What We Can Learn From The (Now Extinct) Pro-Growth Democrats

Posted: Feb 28, 2018 11:50 AM
What We Can Learn From The (Now Extinct) Pro-Growth Democrats

What can we learn from the Kennedy tax cuts that helps us know what to expect from the Trump/Ryan tax cuts? First, I want to clue you into the fact that if we look deeply into the fossil record, we can see that there was once a creature known as the Pro-Growth Democrat. The GD had a symbiotic relationship with the (then rare) Pro-Growth Republican, but was in competition with the Dixie-crat and the Deficit Hawk Republican. In fact, the great JFK tax cut of 1964 was not enacted by JFK himself, because his tax proposals were blocked by a coalition of Dixie-crats and Deficit Hawks. Dixie-crats knew quite well what tax cuts would do -- they would stimulate growth, and create millions of jobs. Eventually employers starved for workers would be forced to defy social convention and hire African American workers and segregation would be undermined by business. The whole disgusting story is told well by Larry Kudlow and Brian Domitrovic in JFK and the Reagan Revolution.

I want to focus in on how we can apply the lessons learned then to today. While the Kennedy tax cuts were waiting to be implemented, the economy faltered. But immediately upon implementation, the economy took off like an Apollo rocket. At that time, monetary policy was fairly stable due to the legal requirements of the gold standard (and when policy makers did cheat on that standard, they cheated toward more stimulative monetary policy, not growth impeding monetary contraction like that which preceded the Great Depression). If monetary policy now remains reasonably accommodative, then it is likely that we'll see the same thing we saw under JFK's proto-Reaganism, a break from the stagnation of the past decade.

The graph below tells most of the story.

For those of you who want the rest of the story, we produced a short video briefing designed to explain this very much under-examined and overlooked episode in US history. It's under ten minutes and quite easily understandable by almost anyone except standard-issue academic economists.

Here's the video: