How to be a succesful, beloved president ( or Prime Minister)

It should not be forgotten that is was the era when Communism was smashed, when Britain re-gained it's self-respect, and STILL people in Scotland hate Maggie Thatcher with a venom and bile that defies description. Of course, they hate her ( and Reagan) because they were made to face reality.
Sadly, I don't think the present government has it in them to do the same.




By ARTHUR B. LAFFER
For 16 years prior to Ronald Reagan's presidency, the U.S. economy was in a tailspin—a result of bipartisan ignorance that resulted in tax increases, dollar devaluations, wage and price controls, minimum-wage hikes, misguided spending, pandering to unions, protectionist measures and other policy mistakes.

In the late 1970s and early '80s, 10-year bond yields and inflation both were in the low double digits. The "misery index"—the sum of consumer price inflation plus the unemployment rate—peaked at well over 20%. The real value of the S&P 500 stock price index had declined at an average annual rate of 6% from early 1966 to August 1982.

For anyone old enough today, memories of the Arab oil embargo and price shocks—followed by price controls and rationing and long lines at gas stations—are traumatic. The U.S. share of world output was on a steady course downward.

Then Reagan entered center stage. His first tax bill was enacted in August 1981. It included a sweeping cut in marginal income tax rates, reducing the top rate to 50% from 70% and the lowest rate to 11% from 14%. The House vote was 238 to 195, with 48 Democrats on the winning side and only one Republican with the losers. The Senate vote was 89 to 11, with 37 Democrats voting aye and only one Republican voting nay. Reaganomics had officially begun.

President Reagan was not alone in changing America's domestic economic agenda. Federal Reserve Chairman Paul Volcker, first appointed by Jimmy Carter, deserves enormous credit for bringing inflation down to 3.2% in 1983 from 13.5% in 1981 with a tight-money policy. There were other heroes of the tax-cutting movement, such as Wisconsin Republican Rep. Bill Steiger and Wyoming Republican Sen. Clifford Hansen, the two main sponsors of an important capital gains tax cut in 1978.

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Associated Press

Ronald Reagan after signing his first tax cut, Aug. 14, 1981.
What the Reagan Revolution did was to move America toward lower, flatter tax rates, sound money, freer trade and less regulation. The key to Reaganomics was to change people's behavior with respect to working, investing and producing. To do this, personal income tax rates not only decreased significantly, but they were also indexed for inflation in 1985. The highest tax rate on "unearned" (i.e., non-wage) income dropped to 28% from 70%. The corporate tax rate also fell to 34% from 46%. And tax brackets were pushed out, so that taxpayers wouldn't cross the threshold until their incomes were far higher.

Changing tax rates changed behavior, and changed behavior affected tax revenues. Reagan understood that lowering tax rates led to static revenue losses. But he also understood that lowering tax rates also increased taxable income, whether by increasing output or by causing less use of tax shelters and less tax cheating.

Moreover, Reagan knew from personal experience in making movies that once he was in the highest tax bracket, he'd stop making movies for the rest of the year. In other words, a lower tax rate could increase revenues. And so it was with his tax cuts. The highest 1% of income earners paid more in taxes as a share of GDP in 1988 at lower tax rates than they had in 1980 at higher tax rates. To Reagan, what's been called the "Laffer Curve" (a concept that originated centuries ago and which I had been using without the name in my classes at the University of Chicago) was pure common sense.

There was also, in Reagan's first year, his response to an illegal strike by federal air traffic controllers. The president fired and replaced them with military personnel until permanent replacements could be found. Given union power in the economy, this was a dramatic act—especially considering the well-known fact that the air traffic controllers union, Patco, had backed Reagan in the 1980 presidential election.

On the regulatory front, the number of pages in the Federal Register dropped to less than 48,000 in 1986 from over 80,000 in 1980. With no increase in the minimum wage over his full eight years in office, the negative impact of this price floor on employment was lessened.

And, of course, there was the decontrol of oil markets. Price controls at gas stations were lifted in January 1981, as were well-head price controls for domestic oil producers. Domestic output increased and prices fell. President Carter's excess profits tax on oil companies was repealed in 1988.

The results of the Reagan era? From December 1982 to June 1990, Reaganomics created over 21 million jobs—more jobs than have been added since. Union membership and man-hours lost due to strikes tumbled. The stock market went through the roof. From July 1982 through August 2000, the S&P 500 stock price index grew at an average annual real rate of over 12%. The unfunded liabilities of the Social Security system declined as a share of GDP, and the "misery index" fell to under 10%.

Even Reagan's first Democratic successor, Bill Clinton, followed in his footsteps. The negotiations for what would become the North American Free Trade Agreement began in Reagan's second term, but it was President Clinton who pushed the agreement through Congress in 1993 over the objections of the unions and many in his own party.


President Clinton also signed into law the biggest capital gains tax cut in our nation's history in 1997. It effectively eliminated any capital gains tax on owner-occupied homes. Mr. Clinton reduced government spending as a share of GDP by 3.5 percentage points, more than the next four best presidents combined. Where Presidents George H.W. Bush and Bill Clinton slipped up was on personal income tax rates—allowing the highest personal income tax rate to eventually rise to 39.6% from 28%.

The true lesson to be learned from the Reagan presidency is that good economics isn't Republican or Democrat, right-wing or left-wing, liberal or conservative. It's simply good economics. President Barack Obama should take heed and not limit his vision while seeking a workable solution to America's tragically high unemployment rate.

Mr. Laffer is the chairman of Laffer Associates and co-author of "Return to Prosperity: How America Can Regain Its Economic Superpower Status" (Threshold, 2010).

How to win votes and make friends..

We don't have any more snow around here, but I was still able to stand on the ice at the edge of the pond in the park today. In our water butt at the back door, there is still an iceberg that is at least 30 cms thick, and I am still wandering about the house with my husky on - we Scots refuse to have the heating on from 09:30 am until 17:30 pm. Actually that's not quite true - its on for an hour over lunch....
I was discussing the effect of temperature on our psyches with a friend the other day. He assured me he felt much more like sex when it was warm and sunny - quite apart from the pyjamas, sweaters, hot-water bottles and the potential for electrocuting yourself on the electric blanket proving a turn-off in the winter. He was also quite sure that business activity always started to pick up again as the temperatures started to fall in September each year, and categorically averred that that was why countries further south than Munich weren't at the forefront of wealth.
I'm not so sure about this - India,Brazil, China and even Japan seem to be doing all right, although I know there are chilly parts in all these countries.
Over on Takimag, Patrick J. Buchanan has an excellent piece on why America's own Mr. Brown did so well in Massachusetts. Basically, the majority white population which works hard and pays its taxes has reached the point where they won't put up with depredations on their wallets for immigrants and ne'er do wells any more.
The same applies here. Gordon Brown's British Jobs for British Workers expresses it perfectly - except we can't do that because we have given away our sovereignty to the EU. America, fortunately, has not yet done so, and I would suggest that because of their history they never will.
Buchanan finishes with the following quote:"What the McDonnell, Christie, and Brown victories teach is that the GOP should stop listening to the Wall Street Journal and start listening to these ( white) forgotten Americans.
An end to affirmative action and ethnic preferences, an end to bailouts of Wall Street bankers, a moratorium on immigration until unemployment falls to 6 percent, an industrial policy that creates jobs here and stops shipping them to China appear a winning hand in 2012. "
The last paragraph says it all.

Get on your bike and get a job.

I have thought recently that Peter Schiff over on Takimag.com had gone off a bit recently but today he has an excellent post which defines precisely why we have millions of non-working people in developed countries.
In essence, Labour Unions have insisted on minimum wages, which effectively price people out of the first rung of the employment ladder, which means they a) never have the discipline of work b) never learn some skills and c) have no incentive to get off the State handouts. Why would you?
The point he makes, of course, is that the bottom rung of the ladder isn't intended to support a family. Its a first job that young people get - like, as he says, pumping gas or serving table. The gas pumpers are long gone, but the serving table still exists, though here in the UK its usually Poles or Romanians who are doing it. Once you have earned something ( including perhaps self respect) you get a better paid job and then start thinking about supporting that family.
Fraser Nelson has a good post today about how Labour has completely reversed its raison d'etre, creating more inequality, poverty and joblessness, which reinforces Schiff's points.
As Schiff says at the end of his article:
"Since our leaders cannot even grasp this simple economic concept, how can we expect them to deal with the more complicated problems that currently confront us?"

How to stop worrying about the economic crisis and learn to enjoy life.

The weekend passed off peacefully enough. My friend from Hungary, the Ex-banker, arrived off the overnight train on Saturday morning.
He was immediately met with how things work here - and how economics is taking over from dogma.
I had booked him into a hotel and paid for the room a couple of days previously. The hotel had no other guests showing.
We went to check him in to be told that we would have to wait - go and have breakfast. We did, and returned to the desk.
With great regret the clerk told us the hotel was full, that the reservation wasn't in the system, and I could have my money back.He did opine that a room might become available later, but in the meantime he would book my friend into another hotel.
Somewhat miffed, I had little option but to agree, and took the Ex-b up to the office/flat for a shave and teeth clean. I set Alin on the detective trail.
He reported back that the hotel had received a request on Friday for 24 rooms ( that's what it has, one of the biggest in Sighisoara) and we weren't the only people who had been shifted - two other couples had been told they had to leave on the Saturday morning despite being there on Friday night.
Faced with having a full hotel from a continuing potential partner or a few odd residents, the hotel took the correct economic decision. It does show how Economics is, in general, not a moral science...
The Ex-b was here to look over land I had lined up as suitable for a fund he was promoting called (surprisingly) Romanian Land Company, rather along the lines of Black Earth Farming but on a very much smaller scale. He had visited the area before as a tourist but was now looking at it with the cold eye of a banker.
Fortunately, the sparkling weather had held and we were able to see rolling fields in blazing sunshine under a fantastic blue sky. Even he was moved by the baby storks demanding to be fed.
The Mayor had insisted we visit him in his office ( he likes to welcome people there surrounded by his Mayoral accoutrements - and every conceivable type of alcohol). Of course he had a purpose - there was a farm for sale and he wanted to show it to us. Naturally, we took the time to see what could only be described as a wreck. It had been a collective cattle farm, now reduced to some dilapidated buildings and 5 hectares.The asking price of Eur 200,000 dropped to 50,000 when we expressed incredulity ( No no, I get mixed up with the old money) to the owner. Iwould guess there is at least another zero to come off.
But we had done what was required, and repaired to the Mayor's house where the Government accountants were expected for a meal before starting work the next day.
You may recall Elena was looking particularly Russian doll-like, and Alin had said I would understand the attraction when I met the accountant.
He was another overstuffed Russian doll, but male. The two of them together would perfectly match. I of course got the giggles and had to hide in the loo until they wore off.
We had an excellent meal ( the chicken noodle soup was of the very highest order) with many toasts and expressions of undying friendship, even from the accountants.
The Ex-b, who I had warned to drink slowly and with lots of water, hadn't entirely believed me, but I could see his eyes glazing over as more and more food appeared with more and various different bottles of wine, tuica, liqura de padura and so on, and it became obvious we would need to get him home.
I whispered to Alin to say he had had a call from Andrea ( who is pregant) and that we would, sadly, have to leave. Alin played his part perfectly - the only slight difficulty was getting the Ex-b to his feet, but soon enough we were heading home with Ex-b happily babbling away.
I couldn't say I was that much better, but at least I was able to get into bed myself.
And we never did pay for the two breakfasts.......