A Critique Of The "Four Percent Growth Project" at the George W. Bush Presidential Center

I learned today that the  conservative journalist, author and educator Amity Shlaes is the Director of the Four Percent Growth Project at the George W. Bush Presidential Center at SMU in Dallas. Shlaes wrote the “Forgotten Man” about the taxpayer during the Depression, and a timely bio of Calvin Coolidge, the Rand Paul of the 1920’s.

Until I read about it today in the NYT Sunday Review, I had not been aware of the Four Percent Growth Project, which struck me immediately as an excellent idea. If there is one thing the world needs today, it’s 4% growth, and a path to get there in less than a millennium.

In perusing the Project’s site, I could find no evidence of monetarist thought, which is surprising considering that Bush appointed a devout monetarist, Ben Bernanke, to be chairman of the Fed. The Project’s site seems to be devoted to conventional conservative thought, as found at your local Rotary or Chamber of Commerce. In other words: Bushism minus monetarism.

As the Bush Center is new, monetarist thinking may eventually make its way to Dallas, as it has to other conservative institutions such as the National Review. Unfortunately, the nearby Dallas Fed is not monetarist, and has always been hawkish and anti-QE, an avatar of orthodox Texas Commercial Bank Thought (TCBT). TCBT teaches that the only way to prosperity is a balanced budget, a sound currency, and an end to Too Big To Fail. This is not subject to debate in Texas. (Recall that Gov. Rick Perry charmingly promised Bernanke that if he ever came to Texas he would be lynched for treason. Rick Perry is a full communicant of the Church of TCBT.)

I am intrigued by the wisdom of the name given to the Project, and I happen to know that Amity Shlaes understands monetarism, even if W doesn’t. (His “Decision Points” do not include appointing Bernanke, even though this was the best thing he ever did.) I am intrigued because these three words cut right to the Holy Grail of politics and economics: moderate sustainable growth. It is annoying to look through all of the economic nostrums  on the Project’s website, which are well-meaning but completely irrelevant to achieving 4% growth.

I will generously offer to replace the thousands of words on the Project’s website with a single sentence: “The Fed’s mandate should be changed from price stability and full employment to 6% nominal growth.” My lay readers will by now be familiar with monetarist thought, the core of which is the Quantity Theory of Money, which holds that central banks control nominal growth. Once this theory, or as I prefer to say “law", is accepted, then a discussion of growth must quickly devolve into a discussion of monetary policy. Money matters and deficits don’t.

Monetarism is generally ignored by both the Right and the Left. This is because they fight on the ideological battlefield of the size and role of the state, and see growth as a derivative of that struggle. The Right says: “You can only get growth by shrinking the state”, while the Left says the opposite. Neither side is interested in a simple prescription which ignores their central ideological dispute. Hence, they argue over which of their irrelevant religions has more influence over the economy, which neither of them understand.

This is also why some smart liberals, such as Paul Krugman and Matt Yglesias, can be monetarists alongside such smart conservatives as David Beckworth, Scott Sumner, Ramesh Ponnuru, and Ben Bernanke. Monetarism, like Newtonian physics, has no ideology.

To return to the Four Percent Growth Project: I hope that down the road Ms. Shlaes will see fit to organize a debate about monetarism. The first speaker should be the man that Bush made chairman of the Fed. The responder should be Rick Perry, without his gun and rope.