| Your joint appearance with Jack Kemp on Sunday’s Late
Edition with Wolf Blitzer last weekend reminded me that you never made
the slightest attempt to discover what supply-side economics was and what
it was not. Because you were only the Secretary of Labor in the Clinton
administration, which kept you out of the economic policy loop, perhaps
that is understandable to some degree. But I was astonished to hear you
several times peremptorily dismiss Jack’s recommendations on how to deal
with the current economy. He would say: "We should do X and Y and maybe
a little bit of Z," and Wolf Blitzer would turn to you, and you would say:
"That’s supply-side economics, ha ha. We already tried that and we know
it doesn’t work. All we got was those big budget deficits." Jack was frustrated,
but tried to be nice, although I wish he hadn’t been. It really is a sign
of the arrogance of Ph.D. economists -- who think they know it all -- that
so few have the slightest idea of what passed under their noses during
the past 20 years. |
| About a dozen years ago, I remember The Washington
Post doing a story about how the economic "gurus" of the 1980s were
Jude Wanniski and George Gilder and why the "gurus" of the 1990s would
be Robert Kuttner and Robert Reich. I was amused that the Post decided
that I was a "guru" only after they decided I was dead and buried. In the
entire decade of the 1980s, during my "reign," Post editorial writers
or editors called me exactly once to get my view of the way the world was
working. Still, I was prepared for a counter-revolution, which is what
we got in the years that followed the Reagan presidency, and I was curious
to learn about the new "gurus." I read up on your views, looking for insights
that I might steal from you and absorb into my analytical framework. Finding
none, I turned to Kuttner, publisher of American Prospect, and found
him a fresh voice in the Keynesian demand-side world. I offered to engage
him in public debate, via an exchange of papers or letters. He decided
I already was dead, having read about me being "toast" as gurus go, and
I never could get a response. My assumption, based on a study of human
nature, is that he knows I would embarrass him in such a debate, and he
would no longer be considered the new guru on the block. |
| The problem for Jack Kemp is that he was in the Bush
Cabinet when it flushed supply-side economics down the drain. You must
have taken a course in debating when you were in college, as you shrewdly
noted the Clinton administration in 1993 had inherited "the Reagan-Bush
deficits." This is the same thing clever Democrats did a few generations
back in blaming the Great Depression on "Harding, Coolidge and Hoover,"
when the same situation applied. Harding and Coolidge were supply-siders
of the first order, which is why the Twenties Roared. Hoover was the George
Bush of his day, a representative of the Old Guard demand-siders, who believed
tariff and tax increases would be just peachy. It would have been nice
if Jack said, "Just one cotton-pickin’ minute, Reich. George ‘read-my-lips,
no-new-taxes’ Bush inherited a vibrant economy from Ronald Reagan, with
deficits falling steadily as a percentage of GNP. Then he broke his campaign
promise, raised taxes, and presto, recession and the deficit rising as
a percentage of GNP." Alas, Jack is reluctant to criticize the President
he worked for, because he was in the Cabinet and did not oppose the tax
increase. He’s a team player, on the GOP team. |
| I’m not, Professor Reich. My allegiance is not to a political
party. I’ve belonged to both of them in my 65 years. My allegiance is to
the supply-side model, which I am more or less responsible for having merged
out of the ideas of two economists, Art Laffer of Ohio, and Bob Mundell
of Ontario. I never formally studied economics, Professor, which is how
I could become a "guru." As a result, I am in a perfect position to teach
you supply-side economics, to fill in that hole in your professional training.
I would do so free of charge, as long as you agree to what I offered that
other would-be "guru," Bob Kuttner. You make your argument, in 1000 words
or less, and I make my response, in 1000 words or less. I’ll post your
exchange and then you post yours, and if you find that I am leaving out
some of your arguments, or behaving badly, you can bow out. At the end
of the process, I guarantee you that you will know a lot more about supply-side
economics than you know now. |
| In the last quarter century, other supply-siders, like
Kemp, have drifted off in one direction or another, making their peace
with demand-side monetarists or conservative Keynesians. But I have not
devalued the model, so I always can back up anything I say, looking back,
with published work. For example, I advised my clients in 1993 that the
Clinton tax increases were not good for the economy, but would not cause
serious damage, because the capital-gains tax had not been raised and because
monetary policy was still a positive influence. As for the deficits, I
have for all this time made the case that they were the result of Nixon
going off the gold standard in 1971, which produced an inflation that Reagan
inherited. The price of gold was $620 per ounce when Reagan was elected.
If it had stayed at that level, the price of gasoline would have gone to
$3 a gallon. If you wish to learn about the discussions and debates that
went on at the Fed and in the Reagan administration, I could help you,
because I was involved behind the scenes every step of the way. The deficits
were absolutely necessary, as the cost of coping with the inflation that
was unfolding in the Nixon-Ford-Carter years. |
| My offer to you is a serious one, Professor Reich. In
the exchange I propose, both you and I will learn a lot more about the
way the world works than we know now. With a million hits a month on my
website, I can assure you that our friendly exchange would get lots of
attention and have a positive influence on the world economy. There is
room for more than one "guru" on the planet. |