The Greatest Story Never Told
Conservation economic stalwart Larry Kudlow continues as a nearly lone voice in the wilderness of economic nay-sayers. Today he has posted more great news about the robust American economy, including that consumer sales are up.
Retail sales came in at 1.4 percent for July, way above Wall Street expectations, while core sales excluding autos, gas, and building materials — a number that feeds directly into GDP — increased 0.6 percent. Over the past 3 months core sales rose 6.7 percent at annual rate, and in the past year they’re up 7.4 percent. Excluding autos alone, sales have gained 9.2 percent in the last 12 months. That’s big time.
Even better news is that business capital expenditures are likely to explode:
The cult of the bear will also be wrong on business capex spending. American businesses have even more cash on hand than consumers, bolstered by second-quarter profits that came in 4 or 5 percentage points above estimates. Even though business equipment and software investment declined 1 percent at an annual rate in the second quarter, it rose 15.6 percent in the first quarter. Averaging the two gets you 7.3 percent business capex for the first half of the year, and 6.9 percent for the last four quarters. Pretty hefty.
Larry is, of course, correct in noting that our current economic happiness was forged by Ronald Reagan and his revolution in the tax structure.
Exactly twenty-five years ago, Ronald Reagan signed into law the first supply-side tax cuts since the JFK plan of the early 1960s. By reducing high marginal tax rates, Reagan transformed the American economy and opened the door to two-and-half decades of prosperity. Economic behavior responds significantly to the incentive power of low tax rates that raise the after-tax return on work, investment, and risk-taking.
The self-loathing demand-siders have yet to find an adequate response to the Reagan revolution, now 25 years hence.