like Kennedy’s. Bill Clinton adopted overregulation of housing finance, and George Bush went back to Keynesian cheap-dollar monetary policies, both creating the housing bubble, while America’s world-leading, highest corporate tax rates at nearly 40% overall became outdated.
Obama inexplicably went back to 1970s Keynesian economics as if the Kennedy/Reagan policies never happened. He became the Regulation President, with gross overregulation of energy, health care/insurance and banking/finance. He increased tax rates for every major federal tax, except outdated corporate income taxes, where he refused any relief.
These Obama policies produced the worst economic recovery since the Great Depression, with no growth in sight. Yet these are the policies — among worse — that Hillary Clinton proudly embraces.
[Originally Published at Investor’s Business Daily]
Peter Ferrara, J.D., is a senior fellow at The Heartland Institute and an advisor for entitlement reform and budget policy at the National Tax Limitation Foundation.
