TCS Daily


Kempism

By Jerry Bowyer - May 5, 2009 12:00 AM

We're going to need another Jack Kemp. We're in the same mess now as we were when he rose to prominence in the 1970s: rising taxes, energy rationing, and a misguided belief that we can counter all of that with the printing press. We're going to need someone who can understand the fundamental truth of the Laffer Curve, and still has the charisma to lead men and women in the political sphere.

I owe Jack Kemp a lot--we all do. His supply-side optimism helped supplant the near-universal conservative pan-gloomism of the '70s. George Gilder wrote the book, and Reagan won the White House, but before both of them, Kemp cracked the code. Kemp took the groundbreaking and brilliant work of Art Laffer and Robert Mundell and turned it into a real political movement and real-world legislation (and rescued it from becoming a Jude Wanniski cult). Kemp helped Reagan to convert from Goldwater-root-canal-high-tax-low-deficit economics and gave the GOP a new lease on life.

Kemp should have been the successor, but the Bush dynasty pulled their many strings and won the White House, and the party lost something. The Republicans have wandered in the economic wilderness, to some degree, ever since. Bush Sr. governed as a Keynesian. So did Clinton, in his first term. In his second term, Clinton governed as a supply-sider. Bush Jr. never really had it clear in his mind: demand-side tax cuts in 2001, supply-side tax cuts in 2003, Sarbanes-Oxley financial strangulation, car-crushing CAFE standards, mark-to-market, bailouts--a mixed supply-side legacy at best.

Now, as everybody and their brother tells us that the only way for the GOP to get back on top again is to stop all this tax-cutting and supply-side growth stuff, it is worth asking whether the Kemp/Reagan formula is obsolete.

I, for one, do not believe that it is.

The main thing about Kempism is that it actually worked. What the big-government conservatives can't see from their perches at think tanks and newspapers is reality. Central planning doesn't work. I don't care about the emerging voting patterns of bo-bos (David Brooks' "bohemian bourgeois"). I don't care if the lawyers and nonprofit executives who live in their planned communities hate Sarah Palin and swoon at Barack Obama. I don't care about any of that, because politics is not the final word; reality is. That's what Kemp got, and so many in the party now do not.

The central planning political consensus was at least as strong in the 1970s as it is now. David Frum should know that: He wrote a fine history of that awful decade. I'm sure that if there had been blogs back then, Washington conservatives would have told us how out of touch Kemp (and Reagan) were with the political consensus, and they would have been right. But they would have been wrong, too, because in the end, the political consensus does not rule the land; reality does.

Foreign affairs and terror prevention were incredibly passé in the years leading up to Sept. 11, 2001. No one wanted to talk about that stuff. Books about it did not sell. Then, reality caught up with our Utopian illusion: Indifference didn't work in defending us against the jihadists. More handcuffs on the CIA and the FBI than on the terrorists in the name of civil liberties didn't work, either. Reality won again, and the political consensus lost.

This will happen again--in economics. Bushbamanomics, the new Washington consensus, will fail. Just as Nix-Carternomics did. They violate the iron laws of created human nature--and so, they must fail.

Where is the next Kemp to be found? Not from the big government right. Yes, they'll keep their titles as the holders of the So and So Chair at the D.C. Institute for C-SPAN 2 Appearances, funded by some poor, deceased entrepreneur. They'll still be The New York Times' favorite conservatives. They'll still appear on PBS regularly; but they won't lead the party.

He (or she) won't come from the gloomy right, who love to drone in Spenglerian tones about the inevitable decline of the Republic. I didn't sign on to Reagan/Kemp to "stand athwart history yelling stop." That's the left's job. They were the ones who tried to stop history, to push it back into the bottle, to stifle the whirlwind of creative destruction. I signed up for the Reagan/Kemp program to stand behind history and kick it hard in the butt, yelling "get moving again." "Create microchips and miracle drugs. Get the Soviets into the ash bin of history, quickly. Bring the slums of Calcutta and Soweto into the modern world."

Our recent crop of GOP pretenders has been most un-Kempian. Kemp understood that reality has the power to bring people with very different agendas and concerns together. I remember one of the big media liberal pundits speaking about the GOP convention in 1984, I think, after Kemp spoke. It might have been Sam Donaldson. He said "These Republicans think they can take born-again Christians and combine them with high-tech entrepreneurs. It won't work."

But it did work. It worked because high-tech entrepreneurs needed lower taxes, and Reagan gave it to them. Born-again Christians were right, the sexual revolution didn't liberate the culture; it degraded it. These two groups didn't have a lot of personal chemistry between them, nor either with the foreign policy hawks who were the real "realists" of the cold war. Personal chemistry didn't bring these people together--reality did. All reality needed was a guy who was willing to search for the truth about the way the world works, to disconnect his flinch reactions about how the political culture would react to the truth, and then explain the basic truths of things over and over again with joy. Jack Kemp was that guy.

Now, of course, smaller men divide up the coalition that Kemp conceived and Reagan created. Some of them talk at length about the sanctity of life but then lash out at the "Club for Greed." Some will cut taxes to the bone, but are bored by dead babies. They believe in "divide and conquer," but of their friends, not their opponents.

Let me offer some thoughts on where the next Kemp will (and will not) come from: probably not from the establishment. Washington doesn't grow problem-solvers, it grows power-accumulators. I'm talking about the right and the left. I'm talking about those in the network of think tanks, lobbying firms and advocacy groups, which constitute the government in exile. The first group crowds around the president; the second group crowds around the money. Neither actually face anything like economic reality. The next Kemp will really get economics, but will be an outsider to the profession. Economics is often best learned outside of a graduate school of economics. Kemp learned it while cooking breakfast for Art Laffer and peppering Art with questions. Of course, Kemp really learned his economics by growing up in an entrepreneurial household.

Laffer is still with us, and still a generous teacher. So are Kudlow and Forbes. My guess is that the next Kemp will be a reader of Laffer, a watcher of Kudlow and a subscriber of Forbes. This person will not have to try to remarry faith and entrepreneurship, because the two were never properly divorced. The conservative establishment will say, "who is that? I've never met them at any of our gatherings." But he (or she) will have energy, and enthusiasm, and problem-solving ability, and more ambition for ideas than for power.

History is about to enter another ditch. Someone will need to stand behind it and give it a hard kick in the butt and yell "get moving again." I can hardly wait.


This article first appeared on Forbes.comJerry Bowyer is chairman of Bowyer Media and a CNBC contributor.
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26 Comments

We don't need another......
We need more people who support the Constitution, free markets and property rights to stand up and shout.

Put bumper stickers on your car.

I like "Politicians are like diapers. They need to be changed often and for the same reason."

Register to vote as a member of a party, NOT independent. Politicians take not of party registration frequently.

Stop waiting for leaders and become one.

"Show up and speak up: "
"This is the last one on the list because it's the most important. The world is run by people who show up. Whether it's church, a Tea Party, a campaign event, a conservative conference, a school board meeting, or a town council meeting, the people who are there and are willing to speak their mind are the ones who change things. Make that person YOU! "

http://townhall.com/columnists/JohnHawkins/2009/05/05/twenty_small_ways_to_help_get_our_country_back_on_track?page=2

In his second term, Clinton governed as a supply-sider
"Bush Sr. governed as a Keynesian. So did Clinton, in his first term. In his second term, Clinton governed as a supply-sider."

Of course, a little thing like ACTUAL REALITY doesn't get in the way of Roy convincing himself otherwise.

Why did Clinton do such a thing?
Republican Congress (as you,Z, know).

He wanted to bring on a recession
That is what Clinton handed down to W, is it not?

An economy under the guidance of supply side theory lives bubble to bubble. Dizzying highs and concussing lows. And then something like we have currently happens because some big players got too greedy and forgot bubbles burst eventually. Oh well, they got their bonuses. Conservatives applaud this?

Bowyers got one thing right, many Republicans don't get reality. Viva La Rush!


Ok, one and a half things right, this section is poetry:

"Let me offer some thoughts on where the next Kemp will (and will not) come from: probably not from the establishment. Washington doesn't grow problem-solvers, it grows power-accumulators. I'm talking about the right and the left. I'm talking about those in the network of think tanks, lobbying firms and advocacy groups, which constitute the government in exile. The first group crowds around the president; the second group crowds around the money. Neither actually face anything like economic reality."

Well said. But its only half credit because Laffer is a joke and history has proven supply side economics is a failure. Unbridled Capitalism either kills a country through its economy because robber barons take the wealth and rest of us are left pick the scraps (see Great Depression), or the government has to turn socialist to save We The People from this economic destruction. It worked to bring us out of the Depression and it will work this time too. Obama just better do it right and not pussyfoot about it like he has so far.

Greenspan caused the recession.
Bad monetary policy.

Bob Jones Fantasy World
"Well said. But its only half credit because Laffer is a joke and history has proven supply side economics is a failure."

Uh-huh...not the real world's history. In the real world, every time SSE has been implemented it delivered what it said it would.

Bob just likes to distort what SSE actually is and what it says it delivers in order to deny said reality.

[Off topic] Dems Screw Over Specter
Dems Shun Specter, Undercut Obama and Reid

The White House's "full support." The backing of Senate leadership. The promise to retain his rank. Pennsylvania Sen. Arlen Specter appeared to gain a new political world for leaving the party that brought him to national politics. One week later, that world is gone.

Specter now stands alone. Stripped of his rank by Democrats. Scorned by Republicans. Specter's flash of strength has turned to weakness.

http://tcsdaily.com/discussionForum.aspx?fldIdTopic=9723&fldIdMsg=102034

Economies
An economy under the guidance of supply side theory lives bubble to bubble. Dizzying highs and concussing lows.

Assume for a minute that "supply side" is something BJ understands (he doesn't-he just froths like leftwingers do at all snappy code words their pavlovian masters train them to slobber at) and assume he's right (he's not, he almost never is)

Then look at the "planned" economies-the more the "planning", the greater the degree, but all have one thing in common-an economy under government STAYS in the hole. Picture any symbol of the current turmoil-housing, education, cars, medicine-ALL sectors with copius government meddling.

Now go get that rectal-cranial inversion fixed, will ya'? You are the joke.

Couldn't happen to a better fellow (lie with dogs, expect fleas and biting)
I've suffered his Senatorship since his good for nothing a** was brought in by REAGAN.

Couldn't happen to a better fellow (lie with dogs, expect fleas and biting)
I've suffered his Senatorship since his good for nothing a** was brought in by REAGAN.

Agreed, Greenspan deserves a sizable portion of blame
You're right about bad monetary policy

Bubbles are real
"In the real world, every time SSE has been implemented it delivered what it said it would."

Yeah, it delivers a period of fast growth followed by a contraction. A bubble. And what do bubbles do?

You're right Heater
Not about the rectal-cranial inversion, but that planned economies are failures. Doesn't change the fact that supply side economics is a failure too. Either extreme has proven to fail.


How is "education" a symbol of our current turnoil?

Government meddling has little to do the with woes of the automotive industry. Damn the government for making people wear seatbelts! Right? Auto industry woes are the result of poor management and decision making, and the taking on of too much debt. The poor economy overall doesn't help either. Imagine, if the government had raised CAFE standards 8 years ago the automakers might have been positioned to take advantage of the change in market preference when gas prices skyrocketed.

How do you define a "planned" economy?

Bubbles caused by cheap money.
Bad government control of the money causes the bubbles.

A free country is a messy country
Supply side economics fails-centrally planned economies fail. What's a citizen to do? Free range capitalism will create monopolies and eventually speculatory bubbles that burst with great dismay. History abounds with examples. I believe Teddy Roosevelt was the first to use government as a tempering agent to the rampant excesses of the so called "Robber Barons". Over the decades this government meddling has tipped the scale in the opposite direction. Many pols figured out a variant of the organized crime "protection" racket. the short version "Give me campaign money and/or do what I like and I'll take care of your or your industry in congress." The result is business decisions based on political motivation not sound models. For example the S&L crisis back in the 80's. Savings and loans were solid, but boring institutions. Then congress changed the rules (dating from the depression) keeping that industry in check and expanded the insurance covering deposits. The real message sent? "Go be more aggressive in your loans and investing, but don't worry the government will protect your depositors if you fail." The rest is history. Under a good system the government acts like a parent using regulation to insure transparency and to temper the capitalist urge to excess. Sadly we have had very few examples of that and we will see none in the future. Supply side economics, letting markets decide where to invest capitol, will be messy, companies will fail, bubbles will occur, it's human nature. There are some intellectuals out there that simply cannot let go of the idea that they can iron out these disruptions if only we would let government control the economy. Of course it's been tried and central control simply doesn't work, but that never stops the Utopians!

'Planned economy'
If the government did not protect the US auto industry from imports, the USA would have been able to buy the best the world had to offer forcing US companies to compete or close.
Even now, only recently has the Smart car been allowed for import. Volvo, supposedly the safest car in the world, cannot be directly imported into the USA without modifications.
USA laws keep efficient diesels out of US markets. US regulations require multiple gasoline formulations around the country affecting the engineering of auto engines.
The list of government regulations controlling the economy is very long.

" Supply side economics fails-"
Maybe you should define 'supply side' as no one seem to understand that it has succeeded.

"The term “supply-side economics” is used in two different but related ways. Some use the term to refer to the fact that production (supply) underlies consumption and living standards. In the long run, our income levels reflect our ability to produce goods and services that people value. Higher income levels and living standards cannot be achieved without expansion in output. Virtually all economists accept this proposition and therefore are “supply siders.”

“Supply-side economics” is also used to describe how changes in marginal tax rates influence economic activity. Supply-side economists believe that high marginal tax rates strongly discourage income, output, and the efficiency of resource use. In recent years, this latter use of the term has become the more common of the two and is thus the focus of this article.
"

http://www.econlib.org/library/Enc/SupplySideEconomics.html

Where has it failed in either definition?

wrong about a messy country
You said there would be monopolies and that there were many examples. That's not even true, nor is the comment about the robber barrons; that's mythology. The only monopoly that can exist is one that has the power of the state behind it in some manner.

Walk me through how a monopoly could happen even today if there were no interference by government. Perhaps you could show us how say, Bata shoes could form a monopoly of footwear. What about how one car company could? Maybe show us how McDonalds could stop Wendy's and all the others. OK, so maybe a better example would be the computer industry. So how would Microsoft stop people from buying MacIntosh's, or getting Linux for free?

meddled even in the car industry.
The government did indeed contribute to the failure of the auto industry in addition to the former bailouts like with chrysler years ago. Remember thow they also bullied Japan into having 'voluntary' restrictions on how many cars they brought in? That meant they brought in the bigger more expensive ones since there is more profit in them. That meant that the cheaper ones which would have been good competition for the american ones, wasn't there.

They also interfered with those stupid safety restrictions too since many other foreign producers couldn't import their cars.

BTW, I like that idea of a safety feature that says instead of air bags, which incourage more reckless driving because people think they will be saved if they speed and whatnot; they should put a big spike on the steering wheel. Then if you have an accident, the spike will go thru you chest. If this were the case, people would be really, really careful about how they drove.

Another safety feature if people were serious would be to wear safety helmets like every single one of the race drivers does.

bubble to bubble
This is explained very well by the 'austrian theory of the business cycle'. It's been know for ages, but politicians like the current system very well; after all if they didn't have it, they couldn't pay for all those things they can't afford otherwise.

easy money delivers asset bubbles
'hard' money as advocated by SSE has never been tried since we left the gold peg in 1973.

The closest we came to going back to it was with Reagan. But Milton Friedman (a Monetarist) talked him out of it.

The stimulus package has failed to deliver
http://www.powerlineblog.com/archives/assets_c/2009/05/stimulus-vs-unemployment-april.php

Here's a chart put out by Barry's administration that projects unemployment.
The top line is their projections for unemployment without the stimulus plan.
The bottom line is their projections for unemployment with the stimulus plan.

The red triangles indicate actual unemployement.

As you can see, unemployment is higher than if Barry had done nothing.

Which is precisely what those of us who know what we are talking about had predicted.

Nice job, Jerry...
Jerry,

You said "Jack Kemp's supply-side optimism helped supplant the near-universal conservative..."

Supply Side theory replaced Keynesian economic policies and insofar as Kemp worked with Ronald Reagan's administration during that transition...perhaps we do need another Jack Kemp. The conservatives and the liberals were both trying to hold onto the Keynesian model.

But the reason Keynesian policies needed to be replaced was that Keynesian theory no longer accurately described the American economy. Supply Side theory did. The Keynesian economy had matured into stasis and Keynesian policies such as government-created inflation only made things worse.

Our supply side economy has now matured into the stasis of chronic deflationary recession. Just as the Japanese economy did almost 20 years ago. If there will be a Jack Kemp and a Ronald Reagan to husband our transition into the policies of the next generation economic model...so that we can grow ourselves out of this mess just as we did after 1982...then we need to first start talking about that fresh paradigm instead of trying to hold onto the old one that is done now...as Richard Nixon and Jimmy Carter tried to do after 1970 with their Keynesian policies until Reagan stepped forward and put a stop to stagflation.

The Supply Side economy is finished. Done. It got us here and it made us rich. So we should have some respect. The Keynsian economy had its day too. We do need to de-centralize...but we cannot go back to supply-side to do that. Supply side implied the consolidation of industries into a few large players that should trickle down their successes into low-cost consumer goods and higher paying jobs based on increased productivity and the outsourcing of low paying jobs.

Supply side defeated the Communist economies by financially crushing the Soviet Union so they could not compete militarily...and by operationally employing the Chinese labor pool to make our stuff and to earn our dollars so that they did not want to do anything else but play capitalism. Our game and our rules. We won. Supply side did that. And now that's over. New rules. New game. New capitalism. If we want to keep winning then we need to pay better attention to how the world works now that we have changed it.

And we need a Republican to be our own agent of change.

What conservatives support Keynesian policies?
New capitalism is old capitalism, free markets.

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