Re: NBC: Staying on the road to prosperity; by Jack Kemp

Where was this? The op-ed page of the WSJ? Kemp wants to forget the past.
Who ran up the deficit to unimaginable heights? Art Laffer? Is he serious?
The Laffer curve has long been discredited. How does Kemp suggest we pay
for repairing the bridges and such? The Iraq War? Kemp forgot one very
important lesson. There is no such thing as a free lunch.





"SMBalloon" <smballoon@xxxxxxx> wrote in message
news:8o94c31bmdhqhlt572hpmhr2p9jo8vcvgb@xxxxxxxxxx
JACK KEMP
Staying on the road to prosperity

August 14, 2007

The great "existentialist philosopher" Yogi Berra once famously said,
"history is just one damn thing after another." Of course the
antithesis of Yogi was George Santayana, an equally famous philosopher
who said wisely, "those who neglect the mistakes of the past, are
doomed to repeat them."

As I write these words in the dog days of August, with all the bad
news of the subprime mortgage market, liquidity crunch and a
fluctuating stock market, it's important to keep things in perspective
and heed the words of Santayana, not Berra.

In other words, we should turn to history and its empirical evidence,
and not give in to irrational decisions based on fatalism and the
neglect of real history.

One such historical fact to remember is that the past 25 years have
been the best stock market for investors in U.S. history. As the
widely respected New York Times financial journalist Floyd Norris
wrote (and blogged) recently, the Dow Jones industrial average hit
bottom on Aug. 12, 1982, at 776.9, while interest rates were at 15
percent.

Since that date, the compounded rate of return from the last quarter
of 1982 until this summer, circa 2007, has been 11.8 percent. Taking
into account inflation, the rate of return has been 8.5 percent.
Norris pointed out this quarter of a century is the best ever in U.S.
history.

This remarkable achievement didn't just happen; it was the result of
policy decisions in the 1980s, '90s and more recently - confirming the
fact that lower tax rates on capital and labor, sound monetary
policies, with open-market initiatives and liberalized trade, leads to
stronger economic growth and rising values in equities.

We neglect these lessons at our peril.

As economist Art Laffer pointed out recently, "If these pro-growth
policies that have led to our 25-year bull market are reversed, don't
be surprised if our financial gains and competitive edge quickly
disappear."

Make no mistake dear readers, listening and watching the presidential
candidates in the Democratic Party debate over the economy, I believe
they are all headed in the direction of higher tax rates and
protectionist trade policies. Have they all forgotten John F. Kennedy
in the early 1960s and indeed Bill Clinton in the 1990s? Where, oh
where is the pro-growth, pro-trade, pro-internationalist wing of the
Democratic Party? Except for Joe Lieberman, they apparently no longer
exist.

Some history for all of us, 25 years ago, there was a mighty revival
of classical economics led by two young economists named Robert
Mundell of Columbia University and the aforementioned Art Laffer, then
a professor at the University of Southern California.

They posited that the only answer to the Keynesian dilemma of
simultaneous inflation coupled with recession was to restore sound
money and sharply reduced marginal tax rates on both capital and
labor. In other words, a hardened dollar, combined with lower taxes,
reduced regulation and liberal trade policies, would spur economic
growth and jobs while combating inflation.

These two economists took me, a GOP congressional backbencher from
Buffalo, N.Y., and turned me from a rather orthodox conservative in
the Eisenhower wing of the party, into a radical tax-rate cutter and
classical liberal on trade and globalization.

Candidate for president Ronald Reagan in 1980 turned out to be the one
(and only) candidate among Republicans who fully (and firmly) bought
into this neoclassical school of supply side economics because he'd
been educated at Eureka College in the late 1920s at the height of the
teachings of the 18th century's Adam Smith and David Ricardo.

Most people forget that when Ronald Reagan took office the top tax
rate was 70 percent and the capital gains rate was near 50 percent.
The soft money policies of the Carter administration had left us with
rising unemployment and an inflation rate of 16 percent (i.e.,
stagflation). Trade was virtually shut down because of the
mercantilist trade policies of "the left" in the United States and
those of "the right" in Japan and "old Europe".

Despite several exogenous events from Y2K to Sept. 11, 2001, from
Hurricane Katrina and rising defense spending in the war on terror,
the U.S. economy is the model for the world as more and more nations
from Brazil and India to Russia, China and Eastern Europe begin to
emulate our entrepreneurial pro-growth economic ideas.

As I've said, August 1982 was the real beginning of the lower tax
rate, lower interest rate and lower tariff policies that turned out 25
years later to have been the policy prescriptions that brought us this
remarkable record. As I write this, the Dow is at 13,335 - not bad!

So to summarize Santayana, yes, we must learn from our mistakes, but
equally important we must remember those decisions that from Reagan to
Clinton to Bush have given the world a road map to prosperity.

We've come a long way, and we've still got a long way to go in lifting
more people out of poverty, creating more minority business owners and
to further democratize our capitalistic system. So to both Democratic
and Republican candidates for the presidency: Let's hear a real debate
about growth and prosperity and not redistribution of wealth and
soaking the rich.
--------------------------------------------------------------------------------
Kemp, a nationally syndicated columnist, is founder and chairman of
Kemp Partners.

(end of commentary)


.

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