Theory 2 Action Podcast
Theory 2 Action Podcast
MM#395--How to Grow the Economy, pt 2: Fix America's Economic Engine
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The American economy is running like a race car at half speed, averaging just 1.8% GDP growth over the past two decades when it should be soaring at 3% or higher. This sluggish performance isn't inevitable – it's the result of specific policy choices that have weighed down our economic engine.
Using a powerful race car analogy, we explore how tax cuts function as essential engine maintenance for the economy, while excessive government spending adds unnecessary weight that drags down performance. The current initiatives to trim bureaucratic waste through the Department of Government Efficiency represent steps in the right direction, but decades of congressional neglect in oversight responsibilities have allowed inefficiencies to multiply unchecked.
Monetary policy plays a crucial role as the fuel for our economic engine. We examine Steve Forbes' compelling argument for returning to the gold standard in his book "Inflation" – a policy that historically coincided with America's greatest periods of prosperity and near-full employment. During the late 1800s under the classical gold standard, more wealth was created than in all previous centuries combined. Similarly, both the 1920s and 1960s saw unemployment rates below 5% when the dollar was pegged to gold. While the political will for such a fundamental reform seems absent today, the historical evidence suggests we should at least aim to keep inflation consistently below 3%.
As we approach America's 250th anniversary in 2026, we have a unique opportunity to implement policies that will restore robust economic growth. By properly maintaining our economic engine through tax cuts, providing clean fuel through sound monetary policy, and removing excess weight through spending discipline, we can get America's race car humming at full capacity again – creating opportunity and advancement for all Americans. What policies do you think would best accelerate our economic growth?
Key Points from the Episode:
• Tax cuts are essential to fix the economic engine and bring investment back to America
• Excessive government spending acts as dead weight on the economy, requiring immediate reduction
• Agencies often stonewall congressional oversight, perpetuating waste and inefficiency
• Steve Forbes advocates returning to the gold standard to eliminate inflation and stabilize currency
• During gold standard periods, America experienced robust growth and near-full employment
• Whipping inflation requires supply-side solutions rather than just interest rate manipulation
• The US needs consistent 3%+ GDP growth annually, not the 1.8% average of the past two decades
• Tariffs and trade policy are like tires - important but not the first priority for economic repair
• The Federal Reserve's fuel quality (monetary policy) needs significant improvement
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Welcome to the Theory to Action podcast, where we examine the timeless treasures of wisdom from the great books in less time, to help you take action immediately and ultimately to create and lead a flourishing life. Now here's your host, david Kaiser.
Speaker 2:Hello, I am David and welcome back to another Mojo Minute and to our continuing series on how to grow the US economy. In our last podcast we talked about how the economy is very similar to a race car and, frankly, sometimes it's easier to think of that word picture of our US economy, that of a race car, and not get bogged down in all the economic terms and the jargon and to simply, or rather just to keep things simple. So it's with that spirit that we are going to create, in our mind's eye, our American race car, and then we're going to think of the economic term and notion of tax cuts as a stimulant and the needed maintenance to the race car's engine that keeps our US economy running smoothly. Now, coupled with that, we're going to believe and think of debt and government spending as extra weight on to that American race car, slowing it down, bogging it down, and to get things moving we need to lighten the weight, we need to lighten the load, and Elon Musk is hammering this area with his Doge team right now numbering around some 100 folks, but Mr Musk believes he can build out the team with a number closer to 200 folks, which is a good thing. Plus, we got the cabinet secretaries, who are all bought in and are starting to cut out the waste, fraud and abuse in the US economy and government. So we are lighting that load on the American race car, and all of that is good.
Speaker 2:Frankly, it should have been done for the better part of the last 75 years, but under the title of congressional oversight, congress has long abandoned its primary and vital role of performing any oversight on any of these agencies. Or if they do, then the agencies themselves stonewall and don't produce the needed documents of which to perform said oversight. So it's just a vicious, nauseous cycle and we don't get anywhere and meanwhile our American race car, our US economy, just gets bogged down with more weight and more burdens. It doesn't need Now to keep things moving. Tariffs and trade policy are like the tires on our American race car. They're essential, sure, but there are other parts of the car that need fixing first, and since right now the tires are not flat, we can deal with them when the time is right. Should we keep an eye on them? Absolutely, need the tires to work, and Trump is right to push for fair trade over free trade, definitely, but should the tariffs happen right now? Probably not. We should and need to get our priorities straight and honestly. You might already be seeing this happening just in more subtle ways. Right now the House and Senate are like two family members arguing over whether to fix the American race car or not. But given how fragile the economy is, we really can't afford to skip the repair. The longer we wait, the bigger the problems could get. So our suggestion is, by focusing on tax cuts first, basically fixing the engine. The US economy will start to run more smoothly. That will bring investment back to the engine. The US economy will start to run more smoothly. That will bring investment back to the country. Kind of like putting good oil into the car and once the economy starts to pick up some speed, get some momentum. It's going to give the president far more leverage to negotiate better and fairer trade deals, like fixing the car's tires.
Speaker 2:Now, one thing the president can't control is Jerome Powell's money supply. That's our infamous Fed chairman. Think of that like the quality of the fuel that we're going to put in the tank of the American race car. You know, back in the 70s and 80s Ronald Reagan got a big boost. He got very good fuel from Mr Paul Volcker and his work at the Federal Reserve to get the economy back on track. Powell's been at the Fed chairman seat for seven years now and he's going to need to step it up to make a real difference. So far he's been lackluster. Frankly, we need another Paul Volcker, don't we Time to fuel up with the quality of that fuel for the next four to eight years, and Powell's term is set to expire on May 15th, 2026. So we will see. Now, way back in 2022, we covered the great economist Steve Forbes and his wonderful book on inflation Inflation, what it is, why it's bad and how to fix it, co-authored with Nathan Lewis and Elizabeth Ames, and that book is our book of the day. So let us go to our first pull quote. So let us go to our first pull quote.
Speaker 2:The best way to end inflation and to spur economic growth is through a return to a sound dollar anchored by gold. A gold standard simply links the greenback to gold, in much the same way that dozens of countries today link their currencies to the dollar or the euro. The US relied on a sound dollar for nearly two centuries and it became the wealthiest country in the history of the world. Remember, money is, above all, a measure of worth. We should no more manipulate the dollar's value than we should float the number of inches in a roller, and yet we have, with disastrous results. The last 50 years of the inflationary Fed policies in the floating fiat dollar has seen slower growth and more economic crises. According to one study, their frequency has doubled since the early 1970s compared with Brenton Woods in the classic gold standard periods. That study was conducted before the financial meltdown in 2008.
Speaker 2:With a gold standard, there would be no inflation full stop. A gold standard simply means that money has a fixed value and can fulfill its intended function as a trusted unit of worth. Stable money and no inflation would mean more investment and a soaring economy. During the late 1800s era of the classical gold standard, when the US, england and most of Europe, and eventually Japan, linked their currencies to gold, more wealth was created during that century than all the previous centuries put together. The United States had what could be characterized as full employment jobless rates of less than 5% during most of the decade of the 1920s and also the decade of the 1960s, when the dollar was pegged to gold. Contrary to what many people believe, you don't necessarily need a large supply of gold to maintain a gold standard. A sampling could be phased in within roughly about 12 months, after which watch the economy take off.
Speaker 2:Now we understand that the Forbes argument for going back to the gold standard makes a ton of sense a ton of sense but frankly, no major party pushes this. There is no political will. And we love Steve Forbes, think he's super smart, think he's excellent on the economy. I even worked for Steve Forbes back on his campaign in 2000. So I'm a big fan of Mr Forbes and his work on supply-side economics. But going back to the gold standard nowadays just seems like a pipe dream because nobody has the political will nor the economic, historical perspective of putting ourselves back on the gold standard.
Speaker 2:Now, donald Trump did flirt with the gold standard talk back in 2016, but his Fed pick, mr Jerome Powell, stuck to the fiat currency trope. And, let's be honest, congress loves spending way, way too much money and the gold standard would force any type of discipline and they would absolutely hate it. We talk often here about Congress. Being a teenager with a credit card and the analogy fits Congress won't cut up their own credit card willingly. Analogy fits Congress won't cut up their own credit card willingly. So, beyond going back to the gold standard.
Speaker 2:What are the other ways to whip inflation? A funny term actually brought back from the 1970s and the goofy buttons that Gerald Ford wore 70s in the goofy buttons that Gerald Ford wore Now. The best way to whip inflation is to choose supply-side solutions over demand-side tinkering, like interest rate hikes alone. The Federal Reserve's reliance on raising rates to depress Japan is just unnecessarily punishing the economy. It's just making people poorer without addressing any root causes. It's the Band-Aid approach. Instead, getting back to Mr Forbes, he suggests stabilizing the currency first, which we talked about, and then boosting production through wait for it, tax cuts, deregulation and free market policies, as we talked about in our first podcast last week. We have the history of the 1980s of doing exactly that, paired with Reagan's tax cuts and deregulation as the model, inflation dropped from 13.5% 1980 to 4.1% by 1988, while growth rebounded heroically, folks.
Speaker 2:So to keep our American race car metaphor going, inflation can either be good fuel or bad fuel that we're putting in the car. It's bad fuel if that inflation is higher than 3% on the CPI index. If you want to bring that down, we want to bring that down rather, but that is not easily done, especially when our government spends way too much money. It's always going to force it higher. It's always nudging it higher. Now inflation could be good fuel into the American race car if it's less than 3%. So right now we're hovering about 3% on the CPI index. We need to stay there or get below to get the economy humming again and get us the good fuel in our American race car and get us the good fuel in our American race car.
Speaker 2:So in today's Mojo Minute to grow the economy, we need the right policy mix to make our American race car come roaring back on the track. We need to achieve GDP growth annually of 3% or greater. Say that quickly 18 times GDP growth. Domestic product growth annually of 3% or greater that has to be our goal Year over year over year growth. We can't have 3% one year and 1.8 the next year, and 3% the next year and 0.2% the following year. We need year over year over year growth. That is how our American race car can get to be buzzing around 150 to 200 miles an hour around the track. For the last two decades we've achieved less than 3% each year, which is garbage. That's a garbage economy. The American race car needs to be buzzing at. Like I said, 150 to 200 miles an hour. That's GDP growth above 3%. And right now, for the last two decades, we've been averaging 1.8%. That's the American car barely moving around the track at below 100 miles per hour, barely moving around the track at below 100 miles per hour. Now, if that was the case, everyone would look at each other standing around the track and say, holy smokes, that car is going away slow. What's wrong with it? We can do much, much better. Look, there's all these other cars that are just buzzing around, no problem. Well, we can do much better and we can do much better with the right policy mix.
Speaker 2:Tax cuts equals our car's engine. Deregulation is all the belts and hoses in the car Got to keep them fine-tuned. Continue to cut government spending, like Doge is doing. That is taking the extra weight off the car. Ensure inflation stays below 3% that's a good fuel supply. And address the trade war, but not immediately. Tariffs and trade are the tires on the car Important and essential, but if it's not flat, let's just fix the engine first and let's get that weight off the car. Let's just fix the engine first and let's get that weight off the car. Now. Coming soon, in little over a year is the 250th anniversary of our country, july 4th 2026. Let's pray that we have done the good work now to get the American race car humming again, hopefully on all eight cylinders and as always let's keep fighting the good fight.
Speaker 1:Thank you for joining us. We hope you enjoyed this theory to action podcast. Be sure to check out our show page at team mojo academycom, where we have everything we discussed in this podcast, as well as other great resources. Until next time, keep getting your mojo on.