4 March 2016

Forgotten man: What the election is all about


Remember the “forgotten man”. He is the man who works, votes, “generally prays” and “always pays”. He was made famous by the economist William Graham Sumner years ago and more recently by my wife, Amity Shlaes, in her book The Forgotten Man. And he is about to emerge at the center of the coming campaign, which is going to be about economic growth, jobs, taxes, and the forgotten man — and woman.

This was hinted at by Donald Trump in his post-Super Tuesday press conference, when he talked about jobs growth and taxes. And he is doing that as America is waking up to the realization that we have just come through what CNSNews calls “a record 10 straight years without 3 percent growth in real Gross Domestic Product.” Whatever else can be said in respect of the candidates, the collapse of the American growth rate has been the principal marker of the Obama presidency.

The figures CNS News was citing are from the Obama administration itself, namely the Commerce Department’s Bureau of Economic Analysis. It recently raised its estimate for growth in the fourth quarter of 2015 to an annual rate of 1% from the 0.7% it had been using as an advance estimate for the annual rate in the fourth quarter. In other words, as the Obama administration sets out on its last year, there are no tailwinds to the Obama economy.

So how is this going to impact the debate that is about to erupt in respect of the general election. My own guess is that it will be harder to predict than one might guess at an early blush. In 2011, the New York Times published a ranking of recent presidents by growth. Obama’s presidency, then calculated at an average growth of 1.2%, was the worst among all presidents since JFK. But George W. Bush, at 1.6%, was the second worst.

W’s father was third from the bottom, with Presidents Eisenhower and Nixon fourth and fifth from the bottom. Of the top five, Jimmy Carter, at 3.2%, was the worst, while President Reagan, at 3.5%, was fourth. So if Hillary Clinton is cornered on this head, she will be able to reply that the growth champions of the full post-World War II presidencies were all Democrats — Bill Clinton at 3.8%, Lyndon Johnson at 5%, and John Kennedy, at 5%.

That’s not going to end the debate, though. It’ll just get warmed up. The Republicans can turn around and claim Bill Clinton’s growth record as their own — that is, as the full flowering of the great boom that was ignited by President Reagan with his supply-side cuts in the top marginal tax rates. And the GOP will be sure to point out that the astonishing record of growth under JFK and LBJ came after Kennedy put through his own supply-side tax cuts.

In the coming campaign, it’s unlikely that the centerpiece of the tax debate will be over income tax rates. It’s more likely to be over capital gains rates and the corporate tax rate. Economist Lawrence Kudlow, who worked for Reagan, focuses on the need for an across the board corporate tax cut — a 15% tax rate for big corporations and personally-owned corporations.

This was foreshadowed by Donald Trump in his press conference after the votes came in on super-Tuesday. Trump, when he got to growth and taxes and the need to bring American corporations home and keep the jobs here, quoted Kudlow by name as reckoning that Trump has the right plan. It is not my intention to make herewith an endorsement, merely to predict that it looks like we are heading into a campaign in which growth is going to be the key issue.

The most important words in Trump’s press conference were: “The middle class has been forgotten in our country.” Hillary Clinton will not be out of this debate. The “defining economic challenge of our time,” she has said, is to “raise incomes for hardworking Americans so they can afford a middle-class life”. Kudlow argues that the biggest beneficiary of an across the board business tax cut would be the wage earning middle-class American. What they’re all talking about is the forgotten man.

Seth Lipsky is editor of the New York Sun.