The May unemployment report reshuffled the deck to report that instead of unemployment soaring to Depression levels at 20% and above in May, unemployment was already declining from 14.7% to 13.3%. That means that we are already getting past the coronavirus lockdowns, and were on track to defeat the pandemic with a V-shaped recovery.
What was the foundation of President Donald Trump’s Blue-Collar Boom that has persisted now to turn everything around? Forty years ago, in 1980, we elected President Reagan to set America on the right course, using supply-side economics, with marginal tax rate cuts and deregulation, to create an unprecedented economic boom, ultimately lasting 25 years, from late 1982 to late 2007. That was after Keynesian economic “stimulus”, meaning more government spending, was all the rage in the 1970s, ending in double-digit inflation and double-digit unemployment.
President Obama evidenced the Democrat disease by never learning from experience. So in 2009, there he was right back at Keynesian economics “stimulus” with nearly a trillion dollars in increased government spending to spend our way out of the Great Recession, as if Reaganomics never happened.
That of course never worked. You can’t increase demand with more government spending without taxing or borrowing an equal amount out of the private sector first.
That always leaves a net increase in aggregate demand of zero, zip, nada, coining a Latin term. That is why there was no restoration of booming economic growth anywhere during the 8 years of Obama/Biden.
And that is why the American people had to rise up and do it themselves, by cashiering Hillary Clinton, and her Obama/Biden policies, and electing Donald Trump out of nowhere. He restored booming economic growth once again by cutting marginal tax rates through his tax reform bill, robust deregulation, and cutting off cheap labor competition crossing the southern border.
That is where his Blue-Collar Boom came from in his first three years, with all-time record low unemployment for African Americans, Hispanics, and Asians, all-time record middle class incomes, and rising wages even among the lowest income and least educated workers.
As Art Laffer and Steve Moore explain to this day, so-called stimulus government spending is just a way of slowing recovery, not accelerating it. Increasing government spending just means more taxes today or tomorrow on those working and producing, to give more to those not working and producing. That reduces work and output on both counts.
That is why the Obama/Biden recovery did not happen until Election Day 2016, when it was clear that Obama’s antigrowth policies were gone for good. But now the same ineducable Democrats are in control of Congress, with Nancy Pelosi as Speaker of the House and Chuck Schumer as Minority Leader of the Senate.
Now suddenly we find ourselves trying to spend more Keynesian big government money to buy our way out of this Depression. As Steve Moore stated in the Wall Street Journal last Monday, Congress has enacted four spending bills to address the Depression the coronavirus shutdown has created today.
Even without Speaker Pelosi’s new so-called Heroes Act, government spending this year, federal, state and local, would be 48% of GDP. With her proposed bill, government spending would be 51.5%, more than half. As Moore writes, “That has never happened. Even in 1943-45, at the height of World War II, government spending was a bit under 50%.” Senate Minority Leader Chuck Schumer said the next relief bill should authorize “Franklin Roosevelt-type action….”
But Franklin Roosevelt’s New Deal never ended the Great Depression. What Democrats are proposing this year, even more so with Biden as their nominee, is 100 years of folly, with this Depression, like Roosevelt’s Depression, lasting more than 10 years. What else can they expect, with unemployment insurance now paying workers more than when they were working.
Maybe Democrats should consider instead changing their name, because they don’t seem to be interested in listening to voters. They seem more interested today in outright power. And in following the failed socialism of the last century.
Recall the riots at the Democrat Convention in 1968, which helped elect Richard Nixon president for two terms. The riots that CNN and MSNBC see as salvation for the hopeless, unelectable, Joe Biden and his far, far left Democrat Socialist Party are similarly turning the middle class and blue collar working people rock solid in favor of reelection of Donald Trump.
Lewis Uhler is the Founder and Chairman of the National Tax Limitation Committee and the National Tax Limitation Foundation (NTLF). He was contemporary and collaborator with Ronald Reagan and Milton Friedman in California and across the country.
Peter Ferrara is a Senior Fellow at NTLF and formerly the Dunn Liberty Fellow in Economics at the King’s College in New York. He served in the White House Office of Policy Development under President Reagan and as Associate Deputy General of the United States under President George H.W. Bush.