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Here is the slide-by-slide documentation for The Supply-Side Story slide show.
(in progress Oct. 10)
2. The Supply-Side “Revolution“
3. How Not to Be Tricked: Everything’s bigger, not just the debt.
4. Go Easy on Reagan
7. G. W. Bush’s promise
8. Debt Confusion Other web sites are still using misleading graphs.
10. The Problem The supply-sider’s stealth agenda
11. What Fooled Reagan The Laffer-Curve “theory”
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| 2. The Supply-Side Revolution
David Stockman, Reagan’s first budget director, considered himself a leftist revolutionary when young, but then became a leading supply-side revolutionary a couple of years before Reagan was elected. In his book “Triumph of Politics,” recounting the failure of the “Reagan revolution,” he frequently refers to the supply-siders agenda as revolutionary — for example, “The GOP rank and file’s reservations about the Kemp-Roth tax cut really bothered me. That was the political gravy — the easiest part of the revolution” (p.55).
During Reagan’s campaign he tells us “Reagan had been converted to supply-side — so for better or worse, Reagan now was the the voice of the revolution” (p. 50).
In the prologue however he tells us “In the final analysis, there has been no Reagan Revolution” (p. 15). In fact he realized this by the end of Reagan’s first year in office. The problem was, that Stockman wanted the budget cut, and that did not happen. Instead only taxes were cut and this produced the huge deficits.
Stockman explains how this happened. “Jack Kemp liked the sound of their [the supply side gurus, Laffer and Wanniski] music on this issue. They were leading him, too, into a shriller and shriller anti-balanced-budget, the-tax-will-pay-for-itself, and deficits-don’t-matter-that-much position” [emphasis added]
And here are some quotes by the press of the day:
“A few of the recently appointed sub-Cabinet officers will be on the cutting edge of the change Reagan has promised for the Federal Government. Their fervent beliefs are a radical departure from the policies of past Administrations, Democratic or Republican. Says one moderate White House aide: “The revolution is happening and nobody is noticing.” –Time Magazine, Mar. 16, 1981.
President Reagan would not be proposing business as usual. The President had in mind what Stockman saw as “fiscal revolution.” –The Atlantic, December 1981.
“Reagan Wins his Budget; the Revolution Begins” –Time Magazine headline, July 6, 1981
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| 4. Reagan’s Promises During his campaign Reagan promised to balance the budget by FY 1983, but on March, 2 1981, Time reports that Reagan changed that to FY 1984. Of course even his FY 1989 was still sending the debt through the roof. |
| 7. Bush’s Promise Was Made More than Once It will retire nearly $1 trillion in debt over the next four years. This will be the largest debt reduction ever achieved by any nation at any time. It achieves the maximum amount of debt reduction possible without payment of wasteful premiums. It will reduce the indebtedness of the United States, relative to our national income, to the lowest level since early in the 20th Century and to the lowest level of any of the largest industrial economies. –PRESIDENT’S BUDGET PLAN: “A BLUEPRINT FOR NEW BEGINNINGS”–February 28, 2001, President’s Message To the Congress of the United States:www.ssa.gov/ history/ gwbushstmts.html ———- Read Mr. Bush’s speech when he presented his first budget in February 2001. He foresaw a $5.6 trillion surplus over 10 years and emphasized that much of that would go to paying down the debt. ”I hope you will join me to pay down $2 trillion in debt during the next 10 years,” Mr. Bush said then, between his calls for tax cuts. ”That is more debt, repaid more quickly, than has ever been repaid by any nation at any time in history.” His budget message that year promised that the U.S. would be ”on a glide path toward zero debt.” –A Glide Path To Ruin, By NICHOLAS D. KRISTOF, June 26, 2005, New York Times. |
| 11. What Fooled Reagan: The Laffer Curve “Jack Kemps bill would keep the income tax progressive by cutting substantially the income tax across the board in every bracket. People would have more of their money to spend as they wish and there would be more for investment to expand our industry. And government would reduce the deficit which causes inflation because the tax base would be broadened by increased prosperity.” —Reagan in his own Hand, p. 277 There are several mistakes here, but the one we are focussed on is the idea that cutting taxes would “reduce the deficit.” This was a completely hypothetical idea put forward by Laffer, and was based on no empirical evidence. This is what George H. W. Bush called “voodoo economics,” and so it proved. Also note that the top rate was cut from 70% to 50% (and then later to 38.5% under Reagan), while the bottom rate was cut from 14% to 12%. It is also wilding wrong to believe that deficits cause inflation, as G. W. Bush recently proved with the the largest deficit every and inflation hitting it’s slowest since the great depression. |
