Wednesday, April 11, 2007

The Reagan Economy Just Keeps On Buzzing Along

Do you know who Larry Kudlow is? He's that wild and crazy talk show host of Kudlow and Company. Here and elsewhere Larry provides insights into everything having to do with the economy and stocks. A couple of months ago he wrote this essay, and surprise, surprise, it has not been widely reported upon. The title: "It's the Reagan Economy, Stupid," wherein he clearly points to the things done in the Reagan years as revolutionary and producing the longest period of economic prosperity in the 20th Century.

More evidence of the Reagan-induced boom comes from Michael Cox, an economist at the Dallas Federal Reserve Bank and co-author of the brilliant new book The Myth of Rich and Poor. Cox recently calculated that since the dawning of Reaganomics 18 years ago, the U.S. economy has slumped into recession for just 6 of the last 200 months, or a mere 3 percent of the time. That is an almost unprecedented stretch of growth considering that historically the U.S. economy has been in decline one-third of the time.

What did Reagan do that resulted in such change?

It was Reagan's supply side economic ideas -- the policy of marginal rate tax cuts, a strong dollar, trade globalization (the Gipper started NAFTA with a U.S.-Canadian free trade agreement), deregulation of key industries like energy, financial services and transportation, and a re-armed military -- all of which unleashed a great wave of entrepreneurial-technological innovation that transformed and restructured the economy, resulting in a long boom prosperity that continues to throw off economic benefits to this day.
So, what next? I predict we are already in a slower period (truckers are complaining, a leading indicator), and we will start to see increasing unemployment (we are basically at full employment now.) However, unless there is a major catastrophe, the Reagan Boom should continue on and on.

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