Marquee Economists Disagree On American Recovery

Kudlow And Bernstein Politely Disagree Over America’s Economic Recovery
By Scott Benjamin


Marquee economists Larry Kudlow and Jared Bernstein strongly disagree on whether a broad tax cut in the mold of the historic Kennedy, Reagan or W. Bush packages would give the middle class a larger slice of the American economic pie.
Kudlow, who served in the Reagan Administration and has been a fixture on television and radio for years, said former President John Kennedy’s tax cut, which former President Lyndon Johnson signed in February 1964 about three months after the assassination, spurred eight years of growth at 5 percent annually.
He said President Reagan’s tax cut led to 5 percent growth annually for eight years and benefitted the middle class.
However, Bernstein, who was an economist to Vice President Joe Biden from 2009 to 2011, said after slashing taxes across the board by 25 percent starting in 1981, his first year in office, former President Ronald Reagan raised taxes 11 times.
“The correlation between tax cuts and economic growth is about zero,” he said before more than 200 people during a forum April 7 at the Ridgefield Library. “Economic growth alone will not address the problems in the economy. It comes down to how that growth is distributed.”
Tom McManus, an attorney and certified public accountant from Ridgefield, moderated the forum on national and Connecticut economic issues. It was sponsored by the Ridgefield Democratic Town Committee.
He said he has known Bernstein, a 1974 graduate of Ridgefield High School, for nearly 50 years and has been acquainted with Kudlow, who lives in Redding, for about 20 years.
Bernstein said that despite their contrasting positions, he and Kudlow are longtime friends and have debated economic issues “6 million or 7 million times.”
Kudlow said the last 15 years has been one of the worst eras of economic growth in the 240-year history of the United States. He said between 1950 and 2000 the American economy grew about 3.5 percent annually, while that figure has been at 1.7 percent per year since then.
He said tax cuts would boost the economy significantly.
However, Robert Samuelson has written in his Washington Post economics column that probably the worst domestic public policy decision in the United States since World War II was the Kennedy tax cut since it was a prime cause of the inflationary spiral that led to four recessions between 1969 and 1982.
He wrote that it also weakened budgetary discipline. Since the Kennedy tax cut was signed into law, there have been 47 budget deficits and only five surpluses, the last of which was submitted in October 2000 by former President Bill Clinton.
http://www.telegram.com/article/20130303/COLUMN68/130309952
Kudlow said all sectors would benefit from a significant tax cut.
“Economic growth is the solution to so many problems, including poverty,” he said.
Kudlow said he disagrees with the criticism that the wealthy derive too much benefit from broad tax cuts.
“When there is a recession, the wealthy lose the most money and during the recoveries, they make the most money,” Kudlow said.
Bernstein said there have been tax cuts in the last 20 years, yet it has done little to benefit the middle class who are anxiously awaiting the wage increases they used to get.
He said one of the best ways to stimulate the economy would be through a large public infrastructure program, which is long overdue and would, among other things, make it easier for delivery trucks to arrive at their destinations.
Bernstein, who is a senior fellow at the Center on Budget and Policy Priorities, said corporate profits have increased 30 percent in the recent years while middle class wages have gone up just 3 percent.
He said on an ascending scale of 1 to 10, he rates the American economy at 6.5, a far better mark than the 2.5 from Kudlow.
“We’re not in a recession,” Bernstein said. “Compared to almost every other advanced economy, we’re doing well.”
“6.5 is defensible,” he added. “The job market is tightening up. We’re adding about 200,000 jobs a month. There has been some wage growth.”
Both economists criticized American companies moving their tax address to a foreign nation to avoid paying higher corporate taxes.
Kudlow recommended dropping the federal tax rate from 35 to 15 percent.
On another topic, the economists agreed that Connecticut’s economy lags behind the national recovery, with Kudlow rating it a zero on an ascending scale to 10 and Bernstein awarding a 3.8.
State Rep. Art O’Neill (R-69) of Southbury recently wrote in the Waterbury Republican that only 74 percent of the jobs loss from the 2009 recession have been recovered and a disproportionate amount of them are low-wage positions.
http://www.rep-am.com/articles/2016/03/23/commentary/946873.txt
The state government has faced several budget deficits since the 2008 financial services crisis.
Bernstein said it appears the prime reason that General Electric is moving its world headquarters from Fairfield, where it has been since the early 1970s , to Boston is that the Route 128 corridor is an innovation hub.
University of California-Berkeley economics professor Enrico Moretti wrote in his 2012 book, “The New Geography Of Jobs,” that the Route 128 corridor, Silicon Valley in California, Seattle, Austin Texas and the North Carolina research triangle were the models for innovation hubs.
http://www.amazon.com/The-Geography-Jobs-Enrico-Moretti/dp/0544028058
He has stated that the average salary at MicroSoft in Seattle is $170,000, even including the secretaries and custodians. He has noted that with those high income levels it usually results in five additional employees being hired in other sectors of the economy for every one of the workers at the innovation hub company.
Bernstein lamented that Connecticut has in real terms reduced spending at its public universities by 17 percent since 2008, leaving a less-educated work force for its corporations.
Kudlow said the most effective stimulus would be a reduction in the state’s business taxes.
Some legislators have said Connecticut is not considered to be a pro-business state and that the Democratic-controlled General Assembly hasn’t been willing to negotiate major concessions from the state collective bargaining units for decades.
Earlier this month Gov. Dannel Malloy’s (D-Stamford) commissioners began laying off workers to address a projected $930 million deficit for the fiscal year that starts July 1.