One of Newt Gingrich’s rivals just before the South Carolina primary criticized him for his claim of having created millions of jobs, saying “Congressmen taking responsibility or taking credit for helping create jobs is like Al Gore taking credit for the Internet.” This charge of self-aggrandizement didn’t stick to Gingrich (many of whose stands have engaged this columnist’s personal enthusiasm and support). Instead Gingrich stunned the pundits by a double-digit spread victory, close to a 30 point swing from January 9.
There are many reasons for Gingrich’s “swing for the fences.” Not least of which is that his rival was wrong and people know it. Government indeed creates or destroys the economic climate. Sound money (for which the gold standard is, well, the gold standard), low tax rates, reduced government spending, free trade, gentle, sensible regulation, and minimal to modest government welfare programs create a climate in which entrepreneurs and businesses grow … and hire.
We’ve been ten years without sound policies of job creation. Some clearly have forgotten the compelling successes of Presidents Ronald Reagan and Bill Clinton — who established growth policies. Contrast the failures of presidents Lyndon Johnson, Richard Nixon and Jimmy Carter. Reagan’s signature achievements, of course, were stabilizing the dollar and cutting marginal tax rates. These factors created a climate so favorable to enterprise that Americans created 17 million jobs.
Clinton signed a Gingrich-led cut in the capital gains rate, reformed welfare, and produced the North American Free Trade Agreement. Ross Perot predicted that NAFTA would produce the loud sucking of jobs out of America; instead Clinton, building on Reagan’s success, produced a climate in which the private sector created 23 million net jobs.
The record is unambiguous; Gingrich was a player in making all of this happen. No wonder the Club for Growth says “As a historical figure, it is undeniable that Newt Gingrich has played leading roles in some of the most important battles on behalf of economic growth and limited government in the last quarter century.”
Gingrich’s rival, by denigrating the role of policy makers in creating a climate in which job creation can thrive, posits a linear translation of his skill set — running a commercial, or even world-scale nonprofit, enterprise — to running the federal government. This raises the specter of Herbert Hoover (while praying it ain’t so).
Hoover was a superb businessman and engineer. And he had modest government experience as secretary of commerce under Harding and Coolidge, a job even less important than it is today. About as unimportant, in fact, as the governorship of a mid-sized State. Hoover applied his problem-solving skills to the problem of the Great Depression. And applied them. And applied them. And applied them. To no effect. Yet Hoover was sure of himself and continued to apply useless remedies.
It took FDR to defy the conventional wisdom — and all of his and Wall Street’s experts. He used his common sense and the advice of agricultural economist George Warren to devalue an artificially overvalued dollar to counteract a crippling deflation of commodities prices and get the economy and employment moving again.
Presidents inevitably surround themselves with experts. A president with common sense and common decency who is confident in his judgment and refuses to be overawed by his experts can be very good or even, as in the case of Reagan, great. An insecure leader who is overly deferential to his experts, such as Lyndon Johnson — or Churchill in 1925 when restoring the gold standard at prewar parity — is destined for catastrophe.
Gingrich plus Paul rolled up an absolute majority of votes in South Carolina. These are the candidates actively campaigning on, or interested in, the gold standard. Polling, both nationally and in South Carolina, has shown, incontrovertibly, gold’s power as a vote getter and might be part of the explanation for Gingrich’s huge surge. The gold standard also is great policy.
Gingrich, with less than a week to go before an election where most analysts put him as an unlikely victor, announced that he would convene a new Gold Commission, and then that it would be chaired by (pro-gold) Reagan Gold Commissioner Lewis E. Lehrman (with whose eponymous Institute this writer professionally is associated) and by (pro-gold) journalist James Grant. Gingrich’s elevation of gold might be called opportunistic … but it’s also authentic: he was one of the seven Congressmen who co-sponsored Jack Kemp’s Gold Standard Act of 1984. In a generous victory speech Gingrich heaped Dr. Paul with praise for his advocacy of the gold standard.
Rick Santorum is gold’s opponent. CBSNews.com reports Santorum attacking Gingrich for saying that “he’d like to reexamine the gold standard,” characterizing that call as the kind of thing that makes Gingrich “radioactive.” Santorum, ludicrously, rather grandly offered … himself as … a “Goldilocks” standard.
One pictures Santorum in a pinafore and … it’s not pretty. In the event Goldilocks received about one-third as many votes as the total of the combined gold standard proponents. Hopefully the crushing defeat will put, at least, the Goldilocks Standard to bed … just right.
Mitt Romney, while having, earlier, reversed his fulsome praise for Ben Bernanke, has remained largely silent on monetary policy. Romney has handicapped himself by choosing as his economic advisory team two George W. Bush economists Glenn Hubbard and Gregory Mankiw. Prof. Mankiw, in 2008, wrote in the New York Times that ”If you were going to turn to only one economist to understand the problems facing the economy, there is little doubt that the economist would be John Maynard Keynes. Mankiw:
In normal times, the Fed can bolster aggregate demand by reducing interest rates. Lower interest rates encourage households and companies to borrow and spend. They also bolster equity values and, by encouraging international capital to look elsewhere, reduce the value of the dollar in foreign-exchange markets. Spending on consumption, investment and net exports all increase.
But these are not normal times. The Fed has already cut the federal funds rate to 1 percent, close to its lower bound of zero. Some fear that our central bank is almost out of ammunition.
Fortunately, the Fed has a few secret weapons. It can set a target for longer-term interest rates. It can commit itself to keeping interest rates low for a sustained period. Most important, it can try to manage expectations and assure markets that it will do whatever it takes to avoid prolonged deflation. The Fed’s decision last week to start buying mortgage debt shows its willingness to act creatively.
Mitt Romney’s Bush-era economic advisors may put the gold standard out of the Romney campaign’s political reach.
But irrespective of a candidate’s position, from gold to Goldilocks, on monetary policy it is incontrovertible that the federal government plays the key role in creating a climate for job creation. And of all of the policy parameters relevant to economic growth and job creation, the most potent is monetary policy.
The leading GOP presidential aspirant promoted monetary reform as core to the economic reform agenda last week. He directed attention to the gold standard and saw a dramatic swing in his standing. Not all of that swing, not even the most of it, is attributable to gold. But gold is an electoral tailwind. Gold standard proponents captured a majority of votes in the crucial South Carolina primary. Res ipsa loquitur.
Monetary reform — with a presumption toward gold — both classical, a la Lehrman, and parallel private, a la Paul — finally is prominent on the map of this presidential contest. From there it is likely to trickle down into the Republican Party’s source code. Monetary integrity as a driver for prosperity and security is an excellent republican counter-narrative to State of the Union.