- Series: Culture of Enterprise Series (Book 3358)
- Hardcover: 368 pages
- Publisher: Intercollegiate Studies Institute; 1 edition (August 1, 2009)
- Language: English
- ISBN-10: 193519125X
- ISBN-13: 978-1935191254
- Product Dimensions: 6 x 1.1 x 9 inches
- Shipping Weight: 1.4 pounds (View shipping rates and policies)
- Average Customer Review: 15 customer reviews
- Amazon Best Sellers Rank: #1,203,243 in Books (See Top 100 in Books)
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Econoclasts: The Rebels Who Sparked the Supply-Side Revolution and Restored American Prosperity (Culture of Enterprise Series) 1st Edition
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—Real Clear Markets
“Couldn’t be more timely. Econoclasts reminds us of what’s wrong with current policy. Domitrovic adds significant value in his review of Carter- and Reagan-era economics.”
—Amity Shlaes, bestselling author of The Forgotten Man: A New History of the Great Depression
“A brilliant look at America’s last economic crisis and Ronald Reagan’s supply-side solutions that finally ended it. The same free-market incentive model would work today. This is the book Americans need to read now, as our leaders rush forward to deal with the present crisis without consulting the lessons of the past.”
—Larry Kudlow, host of CNBC’s The Kudlow Report
“I’ve never read anything on the subject of economics that surpasses this extraordinary book for its lucidity, richness, depth, intelligibility, savvy, and sheer intellectual excitement. Its publication could hardly come at a better time, as the fatal attraction of statism seems to have reemerged, one more time, from the murky depths to which it had been consigned.”
—Wilfred McClay, award-winning historian, SunTrust Bank Chair of Excellence in Humanities at the University of Tennessee at Chattanooga
“Fascinating. Domitrovic has corrected a glaring intellectual deficiency with his new history of the supply-side movement. He is to be commended for his masterful gathering of evidence and his capturing of the feel of the era, of the passion of Arthur Laffer, Robert Mundell, Bob Bartley, and the other supply-side pioneers.”
—Richard Vedder, distinguished professor of economics at Ohio University, author of Going Broke by Degree
Ever since America descended into economic crisis the comparisons to the Great Depression have come fast and furious. Incredibly, we have heard almost nothing about a much more recent economic calamity: the ruinous “stagflation” of the 1970s—the second-worst decade in American economic history. But now, in the riveting, groundbreaking book Econoclasts, historian Brian Domitrovic reminds us that the twentieth century’s greatest economic counterrevolution emerged in response to that crisis: supply-side economics.
In a pulsing narrative, Domitrovic tells the remarkable story of the economists, journalists, Washington staffers, and (ultimately) politicians who showed America how to get out of the 1970s funk and ushered in an unprecedented quarter-century run of growth and opportunity. Here we meet Robert Mundell, the brilliant economist who held court over martinis in a Manhattan steakhouse; his gregarious cohort Arthur Laffer, chief economist on the president’s budget staff at the tender age of thirty; Robert Bartley, the Wall Street Journal’s reticent editorial-page editor who became the first impresario of supply-side economics; Jack Kemp, the football-star-turned-congressman who led the fight to turn supply-side theory into practice; Jude Wanniski, the eccentric, hot rod–driving reporter whose best-selling book touched off the supply-side revolution; and a host of other fascinating figures who helped upend the economic establishment.
Based on the author’s years of archival research, Econoclasts explodes numerous myths about supply-side economics, including its “creation myth”—the famous incident in which Laffer sketched a simple curve on a napkin. Domitrovic conclusively demonstrates that supply-side advocates did not invent a doctrine out of whole cloth. Their central insight was that the two massive means of governmental intrusion in the economy—the income tax and the Federal Reserve—play the primary role in starting and perpetuating any economic crisis. What’s more, Domitrovic shows that the specific combination of tax cuts and stable money had an unbroken record of success long before it went by the name “supply-side economics”: in 1962, when JFK ended the economic sluggishness that had brought three recessions in Eisenhower’s eight-year presidency; in 1947, when the United States embarked on the postwar boom; and in 1922, when Treasury Secretary Andrew Mellon inaugurated the Roaring ’20s by imploring the Fed to keep the price level stable and arranging for Congress to slash income-tax rates.
Econoclasts is a masterful narrative history in the tradition of Amity Shlaes’s The Forgotten Man and John Steele Gordon’s An Empire of Wealth. It is also impeccably timely: this is a story we must know if we are to understand the foundations of America’s prosperity—foundations that are now under increasing attack.
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For at least the last hundred years, the U.S. has experienced cycles of prosperity alternating with economic debacle -- usually about 25 years of the former and, fortunately, only ten years of the latter. Our (economically) worst presidents -- Woodrow Wilson, FDR, Lyndon Johnson, Richard Nixon, Jimmy Carter, and now Barack Obama -- adhered to economic policies loosely described as Keynesian, which means deficit spending, ineffective stimulus packages, high taxes, crippling regulation, and currency manipulation that weakens the dollar. Our best presidents (again, economically) -- Calvin Coolige, John Kennedy, Ronald Reagan -- chose the path of tax cuts, deregulation, and a strong dollar, either explicitly or effectively tied to gold.
In the 1970s the dollar lost 90% of its value and economists coined a new term, "stafglation," to describe the coincidence of high inflation and high unemployment, which until that time were thought to be mutually exclusive. Fortunately for those of us building careers and raising families in the 1980s, Ronald Reagan listened to a group of iconoclasts that included (now) Nobel laureates Robert Mundell and F.A. Hayek, plus economist Art Laffer (the Laffer curve) and Robert Bartley, Wall Street Journal editorial page chief. (Seldom acknowledged is the fact that by Reagan's third year, annual GDP growth and unemployment were both in the 6% range. Compare that with Obama's third year.)
Especially interesting to me is the story of JFK's double-barreled tax cuts that stimulated both the supply side (business) and the demand side (consumers), giving us the longest period of spectacular U.S. economic performance up to that time -- 4%-plus GDP growth from 1962 to 1969.
But first, we need to go back in time, to 1913. It was in 1913 that the last goals of the "Progressives" made it into the Constitution and the law: specifically, the Federal Reserve Bank of the United States, and the income tax. Your first lesson in understanding "supply-side economics" is that it makes no sense without the Fed and the income tax.
In fact, it becomes clear that the "Progressives," although they had nothing but the best of intentions, created two gigantic "toys" they had no idea how to handle. Should the Fed raise interest rates to 25%, or lower them to zero? How about printing money? Could we just print as much as we liked?
And the income tax. Obviously, setting it at 100% would be a bad idea, but how about 90%? Or 15%?
Did anybody have a clue? Not very much. In fact, the Harding administration got lucky in making Andrew Mellon Secretary of the Treasury; he pressed the right levers and created the Roaring Twenties. But then came the stock market crash, and everybody started pressing the levers at random, leading to eleven years of misery.
Robert Mundell says that announcing a simple increase in the price of gold would have put a stop to all this, and there would have been no Depression, no Hitler, and no World War II. The picture is more complicated than that: there was the idiotic Smoot-Hawley tariff law, which basically cut off all foreign trade and led us into a Fortress America mindset: not TOO bad for a huge country with vast resources, but very bad indeed for countries like Germany and Japan, which did not have vast resources and began to set their military machines going.
So there's a whole fascinating history of the world in this book, plus a clear explanation of the main tenets of supply-side economics. Basically, Mundell says that we should use the Fed to support and maintain the current level of prices, period. No inflation and no deflation. Then we should encourage economic growth by cutting marginal tax rates. (Note well, George Bush and Barack Obama: mailing out checks to everyone is NOT THE SAME. Cutting MARGINAL tax rates encourages growth.
There's a lot more in this book. Perhaps the most surprising is that it is actually the first researched and documented history of one of the most important discoveries of the 20th century. Whatever else you read on the subject is simply OPINION, including the "famous" story of the Laffer curve being sketched on a napkin, the terms "voodoo economics" and "Reaganomics," and all the rest. Supply-side economics has a secure place as a respected extension of classical economics.
The only place where it doesn't seem to be given a hearing is in Washington, D.C., right now, where the current economic mess is either ignored, or treated with some sort of stupid band-aid. This is particularly frustrating because there are millions of Americans who could do better, but no one has ever accused the current POTUS of being open to new ideas. In fact, with all the new taxes he's foisting on the country, he's doing the Jimmy Carter malaise waltz all over again, wasting valuable time and trillions of dollars.
As G. K. Chesterton once observed about England, "It may be a strange spectacle indeed to see the blind leading the blind, but right now in Washington we can observe something much stranger: the blind leading those who can see."
Highest possible recommendation!
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