Free Enterprise in Three Minutes with Ray Keating – Episode #142: What is Stagflation and How to Fight It? – Ray Keating explains what stagflation is, when and how we dealt with it before, and the economic policy lessons for today. And all in roughly three minutes - wow! Tune in.
by Ray Keating
The Keating Files – June 25, 2021
The phrase “trickle-down economics” gained prominence as a derogatory phrase hurled at supply-side economic policies of the 1980s by political opponents of President Ronald Reagan. However, it actually has a longer history, going back at least to the 1920s, again, as a way of attacking supply-side-oriented policies.
The trickle-down slur meant that across-the-board tax cuts benefited the wealthy at the expense of others, with perhaps a few benefits eventually trickling down to lower income groups.
The trickle-down attack gets dragged out time and again by those opposing tax relief and/or arguing for higher tax rates. For example, one member of a group of high-income individuals looking to raise taxes on themselves and other wealthy people, asserted in a recent op-ed at TheHill.com (“Why Biden's proposed marginal tax rate increase isn't enough”) that the “Reagan-era tax cuts and trickle-down economics … led to the massive income inequality that we see today.” How so? Well, that’s not explained, it’s just merely asserted.
I always find wealthy people who want to pay more in taxes, and demand that other high-income individuals pay more, interesting. Why? It’s clear that they love the idea of large government in a simple-minded way, while failing to grasp economic realities. For example, they completely miss the economic fact that wealthy individuals who invest or spend their own money will do far more for others than if those dollars were handed over to politicians and their appointees.
Think about it. Wealthy individuals have the resources to invest in new and/or growing businesses, and in turn, in creating goods and services desired or needed by others and employing people.
But what about the rich person who simply spends his money on forms of conspicuous consumption, like buying a bigger yacht? Well, who builds those yachts, and supplies the various materials and parts that go into such yachts? That’s right, it’s people up and down the income scale, including small business owners and their employees.
Indeed, high-income earners play a crucial role in the economy by accumulating wealth and thereby being able to invest in entrepreneurs, ideas and businesses, and therefore, in the investments, technologies and innovations that drive productivity, income and job growth. That’s not trickle-down economics. That’s just economics.
Meanwhile, raising taxes on upper-income earners in the hopes that government, run by politicians, will do something positive with tax dollars amounts to little more than going to the racetrack and putting a big wad down on longshots all day long. It’s gambling, with probably fewer payoffs than at the track.
After all, the incentives at work in government are not conducive to positive, productive outcomes. Politicians and bureaucrats spend other people’s money on programs and projects rooted in political incentives, and special-interest pressures and lobbying. For good measure, when something fails in government, the most likely result is that such failure is rewarded with more money and a larger staff.
Indeed, when you actually think about how government works, those who push for higher taxes and increased government spending – two central points of the Biden economic agenda – are engaging in true trickle-down economics. That is, dollars are sucked away from productive private-sector enterprises, handed over to politicians and their appointees, and one is left hoping that the economic damage will be limited, and that some sort of benefits might trickle down to the individuals that politicians presume to be helping. That’s all about politics, with little evidence of any economic thinking occurring.
In the end, supply-side economics is about providing relief from government burdens – such as through lower tax rates, reduced regulation and free trade – so that entrepreneurship, investment, and economic, income and employment growth can flourish. That’s the antithesis of trickle-down economics, or to use a different phrase, the antithesis of Biden-omics.
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Ray Keating is a columnist, novelist, economist, podcaster and entrepreneur. Keating has three new books out. Vatican Shadows: A Pastor Stephen Grant Novel is the 13ththriller/mystery in the Pastor Stephen Grant series. Get the paperback or Kindle edition at Amazon, or signed books at www.raykeatingonline.com. Past Lives: A Pastor Stephen Grant Short Story is the 14th book in the series. Get the paperback or Kindle edition at Amazon, or signed book at www.raykeatingonline.com. And the 15th book in the seriesWhat’s Lost? A Pastor Stephen Grant Short Story is available, again, at Amazon.comand signed books at www.raykeatingonline.com.
The views expressed here are his own – after all, no one else should be held responsible for this stuff, right?
You also can order his book Behind Enemy Lines: Conservative Communiques from Left-Wing New York from Amazon or signed books at RayKeatingOnline.com. His other recent nonfiction book is Free Trade Rocks! 10 Points on International Trade Everyone Should Know.
One of the best ways to enjoy Ray Keating’s Pastor Stephen Grant thrillers and mysteries is to join the Pastor Stephen Grant Fellowship! For the BEST VALUE, consider the Book of the Month Club. Check it all out at https://www.patreon.com/pastorstephengrantfellowship
Also, check out Ray’s podcasts – the Daily Dose of Disney, Free Enterprise in Three Minutes, and the PRESS CLUB C Podcast.
Check out Ray Keating’s Disney news and entertainment site at www.DisneyBizJournal.com.
by Ray Keating
The Keating Files – December 4, 2020
(Editor’s Note: Much damage has been inflicted on conservatism, conservative thought, and the conservative movement in recent years. The effort to heal, rebuild and re-energize conservatism promises to be a difficult, but necessary undertaking. The Keating Files will regularly weigh in to help that process. This is our first “Rebuilding Conservatism” column, and it comes from the opening to my book Behind Enemy Lines: Conservative Communiques from Left-Wing New York.)
To call oneself a “conservative” in recent times – particularly during the era of President Donald Trump – actually requires a not-so-insignificant amount of clarification or qualification. While there always have been differences of assumptions, opinions and policies within the modern-day conservative movement, a shattering of conservative consensus either occurred, was exposed, or was completed during the Trump era.
However, many conservatives, including myself, still subscribe to and believe that the conservative consensus that began to form after the end of World War II, and arguably reached its height during the presidency of Ronald Reagan, still very much matters, and is critical to the future well-being of the United States and the world.
So, my brand of conservatism, for lack of a better phrase, is traditional, American and Reagan-esque, firmly rooted in Judeo-Christian values, Western Civilization, the Declaration of Independence, the U.S. Constitution, and some essential ideas and institutions, such as the Christian Church, the intrinsic value of each individual, the role of the family, freedom and individual responsibility, limited government, and free enterprise and free markets.
As a first step in exploring this brand of conservatism, following is a brief essay I wrote in response to a request from the office of Michael K. Deaver, who served as President Reagan’s deputy chief of staff from 1981 to 1985. Deaver or his people reached out to me, and many others, in 2005 for essays on how each of us became conservatives. The book was eventually published under the title Why I Am a Reagan Conservative, with the number of essays reduced sharply. My conservative journey, if you will, along with those of many others, failed to make the final cut. Deaver’s book wound up focusing on the “biggies” of conservatism and the Republican Party at the time. But here is what I wrote:
A Conservative’s Personal Journey ... as of 2005
I’m always fascinated by the stories of people who started out as communists, or some other version of the left-wing radical, only to eventually become rock-solid conservatives. My own journey to conservatism wasn’t as dramatic. But perhaps there is something valuable in its very commonness.
It was a story that started out as a young man with few convictions, not unlike many young people in recent decades, and generally self-absorbed. Sports really ranked as my sole passion. But that began to change when I actually started to use that education my parents had paid for since first grade.
Of all places and against long odds, I became a conservative while attending classes in academia.
My undergraduate days were during the administration of President Ronald Reagan. As one can imagine, Reagan was not a favorite with my professors. Except one. I was fortunate to have an economics professor who grasped how the economy worked. Trust me, that’s unusual. He explained the success of Reagan’s supply-side economic policies, and how much of a surprise this was to many in the economics profession.
Supply-side economics made sense given its emphasis on the role of each individual and firm in the economy, and the impact incentives have on economic decision-making. From this foundation, policies of low taxes, a light regulatory touch and smaller government made sense. I wound up writing my undergraduate thesis on supply-side economics, and survived as a supply-sider even through graduate school.
However, economics was only my opening to conservatism. The learning process continued in the areas of national defense, the culture, and social issues. The conservative philosophy emphasized freedom coupled with individual responsibility, the need to defend the country against enemies both internal and external, a robust respect for human life, and a fundamental understanding that we can benefit from wisdom handed down throughout the ages.
All of this made sense to me. But it was when I came back to and was able to more fully understand my Christian faith that I came to see an even deeper wisdom of conservatism. I had grown up in a Roman Catholic household, and every school I attended up through my undergraduate degree had a “Saint” at the beginning of its name. Nonetheless, I wandered from the faith in my teenage years, and while never becoming an atheist or agnostic, I’m ashamed to say that I just did not think about God much at all.
God worked on me, though, including through my wife, and I emerged with a much deeper faith than I could have imagined previously. I became a Lutheran. Unable to stomach the liberal leadership of the Evangelical Lutheran Church in America (ELCA), it was the Lutheran Church-Missouri Synod (LCMS) for me. And though the LCMS has its problems, such as an isolationist streak among a vocal minority, this is a church committed to traditional, biblical, confessional Christianity.
Lutherans also have a strong sense of the sinful aspects of human nature. As it turns out, so does conservatism.
Conservatism is rooted in realism about mankind’s capacity for both good and evil. The main political philosophies that contend with conservatism in the U.S. today – libertarian and modern-day liberalism – fail to fully grasp the evil in human nature. Hard-core libertarians, therefore, see little need for government. Meanwhile, liberals go in the opposite direction, and see no reason to limit the size and reach of government.
For those of us who acknowledge the sinful aspects of human nature, conservatism makes sense as a political philosophy. It recognizes the need for checks and limits.
The state, as a result, should not be allowed to grow large, for if it does, the incentives in government to build up budgets, payrolls and power lead to waste, sloth, corruption, varying evils, and sometimes horrendous atrocities.
When it comes to the economy, conservatism emphasizes that free markets work best, with government focused on protecting property rights, enforcing contracts and guarding against fraud. Why? Because no matter what one’s individual economic motivations might be in the marketplace, true, lasting success only comes if one creates or meets a demand of others. In socialism, the few in government dictate to the masses. In a free enterprise system, entrepreneurs and businesses must work, invent and innovate to please consumers.
Given the dark side of human nature, conservatism also places appropriately strong emphasis on government’s role in protecting life, stopping crime on our streets, and in standing up to international dangers, from communism to terrorism over recent decades.
I came to conservatism via the route of economics. I remain a conservative because of its fundamental understanding that mankind, as history has shown, can achieve tremendous good, but also can inflict real evil.
I might have concluded that essay with a nod to the sixteenth-century Christian reformer Martin Luther by adding his tagline, if you will, “Here I stand. I can do no other.” And I remain largely rooted in the same spot to this very day, with the benefit of having learned more, and thereby further deepened and clarified my thinking.
Over the past decade-and-a-half, though, the definition of conservatism has become far more muddled. In particular, conservatism has become infested by or confused with populism. But while people have long gotten sloppy with the use and definition of the term “populism,” when properly understood, it should become clear that conservatism and populism turn out to be two very different things. I say “should” because what should be understood often turns out not to be the case.
Indeed, while the Left succeeded in redefining what “marriage” means at least in terms of the law and throughout much of our culture, parts of the Right have been working on redefining “conservatism” as “populism,” or at least to have conservatism include major tenets of populism. And during the era of Trump, they have achieved a significant degree of success, such as via Republican Party politics, cable television, YouTube, and assorted commentators who either didn’t understand conservatism in the first place or simply are trying to make their business models fit with a shifting GOP base. I explained this conservative-populist confusion in an essay (“Doubts About the U.S. Still Being a Right-of-Center Country”) appearing later in this book. Here are key paragraphs:
The problem is that the term “conservative” has lost its meaning among many in the Republican Party, particularly during the era of Trump. After all, President Trump has identified himself as a “nationalist.” And his main policy positions and political rhetoric rank as “populist.” And populism is not conservatism.
While a slippery term, populism has some common threads over the decades, namely, fear of something or some groups, opposition to a vague group of “elites,” and claims of being victims. So, populists often rail against bankers and big business. Today, key populist targets are free trade, immigration, and once more, sometimes vague “elites.” Like leftist Progressives, populists seek to engage government on their behalf, for their own causes, while vehemently opposing government action for issues they oppose.
The populist outlook stands in stark contrast to what traditional conservatism has stood for and encompassed. A traditional conservative generally understands and subscribes to Judeo-Christian values, free enterprise, free markets, and a strong national defense, with key policy positions being low taxes, smaller government, a light regulatory touch, strength in foreign policy and national security, free trade, and a social policy agenda led by being pro-life and pro-traditional marriage. Conservatism embraces freedom and personal responsibility, as well as compassion and charity. Conservatism views government in Madisonian terms, that is government more or less is a necessary evil that must be limited to basic duties, such as protecting life, limb and property. Conservatism certainly doesn’t accept the populist/Progressive idea that “We’re all victims now,” and government needs to do something about it, whether that be imposing protectionist trade policies, or breaking up large technology companies that populists fear or with which they disagree.
In the end, populism has more in common with Progressivism than conservatism, and yet, most populists today identify as conservatives.
Looking back on that 2005 essay regarding my journey to conservatism, if written today, I would have placed greater emphasis on conservatism understanding that government exists not to grant or create rights, nor to “improve” human nature and mankind. That’s the ill-considered and often dangerous work of Progressives. Instead, as the Declaration of Independence and the U.S. Constitution made clear, government should protect the liberties and rights – natural rights – enjoyed by men and women that pre-exist government, if you will; and should allow individuals, families and assorted enterprises and institutions – such as the Church and free enterprise – to function, teach, empower, advance, create opportunities, enlighten and serve in an expansive private sphere.
Conservatism, in the end, speaks and acts in and to both the public and private sectors, but certainly not in the ways of Progressivism and populism. Progressives and populists occupy the ground of paternalism, each turning to government with different demands. Progressives demand that government control and mold society, culture and individuals, while populists demand that government do something about whatever or whomever they view as undermining them and what they value. And both groups seem incapable of fathoming the damage that this kind of government can, and inevitably does, inflict.
Thanks to conservatism’s respect of and discernment regarding wisdom handed down from the past; its realism regarding human nature and enduring natural rights; its perspective on liberty; and its optimism about today and the future as illustrated most clearly in its Judeo-Christian and free market pillars, the conservative embraces a limited government that protects liberty, once again, as exemplified by the Declaration of Independence and the U.S. Constitution, and favors an expansive sphere for private action. Conservatives should understand that government is not life, rather government should protect life, limb, property and liberty, so that life can truly flourish in that private sphere.
By the way, this explains why conservatives and libertarians, while I again would acknowledge have some fundamental differences, often find allegiance in the public square because the libertarian bias clearly is toward greater freedom.
Of course, none of this means that individuals in the private sector will necessarily embrace some other conservative ideas, values or policies. Life is anything but neat and tidy, and there always will be challenges and failures. But when conservative values falter, for example, with often grave consequences – such as the legalization of abortion or the relative disintegration of the family – it is not an argument for abandoning foundational aspects of conservatism.
For example, every conservative should be horrified when so-called conservatives dismiss or call for rolling back individual liberty and expanding government in order to advance some other aspect of the conservative agenda. Indeed, when conservative ideas or policies fall out of favor or suffer defeats, the reaction by conservatives should be to find better ways to make their case and persuade, not abandon conservatism’s core principles and ideas. Indeed, it should be the natural response of conservatives to work harder, rather than giving up, when confronted by challenges.
Conservatives should be faithful evangelizers, if you will, not sour-puss, backward-looking, isolationist populists. As President Ronald Reagan declared at the 1985 gathering of the Conservative Political Action Conference: “We’ve made much progress already. So, let us go forth with good cheer and stout hearts – happy warriors out to seize back a country and a world to freedom.”
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Ray Keating is a columnist, novelist, economist, podcaster and entrepreneur. You can order his new book Behind Enemy Lines: Conservative Communiques from Left-Wing New York from Amazon or signed books at RayKeatingOnline.com. His other recent nonfiction book is Free Trade Rocks! 10 Points on International Trade Everyone Should Know. The views expressed here are his own – after all, no one else should be held responsible for this stuff, right?
Also, choose your 2021 TO DO List planner today, and enjoy the pre-order sale! Perfect for you and as Christmas gifts. Choose between The Lutheran Planner 2021: The TO DO List Solution, The Film Buff’s Planner 2021: The TO DO List Solution, and The Disney Planner 2021: The TO DO List Solution. Get more information at https://raykeatingonline.com/t/todolistsolutionplanners
The new book Vatican Shadows: A pastor Stephen Grant Novel is the 13ththriller/mystery in the Pastor Stephen Grant series. One of the best ways to enjoy Ray Keating’s Pastor Stephen Grant thrillers and mysteries is to join the Pastor Stephen Grant Fellowship! For the BEST VALUE, consider the Book of the Month Club. Check it all out at https://www.patreon.com/pastorstephengrantfellowship
Also, tune in to Ray Keating’s podcasts – the PRESS CLUB C Podcast and the Free Enterprise in Three Minutes Podcast
Check out Ray Keating’s Disney news and entertainment site at www.DisneyBizJournal.com.
