Lawrence Kudlow - JFK and the Reagan Revolution: A Secret History of American Prosperity

F ifteen-plus years into the twenty-first century, Americans are in a sour mood. They are cranky. Unhappy. Pessimistic (something Americans almost never are). They are trashing politicians of both parties. They are looking for scapegoatsimmigrants, foreign trade, the top 1 percent, Wall Street traders, fat cats.

But if you take a step back twenty to thirty years, to the 1980s and 1990s, there was scarcely any incitement to class warfare. Whatever prejudices there were against foreigners (Japan, Inc.) were fading fast, and people were more interested in working than blaming. Americans were optimistic, psyched. The mood of the country was up.

The big difference between the years of the 2000s and the two decades before? Economic growth. In the 1980s and 1990s, the economy of the United States was growing rapidly4 percent per year for long stretches. Forty-four million new jobs appeared from 1983 to 2000, an increase of 50 percent in total employment in a good deal less than a generations time. The stock market went up fifteenfold. The effects were felt broadly: savings and nest eggs grew enormously as the average family became a fifth again as rich in 1999 as compared with half a generation before. If these well-established trends had held, untold prosperity would have settled in as the permanent condition of the American people in the twenty-first century.

That boom, immense and extended as it was, did not, of course, last. Since the peak year, 2000, economic growth in the United States has averaged 1.9 percent per yearbarely enough to cover the yearly increase in population. If you subtract the growth of government and just measure the growth of the private, or real, economy, the number is even more pathetic1.4 percent per year. Private-sector employment has inched upward at the achingly slow rate of half a percent per year since 2000. Ten million fewer Americans are employed today than there would be if the trends of the 1980s and 1990s had been sustained; the average family makes $10,000 less comparatively. It was not even the Great Recession that dragged down all these numbers very much. Economic growth since the bottom of the bust in 2009 has been 2 percent per year, making the recovery one of the weakest ever. The prosperity that drove the optimism of the 1980s and 1990s is not even a shadow of itself in America today.

Instead of economic growth, throughout the fifteen-plus years of this new millennium we have been experiencing a historically unusual period of stagnation. Americans dont like it, it does not suit them, and they are wondering what has happened. As the memory of prosperity recedes, Americans are starting to lose one of their essential traits, optimism. As events from the Occupy Wall Street movement of several years ago to the menacing university protests of 2015 to the combative election campaigns of 2016 have shown, the national temper is drawing short, people are getting at one anothers throats, the search is on for unconventional saviors, and divisiveness and conflict, and sometimes a little resignation, are all around. This is not the way America is supposed to be.

Economic growthisnt that something that can only be experienced in short spaces, too unusual and intense a thing to be sustained permanently? Not so: economic growth can be sustained, and for the comprehensive betterment of humanity, as the American experience in particular over the centuries has proved resoundingly.

Since the very dawn of civilization, the resources available to human societies have remained fixed. We have the planet Earth, its crust and atmosphere, along with sunlight from our star. The thing that has changed over the course of history is peoples ingenuity in using those fixed resources. When we have the freedomas the great economist Milton Friedman always told usto get better at learning how to work and how to use resources, something almost miraculous happens. We make things more easily, while using fewer resources as inputs, and we make better and more useful thingsoften things we had not realized we were capable of producing in the first place.

This is what economic growth is: abundance coincident with fulfillment and happiness, all of us becoming flush with the good fruits of our ingenuity, more prosperous, more satisfied in our work and in our leisure, in our lives here on earth. Clearly economic growth is not worthy only because of its material benefits. It is a sign that humanity is functioning at its highest level. Growth means that we are being good stewards of, and are applying the limitless abilities of the human mind to, the earths resources. It means that we are equipping ourselves to be good neighbors, since as the economic pie gets bigger, so can everyones piece of it. Growth here in America means that our great country continues to be an exemplar to the rest of the world, drawing the talented and ambitious to these shores and inspiring emulation in untold places. Growth means that the United States is strong and securenot only because growth confers power, but because it prompts others to admire and join us. Economic growth is human, it is impressive, it is fulfilling, and it is good.

The American people have always (until this strange new millennium) proved themselves adept at economic growth. In the nineteenth century, the country boomed as it attracted immigrants by the millions, overturned slavery, and experienced an increase in the standard of living unimaginable to previous generations. About 125 years ago, in the thick of the Industrial Revolution, the United States became the worlds largest economy. It has never lost that status, even through todays stagnation.

In the twentieth century, the success powered on. Innumerable Americans lived lives, as the essayist Tom Wolfe once put it (referring to the lavish monarch of old-regime France), that would have made the Sun King blink. The meaningful work, the spacious homes, the cars, the vacations, the opportunities that the average inhabitant of this country had as a matter of course throughout much of the twentieth century were unparalleled. There was so much widespread income and leisure in the American Century, as it came to be known, that to make a comparison to the richest people of ages past was unfair.