Sunday, November 27, 2011

Elevator Speech econ #1—a rising tide lifts all boats

In 1963, President John Kennedy said in a speech defending his economic policies that "a rising tide lifts all boats."  His speechwriter, Ted Sorenson has assured us that it was a widely used phrase in New England long before Kennedy took it national.  It eloquently sums up a widely held economic view that the more the folks at the bottom prosper, the more the classes above them prosper.

And of course, this economic strategy works.  But when Ronald Reagan's economic guru Arthur Laffer started to use the phrase, he was selling tax cuts for the rich.  Make the rich richer, he argued, and the wealth will trickle down to everyone.  In Laffer's rephrasing, JFK's idea had been turned on its head.  According to Laffer's economic agenda, a rising yacht will lift all tides.

That didn't happen because such an outcome is impossible.  It doesn't happen in the real world and it doesn't happen in economics.  And since the days of Reagan, the rich have gotten wildly richer while the rest of the income earners have seen their wages stagnate or fall.  This outcome is what powers #OWS.

So whenever you hear someone say "a rising tide lifts all boats," you must make sure that the speaker is quoting JFK correctly.  Otherwise you are probably hearing the bastardized version first popularized by Laffer.  It makes a BIG difference.  One leads to successful outcomes—the other does not.

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