I didn’t listen to the State of the Union. It’s nothing more than political theatrics, and no matter who the President is, everyone already knows what he’s going to say. I’ve read the transcript, and this one was perfectly predictable in its banality and fact-challenged economic presumptions. Some noteworthy commentary:
Everything Joe Biden Did, Besides Listen to the SOTU. Let’s be honest about this at least; daffy old Uncle Joe should have been retired years ago.
Instead of more SOTU discussion, have a read on tax policy, from Brian Domitrovic of the libertarian Cato Institute: Tax Revolt! It’s Time to Learn from Past Success. Excerpt:
The achievements of the 1980s and 1990s stemmed from one source above all: the centerpiece of Ronald Reagan’s economics, the bill that Congress passed in the summer of 1981. This was the great tax cut that had been originally sponsored in Congress in the 1970s by Rep. Jack Kemp of New York and Sen. William V. Roth of Delaware, “Kemp-Roth.”
The tax cut of 1981 — which took all rates of the income tax down by an average of 23 percent, lowered the capital gains rate by 29 percent, and reduced business taxes — was the point of origin of the renaissance of the 1980s and 1990s whereby the economy expanded well in excess of the government.
The tax cut made everything else easy. First of all, it took the heat off the Fed. The Fed did not have to worry about stimulating the economy, because growth flowed from the tax cut. Furthermore, lower tax rates made loopholes less important as a source of profit, so business focused more on real entrepreneurship.
The 1980s saw the turnaround from years of Nixon/Ford/Carter stagflation and ‘malaise,’ the process began with tax rate cuts (not tax cuts; tax rate cuts. There’s a difference.) but also saw the Imperial Federal government swallowing a simplification of the tax code that eliminated a lot of exemptions and loopholes. The result? Tax revenues soared, the product of increased economic activity.
But there was a problem; Congress increased spending just as quickly. Now, for about the last ten years, Federal policy has become as hostile to economic growth as it was friendly in the 1980s, and Congress continues to spend.
That, True Believers, is the other side of the tax policy debate. No change in tax policy will extract us from the current fiscal mess until Congress learns to stop the runaway spending.
Mr. Domitrovic concludes:
Instead of conceding long-term mediocrity under Leviathan, we should take inspiration from our past, indeed our recent past. The last time we were stuck with 2 percent growth for the long term, the 1970s and the early 1980s, we mustered a means of narrowing government. The real results were so stellar that to recite them is to take us back to a world we have lost — but only 15 years ago.
Tax cuts, stable money, and the rendering of spending and regulation as superfluous are the formula of the supply-side revolution — the Reagan Revolution. They stand sentinel right there, not long ago in our history, as the way to advance through our sluggishness and purposelessness today.
He’s right. But it’s only half of the picture.