In my most recent column in Forbes.com, I said the infighting in the West Wing was an inevitable outcome of the long economic stagnation that President Trump inherited. The solution does not reside in the President’s firing, demoting, or reorganizing his team or in having the feuding team members “work this out.” It lies in President Trump’s focusing his advisors on getting the economy moving again, creating jobs at a great rate, restoring upward income mobility for workers and generating a climate of equitable prosperity.
JFK, Reagan, and Clinton all pushed economic growth to, toward, or even beyond the 4 percent rate that produces great job creation and great upward mobility for working people. Properly done, both labor and capital benefit. Most people have forgotten, but President Reagan took a horrendous economy and, with two heroic policy changes, created more jobs than all of West Germany, then the second largest economy in the world. That’s really huge!
We know how he did it: through marginal tax rate cutting and restoring great monetary policy. Both! The means by which Bill Clinton — who cut the capital gains rate and benefited from the Fed’s Great Moderation — did it were comparable. Both of their policy mixes generally mirrored those of JFK, whose policies, when implemented, also got America moving again.
It’s not a matter of doctrine. It’s a matter of getting the equitable prosperity policies right!
If President Trump were to order his team to focus on how to do that, as Job One, it would change the chemistry into a healthy rivalry for who can come up with the best ideas. It would open the door for him to to fulfill his most important campaign promise: to make America great again. Even 3 percent (as opposed to the under 2 percent) growth rate would begin to powerfully restore equitable prosperity to America, change the national tone as America gets back to great work, and even balance the federal budget. Four percent growth would put us on course to paying down the national debt!
The collective intellect of people like Steve Bannon and Jared Kushner is up to the job. That said, I took it upon myself, in that Forbes.com column, to get out my Secret Decoder Ring and give them a great place to start:
To be helpful, let me observe a great place for the West Wingers to start digging for the key to how to approach 4% growth. It’s hidden in plain sight in a temple-like building at Constitution Ave NW & 20th Street NW.
Somewhere in that building, specifically on Fed Chair Yellen’s desk, is (or should be) a sign that states “The buck starts here.” The hidden factor crucial to supercharged, noninflationary, equitable prosperity is great Fed policy. Begin there.
Reagan supported Chairman Volcker’s wringing inflation from the economy. When that was accomplished, and Reagan’s across-the board tax rate cut was fully phased in, America enjoyed a cumulative 3.5+% economic growth rate with a spectacular 7% year. Mr. President? That was huge.
Under Clinton, Chairman Greenspan initially followed policies, called the Great Moderation, for which he recently revealed the secret sauce as “US monetary policy tried to follow signals that a gold standard would have created.” The economy boomed at a sustained average 3.8% rate. Huge!
President Trump? Focus your advisors on how to approach 4% economic growth rates to permanently end the West Wing War and establish your own popularity. To speed their quest task them to first seek out the metaphorical sign on Chair Yellen’s desk: “The buck starts here.” Proceed from there.
The young John Maynard Keynes, in his breakthrough book The Economic Consequences of the Peace, famously wrote:
Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become ‘profiteers,’ who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.
Lenin was certainly right. 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.
Keynes was writing at a time of toxic inflation. His general observation applies to all monetary disorders, including those which currently beset America and, indeed, the world. Let us hope that President Trump will prove himself that “one man in a million” who is able to diagnose the hidden source of our national stagnation and the attendant social woes … and use his shrewd insight to make America great again.
Photo credit: Gage Skidmore