For month over month in July, the consensus estimate was for +0.3%. Instead we got +0.2%.
Meanwhile the big picture shows, like so many indicators, that industrial production hit the big brick wall of Reaganism in 1984.
Post-war industrial production grew handsomely and its growth rate trended upward from 1948 to 1984, but not after.
Why is that?
I think it's because the incentive to invest in domestic industry went away because of the Reagan tax revolution.
Up to that time, high ordinary income tax rates had pushed owners of capital to invest in America for decades because by doing so they could take advantage of relatively much lower long term capital gains tax rates when they wanted to take income. After the dramatic Reagan cuts to ordinary income tax rates, that arbitrage disappeared. From that time onward owners of capital, now flush with cash from taking income at low ordinary income tax rates year upon year, found it more advantageous to invest abroad where low labor costs and unregulated markets promised even more fabulous returns on investment as America hobbled itself with regulation at home. The exit of businesses of all sizes from the United States to East Asia which began from this time turned into a flood after China was admitted into the WTO in 2001.
But today J. D. Vance thinks the U.S. Dollar's status as the world's reserve currency is the cause of all our problems.
If you want to know what makes me despair, that's it.
The following news story was more accurate than Kudlow.
US: Industrial Production Up Again in July as Modest Manufacturing Recovery Continues
