More Butter, More Guns
Moore, Stephen
MORE BUTTER, MORE GUNS BY STEVEN MOORE W hen Ronald Reagan assumed the presidency in January 1981, the United States faced a two-front crisis of war and economics far more ominous than...
...The Soviet Union's Evil Empire was in full cry...
...Fourth, we need a capital-gains tax cutmthe nearest thing there is in pub26 THE AMERICAN SPECTATOR 9 NOVEMBER/DECEMBER 2OO...
...Reagan did precisely the opposite-he dramatically cut rates and simultaneously launched a trilliondollar military buildup...
...The 1997 cut from 28 percent to 20 percent pushed capital-gains tax receipts from $62 billion to $109 billion and set off the greatest boom in venture capital funding in U.S...
...As former Fed governor Wayne Angell, now with Bear Stearns, notes, the driving force behind the current recession has been "a sharp rise in the cost of capital"man investment drought.Venture capital, the seeds of future growth, has fallen 74 percent in the past year...
...Robert Rubin's argument that a capital-gains tax cut would depress asset values by inspiring a sell off of stocks is typical demand-side dementia...
...Capital spending by businesses is at its lowest in a decade...
...Without growth, the economy simply won't produce tax revenues, and the deficit will reach at least that high.The choices are whether we want a deficit with four percent annual GDP growth, or a deficit with no growth...
...Reagan never did...
...The stagnation of the Nixon, Ford and Carter yearsmthe low point in the Cold Warmonly emboldened the Soviets to advance in the Middle East, Africa, even in our own backyard in Nicaragua...
...Former Reagan Treasury economist Paul Craig Roberts once told me there were no more than a handful of people in the administration who really believed supply-side policies would work...
...And in short order we overwhelmed the Soviet Empire, with our missiles and our economic might...
...The Nikeii stock index, near 40,000 in 1990, is now below 15,000...
...Reagan's success destroyed the age-old myth that fighting a war requires domestic sacrificemhigher taxes, austerity, belt tightening...
...It makes no sense to run a surplus when we are at war and the economy is shrinking.Toward the end of WorldWar II, the Federal deficit rose to nearly twenty percent of GDP...
...history...
...lic policy to a free lunch...
...We also need a war-time economic game plan that recognizes warII II III IIIIIIII II Stephen Moore is president of the Club for Growth and a senior fellow at the Cato Institute...
...Unemployment is the highest since World War II...
...economy fibrillated with near double-digit inflation, record unemployment and rapid deindustrialization...
...Businesses should be encouraged to reinvest by allowing them to write-offbig-ticket capital purchases immediately...
...MORE BUTTER, MORE GUNS BY STEVEN MOORE W hen Ronald Reagan assumed the presidency in January 1981, the United States faced a two-front crisis of war and economics far more ominous than anything we face today...
...Prior to Reagan, American wars were always financed with towering tax hikes, from the seventy percent top rate in World War I to the 91 percent of WWII and LBJ's Vietnam era income-tax surcharge...
...The current slump is not a result of low sales at K-Mart and Toys "R" Us...
...But demand-side medicine has only deepened the depression...
...they only shift the timing of it...
...For thirty years, every time we have done this, capital-gains tax revenues have risen, not fallen...
...Hardly a recovery model to emulate...
...and asset values have risen, in some cases dramatically...
...All tax cuts should be permanent, not temporary...
...He entered the room, waited for silence, then announced:"Gentlemen: I hate inflation, I hate taxes and I hate the Soviets...
...Recessions don't win wars, they lose them...
...Rubin is wrong here, too: temporary tax cuts don't stimulate economic activity...
...To the contrary, American households and government have been on a binge...
...First, don't fear debt and deficits...
...Second, we need to stimulate investment, production and global capital inflows, not consumption...
...But Keynesian tax rebates and interest-rate cuts won't do it.We need a big and bold supply-side tax cut...
...Japan is being cemented over with public works projects...
...Cut the capital-gains tax in half...
...President Bush has rightly declared that we are fighting a two-front war: one to extinguish terrorism, and the other to restore growth in the U.S...
...Do something about it...
...time economic realities...
...Reagan reportedly established the priorities for his new administration during its first White House cabinet meeting...
...The U.S...
...economy...
...A cut in the capital gains tax increases asset values, because the tax on that asset is lowered...
...The idea is that more public funding for roads, bridges,Amtrak, and public transit will create boatloads ofjobs and pump dollars into local economiesmthe Japanese model of the 1990s...
...Fast forward all the income-tax rate cuts in the plan that passed Congress last Aprilmwe need the stimulus now...
...The stagflation that followed LBJ's and Nixon's tax hikes and protectionism helped lose the war in Vietnam...
...What is needed now from George W. Bush is precisely that kind of clarity, in our wars at home and abroad alike...
...Fortunately, he said, one of them was Ronald Reagan...
...Bush has the popularity he needs to pass a Reaganite economic growth program that will finance the war against terrorismmand the peace beyond...
...For Bush to achieve the great economic and wartime victories that we must win, he first needs to shatter the wrong-headed economic orthodoxy he confronts even inside his own White House, including his own Treasury Secretary's office...
...at the height of the Reagan defense build-up it was six percent...
...Third, we must learn the lessons of Japan...
...The combination of deflationary monetary policy and a federal tax burden that in five years has risen from 18 percent to 21 percent of GDP is a fiscal anchor on the information age economy...
...the investment sector has rocketed forward...
...Then he left the room...
...The Democrats' alternative to supply-side tax cuts is a demand-side Keyensian "pump-priming...
Vol. 34 • November 2001 • No. 8
