so i am going to leave the tax part to my distinguished co-authors and i am going to make a couple of comments about the investment climate, and a little bit about the stock market. ..

i have been in the investment business for over 40 years and until this year i never recall using the word trillion. now, i use the word trillion every day and it is interesting because when you think of the concept of a trillion, when would we have never had the chance to use the word a trillion? i can't imagine. i don't think about trillions of anything but now i think about trillions of dollars we are spending that unfortunately we don't have. so, we are basically running printing presses and if that isn't a source of concern for you, from an economic and stock market point of view, i don't know what could be. but, let's put this in some sort of context. what are we going to do with these trillions of dollars were printing and we don't seem to

have? well, we are going to borrow money. of course we are going to sell treasury bonds, which is what the treasury does. this year, and last year, it is estimated that the treasury will issue roughly $3.5 trillion of securities. to put that in context, historical context, that amount is nominally a greater than the total amount of treasury securities issued in the last 27 years. so this gives you a sense of the scale and the worry. what does all of this money mean going into circulation? to me, it is pretty clear, economics won a one and a professor hopefully will agree, that mean to replace the more down the road. how far down the road?

i'm going to say 12 to 18 months. from envoy usman points of view i have to tell you that we are looking at things like goals, tips, treasury inflation protected securities, energy and other commodities that we think should be part of portfolios. and indeed we have a chapter in the end of prosperity that talks about that. so, given that the name of the book is "the end of prosperity," i am going to turn it over to my fellow co-authors for some more cheerful news and in keeping with the title of the buck. thank you for your attention. [applause] >> good afternoon folks. i am steve moore. it is great to see so many friends here. first of all thank you to dezenhall and my friend for helping to set this up. i appreciate your hospitality

and it is great to see so many supply-siders here. we are kind of a dwindling group these days so it is nice to see mark blumfield, the people call mr. capital gains, the guy who has been so irresponsible for so many of the great policy changes. you were back here in 1978, right? [inaudible] he is responsible for the 1923-- and jimmy p from u.s. news who is a good friend and is one of the top leading writers on the economic space. >> how do you pronounces last name? >> i an not even going to try. leagis call him jimmy p. i'm going to talk for a few minutes about how the book came into being and by the way, my good friend is here who is one of the great biographers of ronald reagan. when is your new book coming out on reagan? september. he wrote a great book on the 76

reagan campaign and has a book coming out that i can't wait to read about 1980. reagan is a central figure to our book so i am a big fan. it is so funny you mention the issue about the trillion dollars because i was thinking about back in 1987 when i briefly worked for ronald reagan. remember win jim miller was the head of the budget office? we did something arthur in 1987. this was after, it wasn't in the first term or second term but we did something we were not very proud of. we actually pass the first trillion dollar budget under ronald reagan. that was a big thing back then and i remember the first time i appeared on national television was the today show when we came out with that budget in jim miller could not appear so somebody was working for him. they ask me to come in, and i was very nervous because it was one of the first times i had been on tv. you know, katie couric, 8 million people. i spent the entire weekend just

cramming to know every single detail in the budget, so i was ready for any question that katie couric might ask. i knew with the budget was for the peace corps, for the army, i knew what the debt was down to the sixth decimal point and so on. we start the interview and katie couric says mr. moore, iysoo ronald reagan is introducing america's first trillion dollar budget today. she says i only have one question, how many zeros are there in a trillion? it was the worst interview i ever did in my life. i just melted down. it was all downhill from there. by the way, does anyone know how many zeros there are in a trillion? 12, and i know that now but the real question we have to ask yourself is what comes after 100 trillion, a gazillion? but i think you make a very good point that the numbers were talking about are so large there

unfathomable and i actually think maybe the sinister part of me, but i think when the obama administration was talking about the silly economic stimulus package that the introduced that passed in january or february, i think they figured, we can ask for $100 billion or a trillion dollars, most of the american people don't know the difference between the two so we will just ask for a trillion and then our friend, arlen specter, said not a trillion dollars, only $800 billion they got the package through. when we started writing this book, which was about a year-and-a-half ago now, the three of us got together and we concede-- is see the economic storm coming. we looked at the four policy variables that arthur tots of many of us about whether the four things that have an impact on the economy. i want to make sure arthur get these ride. low tax rates over high tax rates, a sound currency, and keep control of government spending and debt.

when the three of us got together and looked at these three variables and by the way this was george bush's last year in office so we were trying to be at all partisan about this. we were convinced that all these policy variables that roughly for the last 25 years have been pointed in the right direction all of a sudden they look like they were born to be pointed in the long-- wrong direction. it looks like tax rates were likely to be going up for the first time, not down and that was a very scary prospect to us. a look like the consensus that had emerged over the last 25 years to move towards free trade and to reduce trade barriers, and by the way we are in the midst of writing the book was one hillary clinton remember and barack obama were, during the pennsylvania and michigan and ohio primaries than they were going around the state saying we are going to get rid of nafta, get rid of all this free trade nonsense and that scared us because obviously the political consensus for free trade has

always been very fragile. and then we looked at what was happening with the currency and the explosion in the amount of money that has been created. are there has a wonderful graph in one of his most recent economic analysis that shows with the money supply has increased by-- how much? >> a little over 100%. >> this is more money creation in the last six months then perhaps the last 60 years. that's certainly scared us because we believe in the old-fashioned milton friedman idea that inflation is simply too many dollars chasing too few goods and that money creation is a real scary thing and i am worried about inflation too. and minammi could see what was happening with spending and debt and again this didn't start with barack obama. this started actually ander george bush. if you look at what happened under the bush presidency one of the reasons he will be regarded with-- is a failure, the federal budget when george bush entered

office was $1.9 trillion. when he left office it was close to $4 trillion so we saw a doubling in spending over the last eight years. one of the themes of the book is simply that policy really does matter and it is interesting last night i was on the larry kudlow show on cnbc and i was debating someone on the other side and he was basically saying the reason the economy has collapsed and we are in this freefall of their recession right now is that the republicans listen to people like art laffer and peter tanous in you and larry kudlow. i smiled and said i wish they had listened to us because i don't think we would be in the trouble we are in. i really think that over the last six months, and i am speaking for myself now, i think everything we have done on the economy, every single measure that congress and the president have taken over this last six months have been exactly the wrong thing to do.

they are batting 1,000. again that starts with the bailout of bear stearns and the auto companies and aig and freddie mac and fannie mae and the 700 billion-dollar bailout of the things. my opinion is the $800 billion spending stimulus bill is simply not going to work in one of the things are there and i have talked a lot about is for the price of that 800 to $1 trillion spending bill that we did we could get suspended the income tax for a year and that would make the case to everyone in this room that if we had simply gotten rid of the income tax for a year we would see more jobs than eck impossible reimagined. the tragedy by the way of what we have done in the last six months especially with the stimulus bill is in so much we are taking on debt. i have never been one who has been overly concerned about that. the real issue is whether you buy for that that in the real tragedy is we are not getting anything for this debt. we are putting solar paneling on

the backs of libraries, but those aren't going to have much of a high return. we talk a lot in the book about what happened in the '70s, '80s and '90s and the kind of promise of the book is that the 1970's was a lousy decade, one of the worst decades in american history and arthur knows the statistics. if you look at the stock market chart, if you look at what happened family incomes, if you look at any measure of the economy in the 1970's under nixon, ford and carter the economy was just a disaster. these stocks in real terms, was it something like 50%? [inaudible] that is a pretty bear market for corn of the things that annoys me to no end in the current economic discussion is when people say, barack obama has inherited the worst economic history since the great depression. that is flat out false.

what ronald reagan inherited was substantially worse than what we are in now and the reason for that is one barack obama at-- and i'm not trying to discount, we are in a big economic called but what obama has inherited is a nine month recession. what reagan inherited was a 14 year essentially recession where the economy just kept going down and down and down. we talk about how the supply-side ideas that reagan brought into the white house in 1981 helped turn the economy around, the two pivotal things that happened in the early 1980's or arthur laffer's ideas about tax rate reductions in the tax rate fell from 70% in 1980 down to 50% and then down to 28 by 86. that is a pretty sick that the year reduction in tax rate reductions. it means the after-tax rate of return on investment increase from 30 cents on the dollar to 72 cents on the dollar so it shouldn't be a big surprise that we saw a big stock market them

once those tax rates were reduced. the other thing that happened which, i don't think reagan gets enough credit for it was the disinflation that happened in the early 1980's. if you look at the chart of the inflation and the chart in the book, inflation hit 145% in jimmy carter's last year of office. i tell the story when i was working in the 1980's as a grocery stores clerk after school, i was 19 years old at the time, and this was before they had the bar codes on the cans of vegetables and things so we actually have the sticker things that we put on the cans of vegetables, in the boxes of wheaties and so on. my challenge arthur when i would come into work was to try to get the higher price down before somebody could take the we aesop the the lower price because prices are rising so quickly. people forget about that era of raging inflation. the inflation rate in the 1980's came down from 14.5% in 1980 by

the end of 1982, down to 3%. that is something almost no economists thought was possible and over that whole next 25 year period inflation was in what we call the swedes zone, the two to 4% range where the dollar gained its value. his goal was to make the dollar as good as gold again and that certainly happened in the 80s and 90s in 2000. by the way, it's just as an aside we think the whole period of 1982 to 2007 was the greatest period of prosperity perhaps in the history of the world as far as asset values in 1984 valued by the federal reserve board at $18 trillion by 2007 valu-jet $58 trillion so we sought a 40 trillion-dollar increase in wealth over that period which is a pretty amazing ride. yes we lost 10 trillion of that in the last six months but still

were way ahead of the game especially if we can turn things around. the jobs, it is a pretty amazing story of what happened to the jobs in the united states over the period of 82 to 2007. united states readed 46 million new jobs over the whole period which is three times as many jobs as all of europe and japan created at the same time. if you look-- people's the yaf sure was a great boom but only the rich prospered. the amazing thing is that the look of household well, it more than doubled over this period. if you look at the range of things people have today that they didn't have as recently as 1980, one of the things that makes me so angry is this idea, the middle class does not have as high of a living standard. they made no gains. at the look of the kinds of things people left today versus what they had in 1980, everything from cell phones to ipod's and all of these things

that didn't even exist in 1980. and factor loved to tell the story, i was watching this movie, wall street, remember that movie with michael douglas. there's a famous scene, michael douglas plays the part of get off in that movie was made in 1986. there's a famous scene where he picks up the cell phone and it is like a brick with little antennas coming out of it. the amazing thing about that, so we brought back a list of the prices of these things come in 1987 the price of its cell phone was $4,600. it was only things that rich people have now the tomoka of them away for free. this was a real prosperity and it wasn't just reagan. it was reagan, paul volcker, bill gates said yes it was bill clinton. we were big fans of what big club-- bill clinton did on the economy. we did the wealth former-- welfare reform. he bones the budget by 2000. i would like to see more of bill

clinton and barack obama's policies burkle one of the things that concerns us is that the democratic party is not the new democratic party and the lager. it is an old democratic party. and that the democrats talked over and over about how this is a new, new deal. this is the last thing i will say and then i will turn it over to arthur. we have a chapter in the book about the great depression and this is one of the things that is so troubling to me, is that we can't even agree on what happened in the past little on what we should do in the future. if you look of the new deal, just look of the objective evidence in we debate our friend robert reich tulis secretary of labor, and a good guy. he keeps talking about what a great success the new deal was. he talked in the book about what really happened during the 1930's. in fact of, by 1940, the only statistic that will give you about the great depression but eight years after the new deal

was launched, the unemployment rate in the united states was 15.1%. it is hard to believe anybody could say this was a successful program when one out of seven americans for still unemployed after eight years of this program and yet this is still held up as a model for the u.s. in 2000-- 2009 and beyond. i'm going to end by simply saying this. people's me, what is fun to happen with the economy? i think this program will fail, unfortunately. i would like to see it succeed but the whole premise of "the end of prosperity" is that ideas do matter. the good this is the americans have, people have short attention span. they have-- we live in an instant gratification sidey. year from now the economy is not substantially better i think americans will say, what comes next? i think we will get back to the kind of policies that that will cause greater prosperity. if we do that i think america's

well poised for another 25 to 30 year run of great increases in wealth and prosperity. so, arthur i will turn it over to you but i just want to say it was so much fun writing this book with you and peter and we have got to do another one again. [applause] >> the one thing i always liked about friedman and robert reich, they would always raise the microphones after they spoke. it is not that funny, cool it. if i can i just want to remind you of a story. of is the first chief of economist manatt omb was formed. iowa's george shultz's reihan person and these numbers are big numbers back then, at least we thought they were. i wrote my mom and told my mom and a number that is 49 million or less we barone's to zero. [laughter] 100 million was .1. which gives you a flavor.

know what is that? bill safire back then have the greatest phrase. he called it may go numbers which he spelled mego which he claims stood four, my eyes glaze over. i want to make sure that steve and peter both mention this but let me mention it seriously. it is not about personalities, not about people. it is not about any of that stuff. it is very political but it is not partisan what we do. we all love bill clinton has the president. i voted for him twice and i want you to understand that i thought he was a disgusting person but i thought he was a great president. mike was that the had been elected he still probably would have been a disgusting for some but we would have lost all the benefits of its leadership of president of the united states. i mean that seriously. especially in this administration, this man, barack obama is one of the most impressive human beings i have

ever seen in my life and politics. i am awestruck. he is an awesome man. he represents so much that is wonderful about our country. a black african father, a white american mother, if that is not the melting pot i don't know what it is. raised in a very nurturing wonderful environment. he went to columbians university, did extraordinarily well. he then went to harvard law school where he was head of law review. you don't get that by affirmative action. you have got to be really good. he then taught at the university of chicago where i taught for most of my life and i can assure you only geniuses are on the faculty there. [laughter] just having fun but this man is really cool. not only that, if you look at his family, kulick at michelle obama. she is not only gorgeous, she is a professional and they have the to the cutest, loveliest family.

this is ozzie and harriet on steroids. if you try to find an american hero barack obama would be at the top of the list. this has nothing to do with barack obama as a person. i am literally very impressed by this man. my view is and then share it with my two co-authors, i think he is wrong on every single issue and it is not because he is not a good guy. he is a good guy but my view is ultimately economics will take over. there are lots of examples, but the what i want to do with you is very simply what it the appointment on the energy and environment issue. fox as me to be there correspondent to respond to the appointments that obama was making to energy and environment, so i was the guy sitting there and the president came up and announce them and as you know chu was elected as head. chu's portfolio is beyond belief. he is professor stanford

university in high energy physics. use thought only professor, he is chairman of the physics at stanford where i got my ph.d.. not only that, he is go to nobel prize in physics. this guy as credentials to the end of the earth. he introduced chu and then chu was followed by carol browner. as you may know she was the impression person for clinton, and then was followed by think it was lisa jackson, one of the-- governor schwartzenegger's people in this. ewind theroux the resumes and it was beautiful. he announced his policies that this a demonstration is going to go along with science and when he hesitated with that word science, there was an application no one had heard of it but that he was going to go along with science and then said that we wanted to have energy independence. we were worried about the environment, the research and the globals the.

and then chu came up and he too mention science many times and hesitating. the words came out, hit the table and crawled towards you. let me if i can go little bit on the energy policy. one of the goals of this adminstration is energy independence and of course i am an old german. i am an economist. i worry about how things get put together, the capitol resources and how people get them so in comes-- i am braded bachman dang, boring stuff and i'm just an old journeymen. when i hear someone talk about energy independence, that is almost a rope-a-dope mistake. let me if i can just describe this because this is david ricardo. i don't know of any of you have heard that the gains from trade in david ricardo. if i look at the world i see the middle east has tons and tons of oil and they don't know what to do with it. i look at the u.s., we know what to do with that and we can always use more.

the simple thing is we and they are both better off by them selling us oil and we using it. and independence is one of the dumbest idea as i have heard my life. it denies all the gains from trade. it is just plain in economic terms, stupid. if i look at this thing, every president since eisenhower, so does not just obama, every presidents as espoused the idea of energy independence and of course every year we have become more and more dependent on foreign energy which is a negative thing. it is a wonderful thing in my eyes. i think it is the silliest thing to imagine minnesota growing bananas. they should buy bananas from costa rica and sell costa rica iron ore. that is the gains from trade. when i look at this, it is just comparing to david ricardo. that is economics 101 stuff and an advocate this thing and i imagine the world or the u.s. is independent. today we import 52% of the oil

we use. can any of you imagine what the united states economy would look like today if we were denied the use of 52% of the current oil we use? with the price of a gallon of gas be? it is crazy, silly, these guys don't know straight up from succumb when it comes to basic economics. it is a catastrophic set of policies. if you look at this stuff in look at this means in trade and of the articles, they respond arthur, you don't understand. the people who on the oil and to have that are bad guys. and i will stipulate that. they are bad guys. i stopped going to beach parties with hugo months ago. i did not played doubles in tennis with ahmadinejad for a while and i am no longer sharing my-- with vladimir putin. i am sick and tired of these guys and i don't like them either but did they not understand the bhagwati theory?

this is named after bhagwati at columbia. you never use trade as a political weapon. dew just -- if embargoes worked, north korea years ago would become a free market capitalist nation. it doesn't work. i am if embargoes wert cuba would have been free market, pro-growth as well. it would seem the truth, beauty and light of the american way. zimbabwe did not be there. and farkas don't work but when embargoes do to is the cause your country as much damage as the country yum vargo. what these people are proposing with trying to punish these countries, what they are proposing is that we don't want to rely on these bad people because they might cut us off, so what do we do in exchange for the threat that they might cut us off? we cut ourselves off.

it does that make sense to you? it is like a guy at 24 realizing some day he is going to die and he was so upset he shot himself. it is guaranteed that solution is worse than the actual problem. you know, using the bhagwati theorem, we have ways of dealing with that government. very simply we have the bully pulpit. the president can go up there-- that doesn't work we have got another department which deals with that. it is called the state department. we have that the shays and all these sorts of things. if that does not work, we have a big one. it is a defense department. weech issued them. you never use trade as a weapon and these are basic, simple mistakes that are of enormous consequence. and i don't mean to belittle this administration. it is not just these