Presidential Candidates Ignore the 5th Element For Economic Growth
- R. Collier Jr- Today’s candidates for the White House have announced the economic platforms of their campaigns, and among the Republican candidates who are trying to gain traction in the face of Trump’s poll numbers and celebrity, the fare is rather light when you consider that they either give scant attention to or ignore the fifth element of economic growth- monetary policy.
It may not be a terribly interesting issue, but money is everywhere and drives everything, so why wouldn’t one make money, how it is valued and managed, THE central aspect of your economic platform IF you, as a candidate, are truly serious about real and sustained growth for everyone?
I recently attended a summit in Jackson Hole, Wyoming (put on by The American Principles Project who, full disclosure, sponsored my trip to the event), in which leading luminaries of the free market and of monetary policy focused on the issues and problems of monetary policy as enacted by the Federal Reserve. The focus was on economic growth, or, rather, the desire and need to re-stimulate economic growth and to discern the impact of a central bank, like the Fed, on economic growth.
It is true that economic growth which includes all sectors and most all people is a key factor for ending problems ranging from poverty to the deficit, to national debt, and even our imbalance of trade. Growth that is productive and that reaches into every home sustains many advances. As former President John Kennedy said, “A rising tide lifts all boats.”
There are five major elements that impact economic growth
Under Reagan and Clinton, George W and Obama, we did not have major operational difference in ANY of these elements of economic growth except for ONE, the fifth element, monetary policy.
Under Reagan and Clinton we had 4% annual growth. Under George W and Obama, 2% or less annual growth (George HW raised taxes which, it can be argued, drove us into a recession).
From “The Great Moderation” under the Fed, which reigned during the Reagan-Clinton years, we went to a boom and bust cycle after 2000. Average Americans prospered, as did the wealthy. Since 2000, the wealthy may have gone from boom to bust to boom and back again, but average Americans went from doing OK, to not doing OK, to doing poorly, to even worse and, finally, to near hopelessness.
If the economy is a fire that we want to keep burning in a manner that keeps us warm from the “elements” of poverty, without burning our house down, then money is like oxygen. Too little oxygen and the fire goes out, too much and the fire gets out of control (you get things like massive inflation that burns the house down).
Monetary policy, how we manage money supply through things like interest rates and the amount of currency in circulation, is not only the fifth element of economic success, it has been the only element changed in an operational and substantive manner since the Reagan-Clinton growth period (The Great Moderation) and thus is THE lead suspect behind the dramatic fall-off of growth (shall we call it The Great Regression?) since 2000 during the Bush-Obama malaise. In fact, 2% growth is really 0% growth per capita because our population grows by 2% a year. (If you want to see real wealth increase, you need an economic growth rate higher than the population growth rate.)
Think of it like this: if we had the extra 2% growth for the last 15 years most everyone, like YOU and me, would have 30% higher incomes, 30% more real property wealth, 30% more in our 401k’s and retirement plans, and 30% more money in the bank.
And yet, for all that, today’s Presidential candidates are focused on the other four elements, while none of them are seriously talking about the Federal Reserve and monetary policy. As John Fund said at The Jackson Hole Summit, “it (the Fed) is the dog that didn’t bark.” Indeed, nobody is barking about monetary policy- how we value the dollar and manage the supply of money.
Where is Ted Cruz? While Rand Paul has touched on this, he has not made it central to his economic platform. The same can be said of them all- monetary policy is the one major change in all economic factors from 2000 that has led to 15 years of economic malaise, therefore, addressing this should be THE central issue of this campaign.
The candidate who can address this with something rational and workable and who can articulate this will rise, even above the heights of mere celebrity.