https://www.wsj.com/articles/party-like-its-1983-11591560625
“In the grip of the world-wide recession, we must all stick to anti-inflationary, high-productivity policies that adapt new technology, retrain workers, and increase efficiency.” Who said that? Donald Trump? Angela Merkel? Emmanuel Macron? Nope, that was Ronald Reagan in May 1983, speaking on the eve of the Williamsburg Economic Summit of Industrialized Nations.
Now, the off-again, on-again Group of Seven meeting scheduled for June is off until September at the earliest. Too bad. It’s needed more than ever. I spoke with Larry Kudlow, director of the White House National Economic Council and the so-called Sherpa of the meeting’s agenda, and asked what his pitch will be. “It’s the Reagan playbook,” he says. “In some sense, it’s very easy. The same principles apply. You want to reduce tax rates, generate incentives, reignite the animal spirits, and deregulate to remove business obstacles.”
Without Reagan’s principles, the capital investment and innovation since 1983 might still have happened, just more slowly. We’d be getting that original iPhone right about now, delaying improvements in everyone’s living standards. Wait, no Uber?
More than 42 million Americans have filed jobless claims since mid-March, and around 21 million are now unemployed. We need jobs, badly. After the first wave of rehiring, Mr. Kudlow insists, “you must reignite growth—you must. Your car battery is dead because you haven’t used it in three months, so you have to pull out the jumper cables and reignite the battery, which is what we are trying to do with the economy.”
In 1983, the U.S. economy had just gone through the ravages of Paul Volcker’s inflation-slaying recessions. Now it’s zero inflation and lockdowns. Do we need another giant stimulus package? Mr. Kudlow thinks not: “The first tranche was rescue, cash, liquidity, survival. Now we’re transitioning through the reopening, and the third leg has got to be growth incentives. That’s been my mantra internally, and we’re going to press that at the G-7.” He prefers a payroll-tax holiday and capital-gains exclusions for investments through the end of the year.
“On trade,” Mr. Kudlow goes on, “Potus’s vision has always been to go to zero tariffs. His favorite word on this has been ‘reciprocity.’ If Europe has a 10% tariff on cars, which they do, and we have 2.5%, they should come down to 2.5%—or zero. The playbook is going to be very similar to Reagan’s.”
As in 1983, Mr. Kudlow says, “the message is the same: growth, taxes, deregulation, trade.” He’s right, but will it resonate? “Macron cut the corporate tax in France, unfortunately phased in. Germany has a pretty deregulated labor market. Britain has relatively low tax and capital-gains rates. But there’s no Reagan figure, no Reagan model for the EU. There never was.”
Who gets it? “BoJo,” he says, the U.K.’s Boris Johnson. “I have said to him, ‘I’m all for Brexit. It’s Magna Carta 2.0. You can liberate Britain, but you have to make Britain a great investment haven, like Singapore or Hong Kong before the Chinese took over, and you’ve got to cut your tax rates as much as possible to attract capital.’ ” It hasn’t happened yet, I point out. “So buy America,” Mr. Kudlow quickly adds.
But we can’t do it ourselves, I say. He disagrees: “I think we can do it ourselves. I think we always have done it ourselves. The U.S. drives the world economy; it doesn’t drive us. In the Reagan years it was the same. Everyone said the rest of the world would drag us down. Not true. That’s why we run trade deficits, which the president doesn’t like, but it just means we’re growing faster than they’re growing. We’re importing capital.” I appreciate the eat-my-dust mentality, but we’re all better off if the rest of the world—the G-7 and beyond—participates.
“The best scenario,” Mr. Kudlow explains, “would be that the U.S. and the U.K. maintain the Reagan playbook: lower tax rates, lower regulation, steady currencies, supply-side incentives for future growth, including a free-trade deal.”
The stock market is up 46% off its coronavirus bottom and down only 5% for the year, confounding investors and CNBC anchors alike. It’s obvious the market is assuming a robust recovery driven by synchronized global growth, but that doesn’t happen magically. I think the world needs the Reagan playbook again, instead of crony industrial policy or boondoggle infrastructure spending, else those market gains evaporate.
Can Mr. Kudlow transfer the 1983 Williamsburg Summit Reagan playbook to the expanded roster of countries meeting in September? “There’s only one guy at both meetings,” he says: “Me.” Hope for similar results.
