The Hoover Institution was in Washington last week. Every year the Board of Overseers of the Stanford University-based think tank meets in the nation’s capital. Much of the two and a half days is spent listening to presentations from a mix of the institution’s world-ranked scholars and prominent men and women in government and journalism. This year the speakers included two giants – economist John Taylor and Supreme Court justice Antonin Scalia. Here are my notes on their remarks.
John Taylor: A Hoover fellow and Stanford professor of economics, Taylor devised what economists call the Taylor Rule, a formula for guiding national monetary policy. Many believe that had the Fed followed to Taylor Rule since the early-2000s, the nation would have escaped the current economic crisis.
— The Challenge:
— The great challenge in economic policy today is overcoming obstacles to growth.
— How can governments promote growth?
— Simple: Predictable policies regarding taxes, spending, regulation and money; rule of law; deference to markets and the incentives that markets provide; limited government.
— Over the last forty year the nation has gone through big economic policy swings.
— In the 1970’s it failed on all the rules, and economic performance was horrible.
— In the 1980s and 1990s, from the Reagan tax cuts to the Fed’s rules-based monetary policy to the Clinton welfare reforms, it adhered to the rules for growth, and we had steady, widely shared growth. This is a period that economists have come to call the Great Moderation, because when downturns came they were shallow and short-lived.
— Now the nation has reversed course: the stimulus programs, the explosive growth of monetary aggregates and the capricious regulatory intrusions are exactly the opposite of what the rules for growth would tell us to do.
— The result: the obstacles to growth are worse than ever, and there is blame on both left and right.
— The Left:
— The Left is in the grip of a destructive mania to regulate entrepreneurs and is pushing for increasing government intervention in both the fiscal and monetary spheres.
— Then, too, every Economics 101 student learns how critical the rule of law is to economic growth, but in numerous ways we are undermining rule of law.
— The consequences? As an example, parts of California are suffering unemployment as high as 27 percent.
— In the 1970s the Council of Economic Advisors said that the natural rate of unemployment was4.0-4.9 percent. Now people are OK with much higher rates.
— We hear as an excuse that deep recessions bring slow recoveries. In the post-World War II period, the opposite has been true. Fast recoveries follow deep downturns.
— The Right:
— On the Right, we are not talking enough about how and why pro-growth policies are good for the middle class.
— Lower taxes etc. are the ways to reduce unemployment and poverty. Even China is moving to reduce taxation for just that reason. But we don’t make the case.
— The GOP is not speaking broadly enough in terms of the range of policies. It shouldn’t just be talking about taxes. It should also be arguing for a return to normal budgeting.
— If Congressional Republicans cave in on the Sequester, things will get much worse.
In the question and answer period, Taylor noted that central banks around the world are reacting to each other and particularly to the Fed. For example, both Japan and Norway are embracing easy money policies. The Fed, he said, should think about its actions in a more global context. Good policies around the globe feed back to the benefit of the United States.
Justice Antonin Scalia:
— The country used to have a devotion to the Constitution.
— The Constitution made us a nation.
— We are the only nation on earth that identifies itself by fidelity to ideas of government.
— But there have been dissenters.
— Woodrow Wilson said that the Constitution was not fit for the governing of modern society.
— He and others have since changed our government, bringing in unelected regulatory bodies that bi-pass the separation of powers.
— The Federalist Papers said that in a democracy, tyranny comes from legislatures.
— Structure was the Founders’ answer to that challenge and what has preserved us.
— Few countries have two equally powerful branches of the legislature and a separately elected chief executive. Few forbid members of the legislature from serving in the executive branch.
— Structure is essential to protecting our freedoms and to government by consent of the governed.
Regarding textualism, the name that has been given to his doctrine of constitutional interpretation:
— In interpreting the Constitution or any law, you go by what the text says, and you use the meaning the words had at the time the law was written.
— You don’t use legislative history. Legislative history consists of floor speeches that most members of the legislature never heard and committee reports that even the members of the committee never read.
— You use the text. A living Constitution is a dead Constitution.