Newspaper Page Text
November 28, 2012
Reporter
PAGE 3A
WHY ARE WE IN THIS MESS?
Fickling: It’s the policies, stupid
Macon real estate executive
shares economic history
lessons with Forsyth club
BY WILL DAVIS
Macon real estate execu
tive Roy Fickling told
Forsyth Kiwanians on Nov.
6 that federal policies are
hurting the economy, but
said history clearly shows
what policy changes would
restore prosperity.
Using a Powerpoint pres
entation like a college pro
fessor, Fickling, a 1988
graduate of the University
of Georgia and president of
Fickling & Co., described
two economic theories that
have competed for pre-emi-
nance since the late 1970s.
The more dominant theo
ry in the last 80 years,
said Fickling, is the
Keynesian model devel
oped by economist John
Maynard Keynes and codi
fied in his 1936 treatise,
The General Theory. It
proposes that government
spending and "stimulus"
can help foster prosperity.
This idea, said Fickling,
has historically been
taught by the economic
departments at most elite
universities, with the
notable exceptions of
Stanford University and
the University of Chicago.
The other theory, said
Fickling, is called supply
side economics. It says
that government is not the
solution to economic prob
lems, but that it largely is
the problem. By taxing,
spending and regulating,
government sucks the life
out of a vibrant private
sector economy, say supply
siders.
The supply side theory
became more popular
when the Keynesian model
followed in the 1960s-70s
led to the economic morass
of the late 1970s. In the
1960s-70s, the federal gov
ernment had followed all
the Keynesian proposals,
said Fickling, including
wage and price controls,
tariffs, high taxes, high
spending and loose mone
tary policy. The result:
Inflation rose to 13 per
cent, interest rates sky
rocketed and wages
remained stagnant. By
1978, said Fickling, the
stock market had fallen 50
percent since 1963.
In response to these dis
astrous results, a young
University of Chicago eco
nomics professor named
Art Laffer began to
expound on the virtues of
supply side economics in
the late 1970s. He devel
oped the idea that
increased tax rates beyond
the point of diminishing
returns eventually mean
lower revenues as it dis
courages the taxed activi
ty. His so-called Laffer
Curve also held that cut
ting high tax rates in some
situations actually results
in higher revenues because
of increased activity.
The Keynesians and sup
ply siders also differed on
the role of the Federal
Reserve. Keynesians
believed the Federal
Reserve should print more
dollars to pump fuel into a
sagging economy and con
strict money supply in a
booming economy to slow
it down. Supply siders,
contrarily, argued that
printing money fueled
inflation and devalued the
dollar. The main job of the
Federal Reserve, they
argued, was to preserve
the value of a dollar.
The ideas of Laffer, who
has become a friend of
Fickling's, and the supply
siders were endorsed and
promoted by the Wall
Street Journal, and Laffer
caught the interest of a
presidential candidate
named Ronald Reagan.
With Reagan's election in
1980, the supply side
enthusiasts would finally
get a chance to implement
their policies.
Critics wailed away at
the supply side theories,
which even vice president
George Bush had called
'voodoo economics" during
his GOP primary race
against Reagan. Many
called on Reagan to ignore
Laffer and his theories.
But Reagan was con
vinced they would work.
So he won significant cuts
in income and capital
gains tax rates and slowed
the growth of federal
spending, while the
Federal Reserve Board, of
which Fickling's father
was a member, constricted
the money supply and
broke inflation.
The result: The economic
record of the 1980s and
1990s shows they worked
as advertised.
Economic growth explod
ed, hitting an unthinkable
7.8 percent per year dur
ing the recovery. Over the
next 20 years the U.S.
economy grew more than
it had grown in the previ-
Roy Fickling of Macon, right, talks with former vice president
Dick Cheney during a hunting trip. Fickling talked to the
Forsyth Kiwanis Club about U.S. economic policy earlier this
month.
ous 200 years of the
Republic. As Laffer pre
dicted, even while cutting
tax rates, government rev
enues doubled in the 1980s
and 1990’s.
Watching the U.S. suc
cess from across the
Atlantic Ocean, British
prime minister Margaret
Thatcher copied Reagan's
policies and the economy
of England took off as well.
Fickling noted that the
lessons of those years
seem to have been forgot
ten by the George W. Bush
and Obama administra
tions. Fickling said the $2
trillion in stimulus spent
since 2008 have done little
to boost economic growth.
Many like to tout how gov
ernment spending carries
a multiplier effect by circu
lating money throughout
an economy, said Fickling.
But Fickling said
Keynesians forget that
government must first
take the money from some
one else before it can
spend it, which offsets any
stimulative effects.
Fickling blamed the cur
rent economic crises that
began in 2008 in part on
the Community
Reinvestment Act, signed
by President Carter and
strengthened by President
Clinton, that forced banks
to issue home loans to
more minority and poor
families. Meanwhile, gov
ernment sponsored enti
ties like Freddie Mac and
Fannie Mae bought up
those loans as subprime
mortgage securities. So
when the loans defaulted,
it set off a banking crisis
from which the U.S. has
yet to recover.
At the same time, the
government has added a
slew of regulations, stran
gling private sector
growth. The Sarbanes-
Oxley law, intended to pre
vent another Enron col
lapse, has cut by two-
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thirds the number of com
panies joining the New
York Stock Exchange. The
Dodd-Frank law, a
response to the banking
crisis, has crippled com
munity banks with regula
tions.
"The cure is worse than
the disease," said Fickling.
The bottom line, said
Fickling, is that govern
ment incentives matter for
prosperity to happen. If
government gives incen
tives for people to work
and invest, as Reagan did
in the 1980s, growth will
happen. Contrarily, if gov
ernment punishes those
who work, invest and
make a profit, people will
do less of those too.
Within hours of
Fickling's report to
Forsyth Kiwanians,
President Obama was re
elected to a second term.
Fickling is a member of
the Georgia Ports
Authority and the Georgia
Rail Passenger Authority.
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Christmas
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m
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