I have been reading about fiscal policy under Ronald Reagan in my father’s splendid book, Presidential Economics. What I have learned or re-learned is that Reagan was confronted with a giant problem in his 1980 campaign.
The problem was budget deficits from the Johnson/Nixon/Ford/Carter years along with high inflation and a stubbornly high unemployment rate.
The conventional economic advice called for raising taxes or monetary restraint to lower the inflation. But the problem there was that those measures would almost surely also generate higher unemployment.
Along came what my father calls “the economics of joy,” which was supply-side economics. This promised that lowering taxes would create so much more labor in the economy and so much higher productivity that employment would grow, output would grow, and everything would be taken care of without having more unemployment. Also, the supply-siders said that lower taxes would raise output so much that the budget deficit would disappear as higher economic output generated more tax revenue at lower rates.
My father does some math to show that the supply-siders’ hoped-for addition to hours worked would have been basically impossible on a scale sufficient to balance the budget or offset the lower tax rates. There just were not enough hours in a year to do it.
However, Presidents are not supposed to delve into small details and so Mr. Reagan thought that the supply-siders were right and he got a major tax cut passed.
The result was worse unemployment and larger deficits.
However, Ronald Reagan was a highly intelligent, adaptive President. He raised taxes, signaled his intention to raise them enough to keep the budget deficit under control, and the economy revived magnificently. Alas, the deficit problem was very far from being solved.
Anyway, I was reading about all of this when my wife burst into the room (at about midnight) and said our son, the recent father, had an allergy problem and she had to drive over to his apartment to bring him some medicine. I asked why he, a strong 23 year old, did not come over to get it himself and she said he was tired from caring for his baby.
So, off we went in the midnight hour to bring our son his medicine. Yes, I went with her.
I felt sort of queasy about it. But I thought that if this happened to Peter Flanigan, a gentleman and a hero, he would not let his wife go out in a big city at midnight by herself (although our son lives in a fine neighborhood about five minutes from us). So, I went out with her and soon we were done with our errand.
But the transition from taking in data about economic policy to taking medicine to our son seemed a bit sudden.
A spectacular visit to Malibu. I gardened in my pitiful way, heaping Miracle-Gro on the jacarandas and then watering them. No matter what I do, those trees do not get the magnificent blue blossoms I love so much — while the jacarandas I do not fertilize do get them. However, the ones I fertilize have grown amazingly tall, and that’s nice.
I filed and read more about economics. Then I lay down in my bed, minus my Brigid, the love of my life. It was lonely. When I awoke, it was dark except that when my eyes adjusted to the lack of daylight, I could see millions of stars and a glowing, immense half moon. The stars in Malibu are far brighter even than the ones in Idaho. I will have to ask Wlady how the stars are in Santa Barbara.
Frankly, I am getting old and tired and cannot handle all of the homes I have much longer. Maybe I will sell them all and just live with my big wifey in the one in Malibu. No swimming pool, but we can get one put in. Then it would be perfect.
I drove home to Beverly Hills about midnight. I started listening to a report on the BBC about the increasing religious control of Turkey. Then I realized I will never go to Turkey so I switched my great Sirius XM to love songs of the 1950s. I imagined doing to fox trot with some beauty in my Junior High, maybe blond and stupefyingly beautiful Mary Lou Gurick (or did she even go to my Junior High?), and soon I was home. Wow, I knew her as a classmate about fifty years ago. Wow. I got home, swam very late, under the stars and palms, showered, then watched Asian rap groups on M Net, my new favorite channel, and then to sleep. I dreamt I was sitting in on Mr. Obama’s cabinet meetings and young kids were skateboarding on the ceiling of the Capitol Dome, hanging upside down like bats, held up by a mysterious device with green and blue lights like the lights on the bow of my Cobalt.
Chaos. The stock market is way, way, way down today. People are screaming bloody murder. The media is, as usual, selling panic and desperation, exactly opposite the way investors should behave. Calm and cool makes people rich.
CNN called to ask me to be on. I cheerfully agreed and ran into my old pal, Jeff Bridges. He looked cheerful. He was being interviewed by Piers Morgan right across from where I was being made up. Piers did not look cheerful at all or even look up from his notes.
I was interviewed by a great guy named Tom Foreman.
Here is what I said:
The Dow was about 6500 (very roughly ) in early March 2009. After today’s drop, the Dow is at 11,383, a rise of almost 80 percent from March of 2009. Not much to complain about there. Plus, the Dow after the close is about where it was last winter in November or December. No one was complaining then. So, at least so far, it’s not so bad.
It will probably get worse. The new agreement with Mr. Obama and Congress provides zero new stimulus to the economy. Mind you, the deal had to happen because the national debt is far too high. But where the stimulus comes from now is a bit hard for many to see. I personally view it as coming from the ingenuity of 308 million Americans or maybe a few million fewer than that. But it is going to be a slow ride back up. Patience and adaptive behavior. Those are the keys.
Then the Eurozone is in trouble. But Germany and France are the keys to that and they are doing fine. I never got why they had to do the whole Euro thing anyway. Why did they need it? And why do we care if the Eurozone breaks up? How much do we export to Greece anyway? Or Portugal? And there will still be great companies in the Eurozone we can buy stock in. Still, it depresses me when the market crashes.
I was feeling pretty low about the whole thing until I heard a 1960s song about a man whose wife dies. I cannot recall the name of the song but it’s by someone named Bobby Goldsboro. I think it’s called “Honey, I miss you.” I started to sob as I cruised along Elevado in Beverly Hills.
The song and my reaction to it made me realize that as long as I have my wife, I am the richest man on this planet. Just her smile is worth as much as Berkshire-Hathaway.
I don’t know what the future holds for the Dow. I do know that I am going to treasure Big Wifey for as long as God lets me have her.