Although attendance was virtual this month, the annual Davos (Switzerland) World Economic Forum took place as usual. This year’s dog-and-pony show, which is always attended by carefully selected and invited uber-wealthy, self-important, so-called world leaders, produced noteworthy insight into U.S. Treasury Secretary Janet Yellen’s enthusiasm for John Maynard Keynes’ discredited economic theories. As if we didn’t get enough of her (and Keynes) while she served as FED chairman from 2014 to 2018.
At least Davos participants’ carbon footprint was significantly smaller this year, having grounded hundreds of private jets.
Students and proponents of Keynes have long existed in Washington, D.C., and regardless of my contrary opinion, they continue to believe that their results will improve over time and with new practitioners. Good luck with that.
Claiming a need to focus on increasing American productive potential, Secretary Yellen introduced 2022 Davos participants to a concept she dubbed "Modern Supply-Side Economics." While I agree with the need for domestic capacity expansion and utilization, I strongly object to Yellen’s usurpation and bastardization of President Reagan’s “Supply-Side Economics.” By the way, Democrats hated the term “Supply-Side Economics,” and immediately substituted the moniker “Trickle-Down Economics,” which they derided for Reagan’s 8 presidential years.
With inflation running rampant, and the Biden Administration's agenda faltering on Capitol Hill, Yellen is seeking to reframe the Administration's economic agenda in a more expansive, optimistic way. But pretentious redefining of Reagan’s successful economic policy is simply smoke and mirrors.
Conservative economists (monetarist devotees of Milton Friedman) argue for lower taxes and reduced regulatory policies to unleash greater supply, while the Biden Administration focuses on Keynesian tax hikes and escalating spending to stabilize demand. Tax cuts and reduced regulations have been successful each and every time they were tried. Yellen knows that but prioritizes adherence to the Democrat party line.
"Our new approach is far more promising than the old Supply-Side Economics, which I see as having been a failed strategy for increasing growth," Yellen said, arguing that tax cuts have failed to produce promised gains, and deregulation has been environmentally damaging. I wonder where Yellen was hanging out when she skipped her courses in U.S. history and Economics.
Yellen spent much of her career as a policymaker focused on solving the problem of insufficient demand in the economy. With her new comments, she acknowledges that America has the opposite problem right now. High demand is fueling current inflation due to a lack of supply. Her hypocrisy is as blatant as her plagiarism of Reagan’s proven economic theory. Remember, it is the trillions of unearned dollars of pandemic relief in the hands of consumers causing current demand-pull inflation.
The Biden Administration has argued for months that proposed “Build Back Better” legislation would decrease inflationary pressures and increase long-term economic growth. That ludicrous notion has failed to convince any elected Republican, as well as Sen. Joe Manchin (D-W.V.), the potentially decisive Senate vote. New Gobbledy-Gook from the Treasury Secretary probably won't change Manchin’s mind, and definitely will not change mine.
Apparently, Secretary Yellen has not read or did not understand, the lessons of tax-cutters, including the Gipper, “W,” and Trump. Yellen's speech doesn't change economic or political realities on the ground. But it does signal a sea change in how Democrat economic policymakers attempt to sell their backward policies to an upset population. I miss Reagan and his ability to communicate, both at home and around the world.
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