Recently, economist and policy analyst Stephen Moore did an interview with a well-circulated newsletter that I occasionally read. He's is the author of the new book "The End of Prosperity" (linky-linky) and an editorial writer for the Wall Street Journal. He is very well educated and was the senior economist for the the U.S. Congress Joint Economic Committee, so he definitely knows what he's talking about. I found this segment of the interview particularly interesting and certainly timely as we start a new era with a president and congress bound and determined to try to regulate, socialize, and tax this country into prosperity:
“The 1990’s was a great decade. Our book (The End of Prosperity) describes when Reagan came in with a new kind of supply-side pro-free-market philosophy- turning around, by the way, the worst decade of the century other than the Great Depression, which was the 1970’s.
Amazingly , the left is rewriting the history of the 70’s: “If only we hadn’t had Reaganomics, we could go back to those wonderful years of the 1970’s”- when we had gas lines and 25% mortgage interest rates and 14% inflation.”
In any case, Reagan did two things. He cut tax rates very significantly from 70% all the way down to 28%. And he slayed inflation. The inflation rate went from 14.5% down to 3%. We had the greatest boom for 25 years in the history of civilization. No country had ever seen anything like what happened in American from the early 1980’s through 2007. We created $40 trillion dollars of net new wealth over that period. It was an awesome experiment in prosperity.
Now, Bill Clinton’s tax increase did hurt the economy, The evidence is that in the first two years in the Clinton Administration, the economy actually slowed down. But once you had the Republican Revolution in 1994, once you had the combination of Newt Gingrich and Dick Armey running the Congress, then Clinton moved back to the right. That’s when he gave his speech, “the era of big government is over.”
We had welfare reform, we had the capital gains tax cut, we balanced the budget. Those were all pro-growth Reagan ideas.
But a lot of the economists that I talk to in the Obama camp look at that period and say, “Look, we can raise taxes through the roof and its not going to hurt the economy.”
That’s a very dangerous idea at a time when the rest of the world is going the other way. China, Sweden, India, my goodness, Russia has a 13% flat tax. How are we going to compete with them with a 40% income tax? It’s a really dangerous idea to be talking about raising taxes right now in the face of the worst economy we’ve had in 25 years.”
Ah, the 70's. I'm so glad I was just a baby during the vast majority of them, especially the Carter years. I think my head would have exploded. I just hope the new prez doesn't take us the same direction.