In 1849 the Scottish philosopher Thomas Carlyle coined the phrase “the dismal science” in reference to the discipline of economics. It is said his observation was inspired by the pessimistic predictions of Thomas Malthus, the Paul Ehrlich of the 18th Century. The Biden Administration has labored with Herculean enthusiasm to put the dismal back into the practice of economics.
Some historic context is called for. The best word to describe the state of economic theory in America today is dirigisme: an approach to economic development emphasizing the positive role of state intervention. There are very few examples of a positive outcome from such state interventions. In fact the results are usually antithetical to the health of the US economy.
The last 125 years have seen a succession of alternating periods of economic growth and contraction. These are the economic equivalent of the alternating periods of cooling and warming that have occurred with the global climate for the past 10,000 years. The difference is that the climatic events are all natural and cyclical whereas the periods of economic growth and contraction are directly related to the level of state intervention.
The periods of growth and prosperity are marked by tax cuts, limited government regulation and free trade. The periods of recession and stagnation always involve budget deficits, as espoused by the Keynesian school, heavy regulation and profligate spending.
The first period of heavy state intervention in the economy was under Woodrow Wilson, a racist, progressive Democrat (redundancy alert!). Wilson delivered to his successor, Warren Harding, the Depression of 1920-21. Harding, in response, secured the passage of legislation that cut federal spending nearly in half, from 6.5 percent of GDP to 3.5 percent. The top tax rate was reduced from 73 percent to 25. The result was a booming economy which is remembered as the Roaring Twenties. The benefactor of this was Calvin Coolidge who took a hands off approach with respect to the US economy. In fact Coolidge took a nap every afternoon in the White House.
The end of the boom occurred when the Federal Reserve, created in 1913 under Wilson, sharply contracted the money supply in 1928. The result was the Great Depression. Hoover and Roosevelt, practitioners of dirigisme, engaged in policies that worsened and extended the Depression.
In the early 1960s John Kennedy cut personal tax rates from 91% to 70% and corporate tax rate from 52% to 48%. This spurred economic growth and increased tax revenues enough to finance Lyndon Johnson’s disastrous domestic social experiments. Johnson’s policies created an inflationary pressure that ultimately triggered Nixon’s ill-advised wage and price controls. Inflation was not reduced but merely postponed until Carter’s hapless Presidency.
Which brings us to the administration of Ronaldus Magnus. Reagan cut taxes and, contrary to the predictions of Malthusian Democrat economists, Federal tax revenues almost doubled. The result of his policies was an economic boom that allowed Clinton to concentrate on White House interns rather than policy. It should be noted that the Gingrich Congress, elected in 1994, held government spending growth to the level of inflation and we had surpluses for the first time in years.
And then came Obamanomics which was the precursor of the present economy under Biden. It was marked by steroidal deficit spending and the disaster that is Obamacare. There was wasteful spending to address the myth that is anthropogenic climate change. Few remember the collapse of Solyndra, a solar panel manufacturer, despite receiving $530 million in Federal loan guarantees. It was, in short, the economic amateur hour. It could never happen twice…
The Trump Administration followed the proven practice of cutting taxes to stimulate growth, kept inflation low and, most importantly, eliminated regulations that were strangling economic growth and driving jobs out of the country. It was the COVID outbreak that cooled off the Trump economy. It should be noted that the policies of Trump reduced Black unemployment to the lowest levels ever recorded at the Federal level. The Democrats haven’t been that unhappy since the passage of the 13th Amendment.
All of which brings us to the present state of the dismal science known as Bidenomics. We have been told that Biden is Obama’s third term and, economically speaking, such is the case. But Biden added another factor to the Obama dumpster fire…inflation. Every demand for increased spending is tied to either the so-called climate crisis or the support of Ukraine. Protera, a company that was created to manufacture EV buses went bankrupt despite receiving a $2 billion injection of newly printed currency. Our Secretary of Energy made a significant personal investment in Protera and sold her shares after the $2 billion “contribution” drove the stock price up, a bit legerdemain reminiscent of the Hilliary Clinton cattle futures miracle. We have invested billions to protect the northern border of Ukraine while our Southern border remains open to all comers. We have increased our domestic financial burden by admitting millions of illegal immigrants. The Mayor of New York City has demanded a cool $12 Billion to cover the costs of his sanctuary policies. The Federal budget is an unmitigated disaster.
Energy independence is dead and a key measure of employment, the labor participation rate, demonstrates that the much ballyhooed low unemployment rate is totally fictitious. It does not help that our Treasury Secretary is the perfect example of a person who has been educated far beyond their intelligence. Another example is our Transportation Secretary, Mayor Pete. Perhaps this was prerequisite to participation in the Biden cabinet.
Bidenomics is bad economics for every American and it will be the legacy of President Houseplant.