This Is the Best 'Hard Goods' Boom in Decades
... Tuesday’s industrial production report showed back-to-back gains in June and July for both total production and manufacturing production. ...
Larry is rightly happy about the increase in the durable manufacturing index.
No doubt about it, it is up, but notice that it is still not as high as it was in Trump 2018 or Obama 2014.
More importantly, percent change in the index for 1H2026 was 1.94, lower than the 2.28 in 1H2018 when Trump was president the first time.
But this isn't an economic boom, and neither was that.
Those are welcome highpoints but in a long-term trend all down hill since the 1980s when Reagan was president, and no one asks why.
Kudlow & Co. never go back in the data as far as they should, even though they served in the Reagan Revolution and touted the results for the economy of the posthumous JFK tax cut in the Revenue Act of 1964, which cut the top marginal rate from 91% to 70%.
Today they use these data sets which go back only to the beginning of 1972, but even at that there is a giant durable goods growth spike of 9.02% in 2H1983 which we have been unable to reproduce since then, which should make them ask themselves, What went wrong?, but it doesn't.
Socrates said that the unexamined life isn't worth living.
So let's examine it.
Robust post-war growth is a truism which is true!
Industrial production generally, and for manufacturing specifically, grew robustly year over year, and the trend for those growth rates was itself strongly positive, as the chart for 1948 to 1984 shows.
But look at what happens after 1984.
You still get positive growth rates year over year, but not as robust as before, and the trend for those growth rates becomes strongly negative.
Something changed in the 1980s to cause this.
I say it's the Reagan Revolution in ordinary income tax rate reductions which caused this, not because tax cuts for rich people is bad, but because Reagan unintentionally sabotaged the tax rate arbitrage which before those tax cuts existed had pushed rich people for decades to make long term capital investments here at home in order to get low capital gains taxes in return.
In other words, Reagan destroyed the negative incentives which drove domestic investment. Take away the penalty of high ordinary income tax rates, and suddenly there's no reason to plow your money into the investments which drive business, jobs, and GDP, especially as enthusiasm for regulations of all kinds began to grow and hamstring profits.
The new tax cut windfalls freed up a lot of money to seek return wherever it could be found, and in the aftermath of the Reagan era that money increasingly went abroad. For people who lived through it, the one persistent theme of the business news was one business after another closing up shop in America and moving production overseas. After China entered the WTO, the steady departure of businesses from America became a flood.
And that's why that last chart, for 1984 to the present, looks like hell.
It has nothing to do with the U.S. Dollar being the world's reserve currency either. That is the dumbest thing I've heard in years, and I can't tell you how amusing that is coming out of the mouth of a Yalie. I guess they don't teach 'em at Yale that the dollar was the world's reserve currency 1948-1984.
I am not an economist. I do not know how to wave a magic wand of policy to make it all right again.
I am just a scholar in the humanities who wanted to know what turned my world upside down in 2007 and why I and millions like me have never recovered.
I have made a life for myself in spite of it all, as people do, but I tell you what, America was pretty great once, so don't tell me this is an economic boom.
I knew the economic boom. The economic boom was a friend of mine. And Larry, this isn't an economic boom.
