Sunday, September 8, 2013

Conrad Black's Richard M. Nixon: A Life in Full 15

For my blog post today on Conrad Black's Richard M. Nixon: A Life in Full, my focus will be on President Lyndon Johnson's handling of the economy.  What follows are some things that Black says about that issue:

Page 477: Lyndon Johnson "rammed through the measures, and spent and spent until the red ink was ankle-deep, though nothing the country could not handle."

Page 478:  "Johnson appears to have surmised that he could conduct a limited war without it interrupting his War on Poverty...while cutting taxes, making the social safety net leakproof, and advancing civil rights."

Page 505: "The tax cuts produced revenue increases and a briefly balanced budget, an isolated event in decades of deficits."

Page 520: "Johnson "was the nation's greatest tax-cutter, except for possibly Calvin Coolidge, and its greatest budget-balancer since Coolidge..."

So which was it?  Was President Lyndon Johnson someone who tried to have his cake and eat it, too: one who thought that the government could somehow spend more on domestic programs and the Vietnam War, while cutting taxes, with the result that Johnson spent the U.S. into the red?  Or was Johnson a budget-balancer, whose tax cuts (presumably the Revenue Act of 1964, which he signed into law) increased revenue?  As is often the case, there is probably an element of truth in both narratives.

A while back, a liberal blogger wrote a post arguing that the economy often does better under Democratic Presidents than it does under Republican Presidents.  As a conservative at the time, I replied that there are Democratic Presidents who enact conservative economic policies, and there are Republican Presidents who enact liberal economic policies.  Kennedy and Johnson, for example, had tax cuts.  But George H.W. Bush, a Republican, cooperated with the Democratic Congress in raising taxes.  The fact that Democratic Presidents often preside over a better economy than Republican Presidents does not prove that liberal economic policies are better than conservative ones, I was arguing.

In retrospect, I think that my point was legitimate, but things are probably more complex than I assumed.  There are times when the same President can support a conservative economic policy plank one day, and a liberal economic plank on another day.  Ronald Reagan, for instance, helped to enact a generous tax cut, but later he supported tax increases.  Moreover, there are disagreements about whether or not certain policies are even damaging to the economy.  There are conservatives who love to blame the recession under President George H.W. Bush on his tax increases, but at least one economist argued that Bush I's tax increases got the deficit under control and contributed to the economic boom that would later come under President Bill Clinton.  Which ideology about the economy produces a better economy?  What policies work and don't work?  I suppose it depends on what factors one wants to consider, and where one wants to look.

But on to the economy under Lyndon Johnson!  Did Johnson's Presidency prove that tax cuts lead to a better economy and increased government revenue, confirming the supply-side doctrine?  Well, I'm not going to dogmatically say one way or the other, but I would like to present some factors for consideration.  First of all, while the national debt did not increase that much under President Lyndon Johnson, this article attributes that to Johnson's ten percent tax discharge, as Johnson sought some way to pay for both the Great Society and the Vietnam War.  Although Johnson was responsible for a generous tax cut, he also believed that there needed to be a tax to pay for some of the spending that Johnson wanted.  Second, some have argued that Johnson's balanced budget was a numbers gimmick: that Johnson actually had a deficit, but he was hiding that by counting in the overall budget the money from the trust programs (i.e., Social Security).  See here , here, and here.  Third, inflation increased under President Lyndon Johnson, and there are arguments that this was because tax cuts and increased government spending resulted in more demand, which surpassed supply (see here).

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