Northwestern University sponsored a lecture by Stephen Moore (photo right) of the Wall Street Journal on Monday night. The theme of Moore's lecture was "Keys to Prosperity."
Moore embraces the free market system in contrast to the Keynesian economic theory, which contends that productive activity is strongly influenced by total spending in the economy, but that spending does not necessarily equal the productive capacity of the economy.
FDR prolonged and made the Great Recession worse in the 1930's by following the Keynesian theory.
As indicative of a boom town, Moore related how he had to spend $650 to say one night at a Best Western Hotel in Williston.
The fracking taking place in Williston, North Dakoka, and in other areas located within the Bakken formation, is reshaping the oil world. It is the biggest find of oil in North America in the past 50 years and represents a real game changer. At least 2 billion gallons on oil are to be gained through fracking. According to Steven Moore, North Dakota has more oil than Saudi Arabia.
It is hydraulic fracking that has changed energy production in the U.S. Hydraulic frackiing enable drilling two miles deep into the ground. There is also the ability to drill horizontally, At high speeds in hydraulic fracking thick shale rock is cracked open through which oil flows out that has been there for millions of years.
Hydraulic fracking is also happening in Montana, West Virginia, CA, allowing this nation to go full speed ahead so that within ten to twelve years this nation can go from an oil import country to an oil export country.
Through hydraulic fracking also to be realized is a150 year supply of natural gas, a certain death knell for wind and solar, which could not exist except for generous government subsidies.
The Left has had some success in demonizing fracking. Twenty states have banned hydraulic fracking, including New York. Although New York has banned the practice, Pennsylvania hasn’t. So Pennsylvania oil producers routinely “dip their straw in New York’s milkshake,” fracking away to extract oil from New York's rich shale deposits
Stephen Moore is not complimentary about the Energy Department and believes that a priority in Washington, D.C. should be to dismantle it. Moore deplores the billions being spent to develop alternative energy.
Most interesting was Moore's discussion of "Who's the fairest of them all?", in which which America's "Boom and Bust" periods were designated.
1972 - 1982 Represented a -60.5% drop in the economy.
1982 - 2000 Represented a +700% increase in the economy. It was then that God gave us Ronald Reagan. Even though Reagen had inherited from Jimmy Carter what had been an 18-year long depression, the election of Ronald Reagan initiated the greatest period of wealth creation ever seen, more wealth than in the prior 200 years combined!
2000 - 2012 Represented a -30.5% drop in economy due to over investment in the dot coms. Steve Moore did admit that his figures were somewhat out of date given the recent surge in the stock market which he attributed to the low interest rates purposely being kept low by Ben Bernanke, Fed Chairman.
In explaining what caused the economy to go from a depression to the greatest period of growth this nation has ever seen, Moore cited the dramatic reduction in tax rates from 70% in the 1970's, a time when government took two thirds of what a person earned (or 70 cents of every dollar), to a 28% tax rate which allowed individuals to keep 72 cents of every dollar after taxes.
In noting how the rich are exploited by the Obama administration for not paying their fair share of taxes, Moore went on to explain how the top 1 percent pays well over its “fair share" -- 22.3% more than their share of earned income which is 13.3%. The same a holds true for the full top 20%. Meanwhile, the bottom 40% income groups earned 14.9 percent of income but paid just 4.1 percent of federal taxes, while the bottom 50% paid just 2%.
JF Kennedy had it right when he said in1962 that the soundest way to raise the revenue in the long run is to cut tax rates. This is in contrast to President Obama who insists that tax rates must be raised, especially on the rich, to stimulate the economy. History tells
another story. Our economy soared when tax rates were lowered during the boom time of 1982 to 2000.
Stephen Moore believes that everyone should pay some income tax to have some skin in the game. Moore does advocate a flat tax.
Moore casts blame on Ben Bernanke for the lack of growth of this nation's economy in that the Federal Reserve is flooding the economy with dollars. Moore called Bernanke's approach the "Helicopter Method", because it's akin to stuffing a helicopter with $100 bills and then dropping them over cities to stimulate the economy.
Why then is this nation not experiencing run away inflation in that it is dealing with its debt not unlike the model used in Mexico, Bolivia, and Argentina. Even though the U.S. government is issuing bonds and the Federal Reserve is purchasing the debt, the American people are too traumatized to spend freely not knowing what the future will bring. For this reason the inflationary measures Bernake is creating by purposely keeping interest rates low are not taking hold.
A sign of the uncertainly many Americans are experiencing over their financial futures can be noted in the sale of 10-year treasury bonds. Despite a negative real interest rate on 10-year treasury bonds, these bonds are selling even though they will be worth less in 10 years, which makes the case that low interest rates are not a sign of strength, but instead a sign of weakness.
Part of the reason for the stock market surge is because many individuals, dissatisfied with the low interest rates on their investments, have no where to go but to return to the stock market, hoping for the best in the long run.
Steve Moore described free trade as important and disinflation as a good thing. Disinflation is often confused with deflation. Deflation refers to a sustained fall in price levels. This is a phenomenon when the periodic change in CPI is negative. Disinflation, on the other hand, is a decline in the rate of increase in price levels.
Because of disinflation the American people can afford to buy more things like new vehicles, apparel, software and computers. Prices most out-of-control over the past 10 years and which have gone up instead of down were in Education and Medical Care,. Both are products of the public sector (government controlled)-- 70% for education and 40% for medical-- in contrast to lower prices in the private sector.
In speaking to the college students present, Moore informed students that their tuition shouldn't be going up every year, but instead downward, and that the present exorbitant cost of tuition represented a big bubble that would eventually burst because of on-line education.
In offering advise to this generation of college students, Steven Moore prefaced his advise with a question as to why so many of you most likely voted for Barack Obama given that he ran up $5 trillion in debt in four year. Voting for Obama could have been forgiven the first time around in 2008, after having come off a period of big spending by Republicans.
Students were reminded that you and your kids will pay for the debt Obama is running up unless spending can be brought under control.
Lastly, Steven Moore enjoined the students present to do what they love in life as a preparation for future success and also to question authority while in college. Just because a professor says something, doesn't mean that it's true. Moore spoke of his college years at the University of Moore where 70% of what he was taught was not true.
Speaking of his mentor, Milton Freeman, Moore related two conditions garnered from Freeman as important to America's future and its prosperity: 1) Universal school choice for every child in America and 2) Cutting government spending.
Steven Moore believes that cutting government spending, along with a flat tax, will create the strongest economy this country has ever known.