After delivering a number of “economic growth” speeches this summer, President Obama has failed to inspire any confidence, falling all the way back to square one in a recent Gallup poll. Actually, make that less than square one. Gallup reported that Obama’s approval rating on the economy has sunk to 35 percent in August from 42 percent in early June.
Why should we be surprised?
And as far as solutions go, Obama keeps giving us the same old, same old: End the spending-cut sequester, lower tax deductions, and raise taxes on the rich, all to free up money for infrastructure, green energy, “manufacturing innovation initiatives,” and the teachers’ unions.
Of course, this would all come on top of Obamacare, which if it doesn’t fall of its own weight, will add so many new taxes and regulations that it will sink the economy even more.
The Gallup poll also reflected voter fatigue over Obama’s stale class-warfare act. It’s a leftover from his first term. He talks about a “winner-take-all economy where a few do better and better while everyone else just treads water.” It’s a bore. It’s unproven. It’s like his new phrase of “an economy that grows from the middle out.” No one knows what this means because it doesn’t mean anything.
However, speaking in Galesburg, Ill., this summer, Obama served up a convenient historical fairy tale: “In the period after world War II,” he said, “a growing middle class was the engine of our prosperity.” Presumably he was thinking of a time when high taxes on the rich and industrial-union rule had the middle class soaring. The trouble is, Obama’s history is wrong.
From 1944 to 1960, with a top tax rate of 91 percent, the U.S. economy expanded at an anemic 2.1 percent annual pace, according to economic historian Brian Domitrovic. And during the Eisenhower years, the economy grew at a subpar 2.4 percent yearly rate, including three recessions, which Domitrovic says made for “the worst growth of any post-war president until George W. Bush and Barack Obama came along.”
So much for post-war prosperity.
But then came the 1960s, the decade liberals love to hate. Why? Because the path-breaking supply-side tax cuts of John F. Kennedy generated one of the greatest booms in economic history.
Actually, according to Domitrovic, it was two big tax cuts. The first was a business tax cut put in place in 1962, and the second was an across-the-board personal tax cut that began in early 1964.
The result? Domitrovic reminds us that the eight-year expansion from 1961 to 1969 saw growth of 48 percent — a third more in an eight-year period than in the 16 years ending in 1960. So the post-war prosperity of 1944 to 1969 did exist at roughly 3 percent per year. But only because the 1960s lifted everything up. Kennedy cut the top tax rate from 91 percent to 70 percent, but all other tax rates were also reduced for top-to-bottom income earners.
Conveniently, John Kennedy’s powerful tax-cut slashing on business, individuals, and investors doesn’t exist in the Left’s post-war, economic narrative. It’s been rubbed out of history, replaced by a liberal vision of powerful unions and high tax rates on the rich, which is supposed to create growth. And expectedly, Obama and the Left never make the connection between the Kennedy tax cuts and the Reagan tax cuts 20 years later, which essentially copied the JFK model.
Not only did Reagan copy JFK’s across-the-board rate reduction, he even dusted off his rhetoric. Reagan frequently talked about a rising tide lifting all boats, after-tax incentives to keep more of what you earn, and how lower tax rates produce higher tax revenues. In fact, Reagan credited Kennedy when the 1980’s tax cuts got the economy moving again.
Domitrovic calls the post-war, pre-tax-cut era the “fairy tale about the 1950’s prosperity which has been current for several decades.” When President Obama talks about a grand bargain for corporate tax reform to raise more revenues to be used for more stimulus spending, or a budget that would end the sequester and its budget caps and stick it to the well to do with a near $1 trillion tax hike, he completely skips the Kennedy-Reagan growth story.
None of Obama’s tax-and-spend proposals will pass the current Congress. He knows that, and so does everybody else. But to suggest that his policies would benefit the middle class or the rest of the economy is cynical and misleading.
President Obama is a former law professor. Even accounting for his huge policy differences with JFK and Reagan, he should do us all the courtesy of getting his history straight.
– Larry Kudlow, NRO’s economics editor, is host of CNBC’s The Kudlow Reportand author of the daily web log, Kudlow’s Money Politic$.