Poker Perambulation

It is a paradoxical truth that tax rates are too high today and tax revenues are too low, and the soundest way to raise the revenues in the long run is to cut the rates now. . . . The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.

Who came up with that?

1. Ronald Reagan

2. Jack Kemp

3. Arthur Laffer

4. None of the above

If you went with 4, you get the Kewpie doll. The supply side remarks that seem pure Reaganomics came from a predecessor and a Democrat. Of course, you’ve properly guessed that was John Kennedy.

As one who recalls that period, I remember it as pretty decent. A middle class family didn’t make as much as today’s gardener or most migrant workers. I was getting $60 every two week but Uncle Sam threw in room and board. The aspiration for many white collar workers was to make 10-12K a year. That got them 3-bedrooms and 2-baths in a nice neighborhood. Their car was one of the ‘mid-range’ brands that went for less than 2K. And, if the job didn’t provide health insurance, it was cheap enough to afford.

After the sad events in Dallas, we got a new President and a new idea. Linden Johnson was about entitlement and field leveling. He passed great civil rights legislation and spent like the New Dealer he was. He called it “The Great Society” and his famous speech about it was called “Bullets and Butter” by the media

By 1980, things were in the toilet. Stagflation was a new term brought about by excesses. Prices rose while income and jobs slumped. Nixon even tried price controls to disastrous effect. Our new President Carter explained to us that we’d grown too soft and expectant. Now we’d have to tighten our belts and lower our standard of living to join the rest of the world. Gas had sky-rocketed to 60-cent. That considered so debilitating that many states suspended their gas tax.

When Reagan showed up, things were pretty grim and his news coverage wasn’t much better than Dubya’s. But his approval rating was. He talked frugality better than lived it. But, he gave the small business types the benefits that allowed them to grow. The economy prospered.

That is a cycle. We all know about cycles. We have them playing poker all the time. Hopefully, the real world has less swing. Some swing is natural. A loose-aggressive will experience greater swing that your more brick-like players. And we’ve all seen tables go from sane to outrageous and then revert. The play goes call-call and then when there is a call-raise those who feel affronted cap – often without regard for conditions.

Well, that isn’t far from the real world I described. We’ve gotten pretty silly with mortgages and what is or isn’t conservative in banking circles. Government has encouraged business to grow. But the encouragement wasn’t production related. It was mergers and acquisitions. Instead of growing the jobs base, they were shrinking it.

Taxes seem a major part of all this as a means of avoiding or reducing debt. Very few ever get it right. Barry Goldwater was a conservative as they come and felt the way to balance things was more taxes – the antithesis of JFK. Democrats favor taxes but only of the rich. I guess every April 15^th, taxed Americans feel they somehow made that category without a lot to show for it. Any tax is a restrictive element. Yet, it is a necessity for modest government. When it exceeds modest the risk:reward we all know about goes up. Government is not as efficient as a mother with a shopping cart and a budget or a small business eking out a profit. Excessive government has a cost that can place a burden on those folks.

If you look at the cycle I described from my youth, you might find an analogy in what is happening today. We can break the full cycle or skip a bit with some paradoxical thinkers flattening the curve. But we don’t seem able to avoid them.

I started with a question so let me end with one.

Is Obama in the Democratic mold of:

1. Jimmy Carter

2. JFK

I think I could make a case from either angle. I’m not going to try to guess because I doubt I will live the decade or so it will take to find the answer. You need to guess — whether you want to or not. And, I really hope your guess is beneficial. Between now and the next election you should have a better answer.

ADDENDUM:

Interesting Times sans the curse, we hope. The auto industry seems whipping boy and potential savior. Two of the three are dead or in the ICU. Chrysler will end up owned (55% estimate) by the employees. GM is headed there because the government wasn’t willing to pony up an extra 500-mil for the bond holders and so loaned (gifted?) them far more on an interim basis. Men of principle can be wrong and right. In this instance and in most, there is a cost involved.

After this shakes out, there will be interesting times on a new front. The UAW will own majority interest in two of what we are still calling the Big Three. That means the owners of two will be the union for the third. That is a pretty obvious conflict of interest. It also places control in the hand of the critics. I hope they aren’t like the movie ones that can critique like a rutting bear but couldn’t make a movie on a bet.

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