Lawrence Kudlow / June 7, 2014

Reclaiming Reagan’s Economic Voice

Despite a shrinking economy in the first quarter and outright declines for consumer spending and manufacturing in April, the May jobs report delivered the fourth-straight monthly gain above 200,000, with nonfarm payrolls jumping 217,000. This is the best four-month increase since late 1999. And finally – after five years – total U.S. payrolls rose above the previous employment peak set in January 2008. (On the 10th anniversary of Ronald Reagan’s death, it’s worth noting that the Gipper’s supply-side policies reclaimed all the lost jobs from the 1981-82 recession in a matter of months.) As for the unemployment rate, it held steady at 6.3 percent. And the underemployment rate (U-6) dropped a tenth to 12.2 percent. So overall, this was a positive report. And it’s good to see more Americans working. But there are still some serious warts in the jobs story.

Despite a shrinking economy in the first quarter and outright declines for consumer spending and manufacturing in April, the May jobs report delivered the fourth-straight monthly gain above 200,000, with nonfarm payrolls jumping 217,000. This is the best four-month increase since late 1999. And finally – after five years – total U.S. payrolls rose above the previous employment peak set in January 2008. (On the 10th anniversary of Ronald Reagan’s death, it’s worth noting that the Gipper’s supply-side policies reclaimed all the lost jobs from the 1981-82 recession in a matter of months.) As for the unemployment rate, it held steady at 6.3 percent. And the underemployment rate (U-6) dropped a tenth to 12.2 percent.

So overall, this was a positive report. And it’s good to see more Americans working. But there are still some serious warts in the jobs story.

One of those warts is a low 2.1 percent wage gain for the workforce. Wage growth for the last couple of years has been stuck around 2 percent. Even optimistic economist Mike Darda calls this “unimpressive take-home pay.” Worker wages are barely running ahead of inflation.

Another blemish in the jobs picture is the rock-bottom employment-to-population ratio. It’s sitting at only 58.9 percent, versus a pre-recession peak of 63.4 percent. And the labor-force participation rate didn’t move in May. It’s stuck at 62.8 percent.

Looking at working-age demographics, some believe there’s a jobs gap of nearly 7 million. And economist Scott Grannis notes that while private-sector jobs have been growing at roughly 2 percent for years, productivity has slumped to less than 1 percent.

So putting it all together, overall economic growth is still trapped in a sub-par growth zone. And it will remain there, Grannis says, “Unless and until policies in Washington become more growth-friendly (e.g. reduced tax and regulatory burdens).”

Aha! Growth-friendly policies.

As you know, this is an election year. So let’s see where the two political parties stack up on the subject of growth.

The Democrats want a minimum-wage hike. That may sound great on the surface, but it’s actually a big job loser for the least-skilled and poorest among us. President Obama and his EPA have launched a war on coal, which will cost hundreds of thousands of jobs if implemented. And then there’s Obamacare, which the CBO estimates will cost at least 2.5 million jobs.

Not a lot of growth-friendly policies coming from the Democrats.

But what of the Republicans? Where are their growth policies? Alas, with some notable individual exceptions, I fail to see a united GOP growth message.

The YG Network, chaired by Republican House Majority Leader Eric Cantor, has put out a white paper called “Room to Grow.” Nice title. But the chapter on tax reform actually attacks supply-side economics, and it never even mentions corporate tax reform.

Readers know that corporate tax reform is my single-favorite pro-growth policy. Actually, I’d like to abolish the corporate income tax altogether – including all the cronyist, big-government special favors, carve-outs, deductions and exemptions. Out with all the K Street mischief.

You know who the biggest winners would be? Wage earners. That’s right. Corporations don’t pay taxes. They merely collect, and then pass on the tax cost in the form of lower wages and higher consumer prices.

Want to maximize wages? Forget the minimum wage and embrace corporate tax reform.

Know which European country has the fastest growth rate right now, at 3 percent? Great Britain. And the Brits have a 20 percent corporate tax rate. Compare that to our 35 to 40 percent rate.

It’s no secret why corporate profits are going overseas, and thus destroying American jobs at home. High corporate tax rates.

I go back to the work of Laurence J. Kotlikoff, economics professor at Boston University. In his models for the elimination of the U.S. corporate tax, the real wages of unskilled and skilled workers rise by 12 percent, real GDP growth increases 8 percent and capital investment soars 23 percent.

In other words, significant U.S. corporate tax reform would jack up wages and jobs – predominantly middle class wages and jobs. It would attract investment from all over the world. And to U.S. companies that shelter profits overseas, we’d be able to say, “Come home to America.”

The growth impact of significant corporate tax reform would also drive up the value of the dollar and allow the Federal Reserve to normalize interest rates much more quickly. That, by the way, was the Reagan policy. It worked for two decades, producing nearly 45 million jobs and roughly 4 percent wage growth.

Lower tax rates and King Dollar. It’s a recipe for prosperity. Will any of you Republicans who claim to be Reagan followers make that case? Where is your Reagan economic voice?

COPYRIGHT 2014 CREATORS.COM

Start a conversation using these share links:

Who We Are

The Patriot Post is a highly acclaimed weekday digest of news analysis, policy and opinion written from the heartland — as opposed to the MSM’s ubiquitous Beltway echo chambers — for grassroots leaders nationwide. More

What We Offer

On the Web

We provide solid conservative perspective on the most important issues, including analysis, opinion columns, headline summaries, memes, cartoons and much more.

Via Email

Choose our full-length Digest or our quick-reading Snapshot for a summary of important news. We also offer Cartoons & Memes on Monday and Alexander’s column on Wednesday.

Our Mission

The Patriot Post is steadfast in our mission to extend the endowment of Liberty to the next generation by advocating for individual rights and responsibilities, supporting the restoration of constitutional limits on government and the judiciary, and promoting free enterprise, national defense and traditional American values. We are a rock-solid conservative touchstone for the expanding ranks of grassroots Americans Patriots from all walks of life. Our mission and operation budgets are not financed by any political or special interest groups, and to protect our editorial integrity, we accept no advertising. We are sustained solely by you. Please support The Patriot Fund today!

★ PUBLIUS ★

“Our cause is noble; it is the cause of mankind!” —George Washington

The Patriot Post is protected speech, as enumerated in the First Amendment and enforced by the Second Amendment of the Constitution of the United States of America, in accordance with the endowed and unalienable Rights of All Mankind.

Copyright © 2022 The Patriot Post. All Rights Reserved.

The Patriot Post does not support Internet Explorer. We recommend installing the latest version of Microsoft Edge, Mozilla Firefox, or Google Chrome.