In the decades that followed World War II, Keynesian theory was the widely accepted economic tenet of the day. As such, it was believed that recession and inflation could not occur simultaneously—it simply didn’t make sense. But in the 1970s, during the dark days of Jimmy Carter, economic growth stalled and inflation skyrocketed. The world needed a word to describe this new economic condition. “Stagflation”—a portmanteau of stagnation and inflation—fit the bill, and the word caught on.
I bring this up because, about a year-and-a-half ago, my old friend and colleague Alan Rohrbach and I were talking about the anti-business policy coming out of Washington. We realized that there was no word to describe what had been unleashed on the American people by our fellow Chicagoan. So we decided to come up with one. That’s how “Taxulationism” was born.
Taxulationism = taxes + overregulation + trade protectionism. Three of the four so-called prosperity killers, as defined by Art Laffer. (The fourth is inflation—which has evolved as a byproduct.) Not the most melodious word in the world, but it does serve as a way to encapsulate the systematic erection of barriers to job creation and economic growth that has taken place under President Obama’s leadership.
We’d tabled the word for a while—the November 2010 election stared the pendulum swing of American political thought back in the right direction, and the end of the secular bear market felt almost like the green shoots of a recovery. But after the summer we’ve had, the president’s American Jobs Act and the so-called Buffett Tax that’s going to help pay for it, Taxulationism is back and more relevant than ever.
Let’s break this word down, shall we?
Earlier I mentioned the dark days of Jimmy Carter. Having lived through that era, I saw first-hand the ways an inefficient tax policy could stymie growth—and the ways that efficient tax policy under his successor, Ronald Reagan, could unleash the American entrepreneurial spirit. So last week, when the president announced his plan to raise taxes on the rich because Warren Buffett’s secretary supposedly paid a higher rate than the Oracle of Omaha himself, I cringed.
The Buffett Tax is a prime example of the total lack of understanding this administration has for the way jobs are actually created. I’ll be the first to get behind tax reform, but the liberal elite in Washington have it all wrong. They remain convinced that it’s government, not the private sector, that will fix unemployment.