A Kudlow Follow-Up
A follow-up to my post on Kudlow’s “overly tight money” nonsense…
On a whim, I went to google and looked up Kudlow and “tight money”…
Here’s Kudlow stating (in 2006):
A combination of tight money and tax hikes is a formula for recession. On the other hand, tight money and lower tax-rates is a tried and true growth formula–the Reagan model. History bears this out.
Is it me, or does he contradict that statement with the one I made note of the other day:
Yes, economic growth may indeed pause to roughly 2 percent in the next couple of quarters, the result of two years of overly tight money from the Federal Reserve and the ensuing upturn in sub-prime defaults and foreclosures.
Go to what he wrote… I am not quoting him selectively. There are no caveats I’m leaving out.
So here’s what’s left. On the one hand, “tight money and lower tax-rates is a tried and true growth formula”. On the other, “economic growth may indeed pause… the result of two years of overly tight money”, and we’ve certainly had lower tax rates since 2003 (and 2002 and 2001). So tight money and lower taxes is a combination that produces both faster growth and slows growth.
Here’s the way I see it:
1. Kudlow has given up his old belief in tight money and tax cuts.
2. Kudlow is now writing something he doesn’t believe and is choosing not to issue a retraction.
3. By lower taxes, Kudlow means lower taxes every single year.
4. Kudlow will write any sort of nonsense, no matter how silly.
I don’t think I’m missing any options.
I don’t buy option 1 – Kudlow holds Reagan in very high esteem, and he’s not about to suggest that what happened in the early 1980s is not a good idea. Option 2 doesn’t make sense at all. Option 3 means that there is a limit to growth – once tax rates hit zero, there isn’t much more to do. Well, maybe we could get the Skeptical Optimist to hand out money, in effect subsidizing a negative tax rate, but I suspect Kudlow isn’t looking in that direction.
Which leads to option 4. That one I buy.
Quick update… if you think the difference lies with the word “overly” – take a look at the graph I provided here. Money was tighter during most of Reagan’s term than during 2006.