Former US Senator Phil Gramm on Inequality Fallacies and How Economic Freedom Creates Growth | Hoover Institution

[upbeat music] This is the Capitalism and Freedom in the 21st Century podcast, an official podcast of the Hoover Institution's Economic Policy Working Group, where we talk about economics, markets, and public policy. I'm John Hartley, your host. Today my guest is Senator Phil Gramm, who served as the US senator from Texas from 1985 to 2002, during which time he served as chair of the Senate Banking Committee. Prior to that, he was a congressman in the US House of Representatives from 1979 to 1985, and prior to that, he taught economics as a professor at Texas A&M from 1967 to 1978. He served as vice chair at UBS. He's a fellow at AEI. He's also the author of recent books, The Myth of American Inequality with John Early and Robert Ekelund, and The Triumph of Economic Freedom with Don Boudreaux. Welcome, Senator Gramm, an honor to have you here.

Oh, thank you. It's an honor to be here. I appreciate your patience, John.

Oh, uh, it's a true honor to have you here, uh, Senator Gramm, and, and I think, uh, it's really, uh, so fantastic to talk to someone who not only is a PhD research economist, uh, a- and, uh, a very decorated one at that, but also, uh, has served, uh, in government, uh, at the highest levels of government, uh, engaged in economic policy. I think it's a very rare, increasingly rare combination, so it's a real honor to have you on and to talk to you about all your thoughts on economic policy, uh, and, uh, what, um, why economic freedom matters and how, uh, we should talk about inequality. Um, I wanna start with your early beginnings. Senator Gramm, you were born in Georgia. Your father was in the military, and your mother was a nurse. What got you interested in economics, and what led you to get a PhD, uh, in it from the University of Georgia?

Well, I, um, I was born at Fort Benning. My dad was a sergeant in the Army. Um, my mother was a practical nurse, and I grew up in Columbus, and, um, I went to the University of Georgia, and I had run out of money at the end of my freshman year and had spent 18 months working, going to school at night, and taking correspondence courses. So when I got back to university, uh, I, m- much of the stuff I'd taken didn't add up to any kind of degree plan. So the first subject that I thought I might be interested in was physics. And so I thought, well, you know, I liked school, and, uh, so I went to my professor, uh, Dr. Runing, and said, "Well, what would you recommend to somebody who was thinking about getting their PhD in physics?" And i- in a level of honesty that I don't think you would have run into by most people who were in an active department teaching, he said, "If you love econo- uh, if you love physics more than anything else in the world, do it, but if you don't, don't. There are no jobs in physics. You'll end up spending, uh, f- 15 years as a postdoc. You may never get tenure." And so I walked out of his office down to the National Science Foundation office, and there on the wall was a poster that showed the starting salaries of PhDs in 1963, and at the top of the list was economics. So I thought, well, you know, economics I think has something to do with the stock market, so I signed up.