The era of feeling good was epitomized by the president's relaxed sense of the Presidency.
"If you see ten troubles coming down the road you can be sure that nine will run into the ditch before they reach you," the president is quoted.
The Treasury Secretary found a more sophisticated rationale for the doctrine of laissez-faire.
He argued that the populist idea of progressive taxation was destructive to general prosperity. Instead of using the income tax to compensate for the maldistribution of wealth and income, tax rates on the rich should be cut drastically in order to stimulate economic growth. The rulers devised tax credits, refunds and abatements to benefit corporations and they enacted major income-tax reductions, purposely skewed to benefit upper-income brackets.
The argument was that everyone would eventually benefit as the wealthy devoted the tax cuts to capital investment and new jobs were created. The Treasury Secretary fell short of the ultimate goal - complete elimination of progressive tax rates - but his approach seemed for a time to be wondrously effective in stimulating new enterprises and expanded production. As the prosperity unfolded, the Federal Reserve shared in the applause. Inflation was low. Economic performance was evidently aided by the Fed's stable management.
In the era of self-congratulation a slow slide of economic indicators was largely ignored. After all the stock market was rallying again - a sure sign of more good times ahead.
The Federal Reserve was on a slow path of removing accomodative policy and established another precedent - it's ability to obfuscate and confuse when under attack. Public discontent was blunted by long and technical answers that diverted attention from the Fed's own role in economic distress. The official answers were usually accurate in the narrow sense, but they grossly dodged the questions. This evasive technique was to become standard procedure. After the retirement of the chairman the Federal Reserve suffered a historic disgrace. The stock market fell and fell and fell. The new Fed chairman stood on the sideline, defending former actions of the Fed with the notion that he did not want to suffocate the economy further by tightening monetary policy.
The president looked at the catastrophe with a relaxed attitute. His policy had always been to preserve the old moral and economic precepts amid the material prosperity which many Americans were enjoying. He refused to use Federal economic power to check the growing boom or to ameliorate the depressed condition of certain industries. His message to Congress called for isolation in foreign policy, and for tax cuts. Four years after his retirement he confided to a friend, "I feel I no longer fit in with these times."
Now The Prudent Investor asks:
- Did this happen in in the past?
- Is this happening right now?
- Toni, you are a moron. Leave me alone with Calvin Coolidge. Here is a dollar and now go away, please!
Please post your answers under comments.