by Lawrence Kudlow and Brian Domitrovic
reviewed by Christopher Klim
“Circumstances called for final and definitive policy—and Kennedy chose Treasury’s recommendation: supply-side economics.”
To many, the study and discipline of economics seems like a dark science practiced by witch doctors who are more skilled at explaining what just happened in the world of business and finance than making sense of current developments. Very few experts make salient arguments, much less absorb the breadth of the important issues, instead delving into the details and missing the point altogether. However, Kudlow and Domitrovic’s recent offering on late twentieth century American prosperity makes sense of what worked and what struggles to work, thereby laying down an obvious course too simple and effective to ignore.
Lawrence Kudlow—an economic commentator and former presidential administration advisor—and Brian Domitrovic—a professor, historian, and economic institute researcher—examine the genesis of President Kennedy’s economic strategy and, later, its reemergence within President Reagan’s administration. In the early Kennedy days, the economy lagged, unemployment was rampant, and taxes were high and full of loopholes. Kennedy, gaining his feet in the Oval Office, stayed the course with dismal results, but as the economy floundered and the president’s experience grew, he listened to different voices within his administration. They told him to cut taxes and aim for growth. This bold economic move would become an important yet forgotten component of Kennedy’s legacy, perhaps overshadowed by his civil rights achievements. As any philosopher or student of sociology would know, it is extremely difficult to elevate a society within a challenging economic framework. Historically, lasting change comes with an improvement of conditions. Drastic change, and not always for the better, foments under dire conditions.
Central to the prosperity discussion is the Keynesian vs. Supply-side economics debate. In brief, Keynesian economists assert that the economy is influenced by the aggregate demand of consumption, government spending, exports, and investments, which are often supported by a large and heavy-spending government—think stimulus money and regular intervention by various federal regulatory bodies. Supply-side economists push for low taxation and deregulation, allowing for greater flow of goods at lower prices, which in turn leads to more jobs and higher wages. Keynesians believe that a large government fueled by hearty taxes allows the authorities to tinker with economic metrics to the benefit of the people. Supply-siders want to shrink government and let the economy run itself, increasing tax revenue through economic growth.
Most presidents are faced with a choice to accept Keynesian economics. The successful administrations battle it. While it took Kennedy’s assassination to solidify both his growth-oriented economic vision and key civil rights legislation, these choices led to golden years of prosperity for the middle class on both economic and social fronts. Years later, when President Reagan inherited a lackluster economy, he summoned much of Kennedy’s plan to recreate a new American revival. (In turn, President Clinton coat-tailed this movement by mostly leaving their system alone.) The similarity between the diverse figures of Kennedy and Reagan was an ability to listen to and sift through a cadre of intelligent advice and their core faith in the middle class as the heart and soul of the nation. Their plan was deceivingly simple: lower taxes in business and income, which stimulates production and jobs and then results in additional tax revenue via motivated wage earners and corporate expansion. As a result, most everyone is working and self-empowered.
The authors use straightforward language, historical anecdotes, and key sources to map the successes and failures of both the Kennedy and Reagan economic plans. By marrying the course of these historic presidencies, the authors highlight American progress, while contrasting it against its left and right turns into faltering policies. During the discussion, the authors limit their personal politics, even though it is indeed politics that impedes real growth again and again. If there were an E=MC2 for economics, the C or constant in the equation would be misguided and dirty politics. As the authors reveal, the interplay of politics and economics has become so contentious that both parties to various degrees have abandoned their legacies of success. And everyone but Washington seems to be suffering.
This is a compelling and important book, which should be delivered to every senator and congressman as required reading.
RECOMMENDED by the US Review