The True Gold Standard (Second Edition)
Jack Kemp and the Gold Standard
All of his former rivals now unite behind the GOP’s presumptive nominee, Gov. Mitt Romney. Conservatives and most libertarians are joining together in opposition to the now softly (and, one hopes, temporarily) despotic Democratic Party. Herman Cain, in this process, may prove to be the one with the biggest impact on the presidential election, the contest to hold the House, gain the Senate majority, and the future direction of the GOP.
The other former presidential rivals will help unite the Republican base. Cain is positioned to unite and also to excite that base, and, of at least as great importance, to grow it. Yes, Cain is a unifying factor. He comes from the business class, appeals aggressively to Tea Party constitutional purists, presents a pure Supply Side job-creation message of lowering marginal tax rates plus a rule-based monetary policy, and he champions the most potent issues of social conservatives (whether Republican or Democratic): traditional marriage and pro-Life.
More importantly, Cain is exciting. Exciting and mobilizing the base is critical to a Romney victory. Cain mobilizes. In addition Cain is, perhaps uniquely, positioned to take the contest right to the Democratic voters in the nine crucial swing states. Rasmussen’s polling shows that labor union members (including this columnist, a card-carrying member of the AFL-CIO) and blacks both are highly supportive of the gold standard, an issue which Cain now unequivocally champions. Cain reportedly draws enthusiastic receptions on college campuses. Cain’s own polling reportedly shows that 62% of Latinos are enthusiastic about his 9-9-9 plan.
Three of the most voter rich Democratic leaning blocs — Latinos, Labor Union members, and Blacks, resonate strongly to Cain’s optimistic message of economic opportunity through low tax rates and/or gold. These blocs also trend far more religiously serious than the national political elites. Thus they also resonate to ordained Baptist minister Cain’s down-home stand for the traditional definition of marriage and the sanctity of life.
Cain was inspired to join the Republican Party by the last great Republican official to demonstrate true and consistent passion for the dignity of nonwhite Americans, Jack Kemp. Kemp mostly is remembered for his championship of marginal tax rate cuts. These, plus monetary integrity, jet-propelled the economic growth of the Reagan-Clinton era. Yet Kemp described himself as “a bleeding heart conservative.” When he left government service (after serving as President George H. W. Bush’s secretary of Housing and Urban Development) the only political purposes for which he reliably could be dragged out of retirement were any calls to advance the economic and political power of marginalized ethnic groups, especially Blacks.
The fact that Cain happens to be black makes it easier for him to punch through the wall of skepticism many traditionally Democratic voters have toward Republicans. Their skepticism derives, even though wrongly attributed to conservatives, from conditions such as that noted by The Atlantic’s James Warren in a piece aptly entitled Driving While Black : “… an African-American driver is about three times as likely to be the subject of a search as a Caucasian driver, with a Hispanic driver 2.4 times as likely to be the subject of a search. But when vehicles are searched, whites are more often found to be hiding contraband.”
Developing an ear for the concerns outside of the traditional GOP base is essential to the GOP’s future. The charming and optimistic Cain could prove a great agent for an overdue renewed championship of equality of opportunity within, as well as a persuasive envoy of, the GOP. A serious focus on equality of opportunity can exile anything like “DWB” beyond the Pale, rebooting the GOP’s reputation inside urban enclaves.
John D. Mueller, Lehrman Institute Fellow in Economics at the Ethics and Public Policy Center, presented the following lecture at the Family Research Council in Washington, D.C., on April 11, 2012.
I'd like to thank the Family Research Council for its gracious invitation to deliver this lecture, and to Rob Schwarzwalder for both his generous introduction and his leadership. The topic I'd like to discuss this afternoon is "Redeeming Economics: How Federal Budgets Affect the American Family." ISI Books recently published my book, Redeeming Economics: Rediscovering the Missing Element. As I will explain, the original element missing from modern economics is the one that describes our interpersonal relations of love and hate. I should add that my relationship with FRC goes back a long time. In fact, the substance of several of the chapters originated in articles and research published in FRC's Family Policy journal. I see Bob Patterson in the audience, who developed it from a monthly newsletter into a first-rate journal. Though I've attended many events here at FRC, I think my last formal presentation was in 2008, when I presented a paper on "Causes and Cures of Demographic Winter" for a panel when the film "Demographic Winter" was screened here.
I'd like to accomplish three things today which might at first sight seem unrelated.
First, I'd like to offer "a brief, structural history of economics," in order to show that the most important element of the original scholastic economics has been missing since its deliberate omission by Adam Smith, and how its absence has caused several major problems with today's neoclassical economics, particularly its understanding of marriage and the family. I'll illustrate with two such problems: the first offered by Steven D. Levitt and John J. Donohue III's famous claim that legalizing abortion in the 1970s must have reduced crime rates starting in the 1990s, and the second explaining the failure of existing economic theory to explain the "demographic winter" which has already engulfed the rest of the developed world.
Second, I'd like to pose the question, not "WWJD?" but "WDJD: What Did Jack Do?" referring to Jack Kemp, for whom, as Rob mentioned, I worked for ten years before and during both Reagan administrations. I believe that posing this question will help us understand why the fiscal policy devised by Jack Kemp and implemented by Ronald Reagan was both politically and economically successful, and also why conservatives since abandoning it have so often seemed to snatch defeat from the jaws of victory.
The third and final part of my talk might be called "Benefits or Babies: The Obama and Ryan Budgets and the U.S. Birth Rate." I'll show that the choice our government is now making is whether the United States will join the rest of the developed world by sinking into "demographic winter" and steadily declining in relative size and importance, or else maintain the demographic component of American exceptionalism.
Newt Gingrich has moved to capture some Republican voters who lean toward Ron Paul and other Republicans who were Jack Kemp followers by naming two gold bugs to the Gingrich future team of advisers.
The former House speaker says he intends to appoint investment banker Lewis E. Lehrman, famous in the Reagan era for his red suspenders and gold-standard advocacy, and Jim Grant, editor of Grant's Interest Rate Observer, as President Gingrich's Gold Commission - if and when of course Mr. Gingrich wins both the Republican nomination and the general election in November.
Mr. Paul, a Texas congressman with a conservative libertarian world view, earlier had promised to appoint Mr. Grant as chairman of the Federal Reserve Board.
"It is a smart move to pitch both the Paul enthusiasts who may not think Paul has a chance and the Kempians," conservative fundraiser Richard Norman told The Washington Times.
"Kemp and Paul are about as far apart as you can get but the one thing that unites them is a return to the gold standard."
The late Mr. Kemp was the darling of the many in the conservative movement when as a New York congressman he cosponsored what became the three-year across-the-board 25 percent cut in personal and corporate income-tax rates.
Mr. Gingrich told the Southern Republican Leadership Conference in Charleston the day after his debate in South Carolina that pegging the dollar's value to gold should be considered by a presidential level study group.
Mr. Lehrman headed such a commission in the administration of Ronald Reagan.
Last year, Mr. Lehrman authored a book titled, "The True Gold Standard: A Monetary Reform Plan Without Official Reserve Currencies."
Mr. Gingrich described Mr. Lehrman and Mr. Grant as "distinguished students of monetary policy and long-time advocates of a return to hard money — a dollar as good as gold."
Mr. Gingrich has established himself as a hawkish interventionist on foreign policy, the opposite of Mr. Paul's view that America does best when it minds it's own business.
"I have had, and will continue to have, many strong disagreements with Congressman Paul during the campaign, but I believe he has made an important contribution in the field of monetary reform," Mr. Gingrich said.
Mr. Gingrich however said he is "not presently committed" to a return to the gold standard abandoned in 1933.
All eyes at the debate tonight will be on the former speaker of the House, and current president aspirant, who this week dramatically moved the political discourse by calling for a new Gold Commission.
Mr. Gingrich is no stranger to gold. He was one of the seven cosponsors of Jack Kemp’s 1984 Gold Standard Act. A gold commission is an astute way of easing into a subject that every candidate fears might put them into a thicket of technicalities over their heads. Even Rep. Ron Paul, well associated with the issue, is curiously standoffish in campaigning on it, concentrating on closing military bases and auditing the Fed.
Perhaps this diffidence stems from the fact that Dr. Paul’s preference — competing currencies — is so radical, drawing a wall of separation between money and state. That’s a great system, favored late in his career by Friedrich Hayek, but it’s not exactly what the Founders of America had in mind. They understood money as a specified number of grains of silver or gold.
Brian Domitrovic called monetary reform “the unfinished business of the Reagan Revolution.” At a recent conference hosted by the Atlas Foundation, it was as though the Reagan Revolution was born again to finish the job at hand—restoring a gold-backed dollar. Scholars, businessmen, and journalists discussed the economic and political history of sound money. Moderated by Jimmy Kemp, son of the late great Jack Kemp, panelists included Lewis E. Lehrman, Judy Shelton, and Steve Forbes. It was, of course, early during the Reagan years that Kemp-Roth tax cuts were executed unleashing one of the greatest periods of economic growth during the last century. And, it was President Reagan who established the United States Gold Commission on which Mr. Lehrman served.
The room was packed—more than 160 people gathered to hear this historic panel and many stayed long afterwards to continue questioning the panelists. Mr. Lehrman opened the discussion briefly surveying American economic history from the Industrial Revolution to the present day, tying our latest financial disorder to the modern reserve currency role of the dollar. The solution? Establish convertibility of the dollar to gold once again. Neatly laid out in a five step plan, Mr. Lehrman’s plan is compelling and offers a serious solution to the endless alternating cycles of inflation and deflation.
Dr. Shelton reminded us that it was Congressman Kemp who so clearly articulated the idea of the dollar in saying that “the dollar should be so honest, so sound, so trustworthy, so good, so predictable, so lasting in value that it’s as good as gold.” In her slim volume titled, A Guide to Sound Money, Dr. Shelton establishes ten core principles of sound money. Her newly released book, Fixing the Dollar Now: Why US Money Lost Its Integrity and How We Can Restore It, Shelton extends the principles laid out in her earlier volume and establishes a plan for gold-backed bonds as an intermediate step in returning to a gold-backed dollar.
Steve Forbes, businessman, entrepreneur, and former presidential candidate, offered the likely political rhetoric with which a rising GOP presidential candidate might persuade the nation to move forward to gold. Likening monetary policy to a well-run car, Forbes argued that if there is too little or too much money (fuel) in circulation, then the economy (car) stalls. However, if there is just the right amount, the economy (car) hums along, moving forward. The amount of money cannot be determined by a single central authority but rather by the people engaged in economic activity. With a gold-backed dollar, America may well have the chance to grow and prosper once again.
In closing, Dr. Shelton pointed out that it was Alan Greenspan, appointed as the Federal Reserve Chairman by President Reagan, who wrote in 1966 that, “Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”