Meeting with Larry Summers Jude Wanniski May 8, 1997

Memo To: Erskine Bowles, Chief of Staff, The White House
From: Jude Wanniski
Re: Meeting with Larry Summers

cc: Deputy Treasury Secretary, Larry Summers
Sen. Trent Lott, Senate Majority Leader Rep. David Bonior, House Minority Whip Sen. Bob Torricelli

Thank you for arranging for me to meet with the Deputy Treasury Secretary to discuss the recommendations I made to President Clinton in my letter of April 22, 1997 — presidential executive orders to index capital gains taxation retroactively and prospectively and to stabilize the dollar value of our international gold reserves. In the half hour we spent together, we of course could not even scratch the surface of the rational underpinnings to the ideas. Dr. Summers met the ideas with skepticism, but I think with respect. It never occurred to me that he would embrace them without a serious hearing, or he would have already have recommended them to Secretary Rubin and the President. At the very least, he understands that the twin proposals — one monetary, one fiscal — were originally offered by Jack Kemp last June 18 as an economic plan that is basically free of ideological content and could be easily supported by the leaders of the Reform Party as well as the two major parties. Dr. Summers asked that I send the back-up materials in support of the idea. He also gave me every assurance that he would examine them carefully. If such a dialogue occurs, I feel confident that Treasury would see the potential in them for much greater non-inflationary economic growth — with federal revenue flows that would obviate the need for painful cuts in entitlement programs well into the next century.

The fact that there has now been a budget agreement to get the nation past immediate difficulties is all to the good. I believe Dr. Summers understands that I may have a pool of information and analysis that has not been available to the administration. In other words, I was most pleasantly surprised to find him open-minded to the general outline. He was even good enough to tell me that he had read my 1978 book and an earlier 1974 essay and that the ideas therein had influenced his thinking to some degree.

The executive orders address the generational problems you cited today on "Meet the Press." The more economic growth that we can project into the next several decades, the smaller the generational problem occurs. I assured Dr. Summers that I had discussed the ideas several times in recent years with Alan Greenspan, and that the President would find Chairman Greenspan in enthusiastic support of them. Greenspan especially understands that unless and until the United States commits itself to restoring the dollar's link to the real things on the planet, via gold, the entire world will be without the stability that only the dollar/gold link can bring. A European monetary union is out of the question until the dollar/gold link is restored, which I believe is what leads Greenspan to say that the Euro cannot hold together for very long, no matter how good the intentions of Europe's leaders.

Dr. Summers readily agreed that there are too many great, global problems that can only be addressed by the United States, alone atop the world power pyramid. To instead waste time debating "flex time" for daddies and school uniforms for kiddies will be a part of history's assessment of President Clinton and the GOP Congress. The whole world is waiting for guidance from us on how to proceed into the next millennium. President Clinton should be made aware of the opportunities he has to do great and historic things with a few strokes of his pen.