News is coming in that President-elect Donald Trump is considering Larry Kudlow as chair of the Council of Economic Advisers. Here is one of his qualifications: Larry just wrote a book, with me in fact, on CEA history.
A few years ago, in my personal blog that preceded my column here on Forbes.com, I wrote a post called “Lowlights in CEA History.” It was prompted by an incredible (as in unbelievable) statement from President Obama’s CEA chair at the time, Christina Romer. Here was Romer, in words Larry and I could not resist quoting verbatim in JFK and the Reagan Revolution:
Larry Kudlow knows the CEA’s secrets
“This past year, the Council has been blessed with staff of a caliber not seen since the glory days of the CEA in the 1960s, when future Nobel laureates Robert Solow and Kenneth Arrow were senior economists and James Tobin was a member.”
Now mind you, it was Romer who was responsible in 2009 for the consensus most ludicrous prediction of the post-Great Recession era, her chart drawn up in the push for the Obama stimulus proposal showing how high unemployment would go if Congress did not act. As the years unfolded, events exceeded the worst-case scenario given the stimulus.
But what charmed Larry and me was Romer’s survey of CEAs past and putting the John F. Kennedy one on top. That’s the one in which “James Tobin was a member”—Tobin being a Yale Keynesian who after his CEA stint from 1961-62 went on to win the economics Nobel the year Ronald Reagan took office (to his great and evident chagrin) in 1981.
The thing is, Christina Romer, if you read the historical sources, you see all too clearly that JFK’s CEA remains one of the most ridiculously overhyped cliques in the modern history of government. Everybody—tout le monde, as Tom Wolfe would put it—in the vast establishment of university economics knows that JFK’s liberal economists, Tobin, Paul Samuelson, CEA chair Walter Heller, Robert Solow, Keynesians all, designed the “new economics” (that’s what they called it) where the government would goose “demand” and big economic growth would follow.
Yet here is what Larry and I found by nosing around places like the archives of the Kennedy administration. Early in his term, JFK largely accepted the advice of his CEA. These advisers said spend money big time, on all sorts of ludicrous things such as post-office construction, early mailings of veteran-benefit checks, and national-park internship programs; bail out of the Bretton Woods gold standard to allow monetary policy to become permanently loosened; and at all events keep the current income-tax structure, with rates running all the way up to 91%, while pursuing a “standby” executive authority to shave tax rates by at most five points for eighteen months at a time.
Kennedy actually did all this stuff, except for gaining the standby authority, and here is what happened. Growth in 1961 was 2.6% (less factoring out government spending), exactly the average of the previous eight years—which Kennedy had campaigned against as he ran for office in 1960, rallying voters with his pledge to “get this country moving again.” In early 1962, Kennedy maintained his advocacy of the CEA economic plan, intensifying his calls to get the mini-tax-cut standby authority.