Larry Kudlow Makes a GREAT Point....

The other day Larry Kudlow contrasted what happened back in the Keynesian 1970s; "Look what happened: Oil prices rose in the 70s. Stock prices fell. That was global inflation. That was high tax rates. That was crazy wage and price controls and over-regulation," with what's going on in the Supply Side era of TODAY, "Stocks and oil are rising together. That is a global economic growth signal. It is not an inflation signal."

As he notes, "You’ll note that in the 1970s, commodities and the 10-year bond rate both went up together. That was inflationary. Heck, bond rates reached around 15 percent at one point. They’ve been sliding down for several decades. Now commodities are booming, while bond rates are at rock bottom, hovering just above 4-percent.

"It’s all about low tax rates worldwide. It’s all about strong, global, free market capitalism creating high demand for commodities. Production can’t keep up, that’s all that’s going on. That’s why prices are high."

SEE: http://kudlowsmoneypolitics.blogspot.com/2007/11/kudlow-101-this-aint-1970s.html

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Anyone who was alive during the late 1970s KNOWS Kudlow is right.

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For those who weren't, Carter, one of the most inept and ineffectual Presidents in U.S. history (perhaps only James Buchanan, who made the Civil War all but inevitable was worse), continued the failed Keynesian policies of LBJ and Nixon. Keynesian policy was based on the view that more government spending, especially social spending was good for the economy.

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As a result, the government taxed productivity (work) heavilly, in fact, so much so, that many construction workers and others would not work overtime unless they were hired under another name at "straight-time plus," that is, if you worked 10 extra hours, your pseudonym (ie. John Smith) would be put down as having worked 15 hours).

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Our welfare system was so lavish (by 1990 a person on welfare in NYC made the equivalent of $24,000/year with Section-8 housing allowances, clothing allowances, food stamps, etc., more than enough to serve as a permanent disincentive to work) and so lax (major Municipalities, like NYC had large numbers of people on their rolls who didn't belong there. How do we know? As soon as Welfare Reform took hold, NYC welfare rolls dropped from just over 1 million to under 700,000, virtually overnight) that social spending, like crime was through the roof.

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Unfortunately for long suffering Americans, Keynesian policies DIDN'T prove at all "good for the economy, quite the reverse. Even before Carter took office inflation was a growing problem. Presdient Ford had tried, largely unsuccessfully, to cut back on some government spending, but Carter saw those attempts as ineffective and raised tax rates instead of trying to cut more spending.

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So, what was the ultimate result?

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INFLATION: Currently under Bush, it hovers around 2.3%/year (under 3% for all his tenure)
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Under Carter inflation peaked in the double digits! He presided over some of the worst inflation in post-Great Depression history! 1979 11.3%, in 1980 13.5%.
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UNEMPLOYMENT: Currently under Bush - 4.5% (it's been under 5% for almost all his tenure)
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As for unemployment under Jimmy Carter, well his LOWEST unemployment rate was 5.9% in 1979, 1976 was 7.7%, 1977 was 7.1%, 1978 was 6.1% and 1980 was 7.2%
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Interest Rates (Long Term interest rates): Have just budged above 6%, with thirty year fixed rate mortgages still avaliable for 5.9%
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Under Carter; In September of 1979 long term rates rose FROM 9.2% to 10.1%!!!
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In short, Supply-Side policies SAVED the U.S. economy from "Carterism"/Keynesianism and, yes, Third Worldism."..."