“What The Godfather Of Reaganomics Gets Wrong”: Wink, Wink, Nudge, Nudge; More Distorted Reagan Nostalgia
Chris Christie just announced a big tax-cut plan. Well, of course he did. Offering such proposals is de rigueur for Republican presidential candidates. And it pretty much has been since the Reagan presidency.
No surprise, then, that Arthur Laffer, intellectual godfather of the Reagan tax cuts, remains in high demand on the right. Many GOP 2016ers — including Jeb Bush, Scott Walker, and Ted Cruz — have been publicly consulting with the supply-side economist who continues to joyfully preach the wonder-working power of cutting top marginal tax rates.
But Laffer is, shall we say, less than enthusiastic about my recent column here at The Week, in which I argued that some presidential wannabes were misinterpreting and misapplying the lessons of Reaganomics. As I wrote a few weeks back:
Republicans sometimes misuse Reaganomics to justify fantastical tax plans that promise deep rate cuts for the rich — both Cruz and Paul favor low-rate flat taxes — that will pay for themselves and boost the middle class through explosive economic growth. … Republican policymakers and voters have little reason — either from historical experience or empirical studies — to assume tax reform will generate a prolonged period of 4-5 percent GDP growth such that concerns about budget deficits and income distribution are irrelevant. [The Week]
In other words, a flat tax won’t supercharge growth enough to prevent us from losing big bucks. This is a rather modest claim and critique, one perfectly compatible with the idea that the Reagan tax cuts were still good policy. Reaganomics was a home run — just not an impossible five-run dinger.
My comments are also compatible with the consensus among economists on the left and right. Yet Laffer felt compelled to respond to my article with a three-chart, five-page, 2,000-word rebuttal.
Laffer is one of the most important public policy entrepreneurs of the 20th century, right up there with John Maynard Keynes and Milton Friedman. His official bio asserts his work was responsible for “triggering a world-wide tax-cutting movement in the 1980s” — and that is no vain boast. His famous Laffer Curve — an illustration of the trade-off between tax rates and tax revenue derived from the ideas of philosopher Ibn Khaldun — is indeed one of “the main theoretical constructs of supply-side economics.”
So it is disappointing that Laffer, in responding to me, offers such an odd, airy, and ultimately unnecessary defense of his life’s work. For instance: While Laffer doesn’t explicitly say the Reagan tax cuts paid for themselves, he doesn’t say they lost revenue, either. Yet he spends hundreds of words countering my claim that they didn’t pay for themselves. What Laffer basically argues is that since (a) income tax revenue rose during the 1980s, (b) the rich paid a higher share of GDP in income taxes, and (c) there were more employed people as a share of the entire adult population, then that must mean the tax cuts paid for themselves. Except he doesn’t actually say that. “Well, I hope you get the idea” is how he puts it. Wink, wink, nudge, nudge.
Put aside for a moment that Laffer mostly avoids my evidence, such as a Treasury Department study concluding the Reagan tax cuts lost $200 billion a year and one by former Bush II economists that found income tax cuts only recoup a sixth of the revenue they lose through higher growth. A bigger flaw in Laffer’s argument is that he ignores everything else happening in the U.S. economy during the 1980s. Tax rates matter plenty — Laffer’s key insight — but they aren’t all that matters. Laffer ignores the big role of easier monetary policy in driving the recovery after the awful 1981-82 recession. And, yes, the employment-population ratio rose in the 1980s — as it did in the 1970s. Did the Reagan tax cuts cause the Baby Boom, too? Laffer also ignores the revenue impact of $115 billion a year in 1980s tax hikes and how the Tax Reform Act of 1986 nudged rich people to shift how they took their income to the personal income tax base from the corporate one. Laffer ignores a lot as he attempts to make a stronger-than-necessary case. The economist doth protest too much.
Laffer’s other big objection is that I downplay the growth effects of the Reagan tax cuts by cherry picking dates. Since the tax cuts did not go fully into effect until 1983, Laffer argues that’s the appropriate start date for the Reagan boom. Indeed, real GDP grew at a snappy 4.5 percent annually from 1983 through 1988. But Laffer’s timing is problematic. The recovery likely would not have been as strong if not for the 1981-82 recession itself. Sharp recoveries after downturns were the rule of the postwar era through the 1980s. And since the 1981 downturn was the deepest, a strong rebound would be expected. For example, the economy grew by 5 percent during the first two years after the awful 1973-75 recession.
Again, none of this means the Reagan tax cuts failed. It would be hard to find a reasonable economist who denied they boosted growth in the 1980s as the Fed battled inflation. The effects just were not ginormous enough to fully offset the direct revenue loss. More importantly, perhaps, Reaganomics — tax cuts, deregulation, entrepreneurial optimism — changed America’s longer-term economic direction. Economist Michael Mandel contends that “the impact of the policies Reagan set out in the 1980s, which slowly worked their way through the economy, helped lay the groundwork for the Information Revolution of the 1990s.” So, yeah, you can give Reagan a bit of thanks for your smartphone.
This is the data-driven, evidence-based analysis Laffer and other old-school Reaganauts should be making to today’s GOP and center-right movement. The real Reaganomics. With fantasy tax plans again abounding on the right, the presidential race could use a reality check more than more distorted Reagan nostalgia.
By: James Pethokoukis, The Week, May 13, 2015
“A Pointless Exercise”: The Iowa Caucuses Are A Big Fat Joke, And Jeb Bush Is The Only One Laughing
Jeb Bush’s heartless betrayal has sent shockwaves through the presidential race. I’m not talking about his advocacy for Common Core educational standards, or his disturbing habit of talking about undocumented immigrants as though they were human beings. No, it’s the news that broke Monday: Bush will not be competing in the upcoming Iowa Straw Poll this August.
The chairman of the Iowa Republican Party was predictably contemptuous of Bush’s excuse that he’ll be going instead to a different gathering of Republicans in Georgia: “We don’t buy this excuse and neither will Iowans,” he said. Et tu, Jeb?
How on earth could Bush ignore the Straw Poll, an event whose winner four years ago was future non-president Michele Bachmann? It may be because Bush is lagging in the Iowa polls and he’s worried he’ll do poorly. Or it may be because the Iowa Straw Poll is a pointless exercise.
In fact, everything about Iowa’s role in the presidential election process is absurd, and I say that as not only someone who reads, thinks, and writes more about politics than any sane person ought to, but also as one who counts actual Iowans among my friends.
Iowans are, as a whole, fine people — as much as any other state’s residents. But do they really deserve the power we give them every four years? Granted, some state has to hold the first presidential contest, but the fact that it’s in a state with a comical election system and where the overwhelming majority of voters can’t be bothered to make it to their state’s contest is particularly maddening.
You’d expect that with a dozen or so presidential candidates practically moving to the state so they could meet each and every voter in all of Iowa’s 99 counties, turnout in the caucuses would be high. No such luck. In 2012, turnout was a measly 6.5 percent, meaning 14 out of 15 Iowans didn’t vote in the caucuses. While it’s true that only one party had competitive primaries that year, even in 2008 when there were tight contests in both parties, it topped out at 16 percent. Not exactly an inspiring show of their commitment to democracy.
Part of the explanation may lie in the fact that caucuses are time-consuming and involve standing around in a high-school gym while people give speeches, then moving about in little gaggles according to your favored candidate. Whatever old-timey nostalgic thrill that might give you, it’s undeniably a hassle compared to just pulling a lever or punching a chad. Nevertheless, don’t you think that if multiple candidates had literally shown up to your house to beg you in person to choose them, you’d manage to make it out on caucus night?
That’s not to mention that the event next February is actually merely the first step in a ridiculously baroque multi-stage process. What Iowans will be selecting on that evening is precinct caucus delegates, who will later go to the county convention (remember how there are 99 counties? Yeah, that means 99 conventions), and from there to the district convention, after which it’s on to the state convention (can you feel the excitement building?) where they’ll actually select the delegates who’ll go to the national convention next summer.
You’d be hard-pressed to offer a persuasive explanation for why they bother with all that, and more importantly, why the rest of us should care. But Iowa is first (and will stay that way, because there’s a state law mandating it has to be), so candidates will continue to troop through the state, testifying to their affection for the “heartland” and their love of ethanol, and heading to the Iowa State Fair to consume food on a stick.
(Permit me a brief digression: Sadly, deep-fried butter on a stick — in which, yes, an entire stick of butter is battered and deep-fried, then stuffed down your food hole — is for some reason no longer on offer at the Iowa State Fair as it was for a brief but glorious period. Last year’s fair did, though, feature no fewer than 69 food-on-a-stick options.)
You can understand why politically involved Iowans are so protective of this process. After all, if you’re a Republican precinct captain in Oklahoma or Rhode Island, you’d no doubt love to have Scott Walker and Marco Rubio sit at your kitchen table and tell you how important you are to their campaign. But the real fault lies with the news media, which looks at the results of this bizarre contest and decides that it’s actually freighted with meaning about the will of the electorate.
Perhaps it’s because after months and months of covering a campaign without any concrete results, they can’t help but go a little nuts over the first actual votes anybody casts. But they play an inane game of expectations — setting them, interpreting them, and spinning them — to try to enhance the uncertainty and drama. At the end of it, some candidates will be said to have failed to meet expectations and thus be consigned to permanent loserdom, their campaigns no longer worthy of attention, while others will be elevated on high (only to be pulled down soon after). Imagine if we reported sports that way: “Analysts are calling the Red Sox the clear winner in last night’s contest after they came within two runs of beating the Yankees, whom most had expected to coast to an easy victory. Hard questions are now being raised within the Yankees organization about what the failure represented by this narrow win means for their chances in the fall.”
The only redeeming factor in this whole exercise is that for all the importance the political press puts on Iowa, winning seems to have little relationship to whether a candidate wins his or her party’s nomination, let alone the presidency (as Rick Santorum and Mike Huckabee, winners of the last two GOP caucuses, can attest). Just don’t get me started on New Hampshire.
By: Paul Waldman, Senior Writer, The American Prospect; The Week, May 13, 2013
“Stressed To The Breaking-Point”: House Republicans Aim To Cut Amtrak Funding The Day After Philadelphia Derailment
A New York–bound Amtrak train derailed in Philadelphia last night, leaving at least six passengers dead and more than 200 injured. Department of Transportation and National Transportation Safety Board officials are investigating the reason for the accident, which is sure to be a flashpoint in an ongoing battle to upgrade the nation’s infrastructure.
The debate resumes today: The House Appropriations committee already had plans to mark up a bill on Wednesday that would, among other things, cut funding to Amtrak from $1.4 billion to $1.14 billion. (Britain, for the record, spends $8 billion annually on its rail network.) Not all Republicans are on board with the cuts. Pennsylvania Rep. Ryan Costello, who sits on the House Transportation and Infrastructure Committee, on Wednesday promised he’s “not in that camp” and “if that bill shows a reduction when it hits the floor, myself and others, I think you’re going to see amendments to make sure that there is stable funding on the northeast corridor.”
President Richard Nixon created Amtrak in 1970 to boost passenger rail service, but he made it a for-profit corporation. That’s the cause of many its political troubles today. Amtrak has never been able to turn a profit, and Republicans—who favor a fully privatized rail system—are loath to spend taxpayer dollars on a money-losing operations. They have repeatedly threatened to slash federal funding for Amtrak, which has struggled to make do with what Congress gives it. In an annual report to Congress from February, Amtrak President Joseph Boardman described “critical infrastructure stressed to the breaking-point” that result in “frequent service meltdowns”: “Efforts by Amtrak, the freight railroad industry, and state and local governments to address these problems are thwarted by the lack of adequate and reliable Federal funding to match state and local investments in rail, and to attract private investment capital and facilitate public-private partnerships.”
And yet, rail safety has improved in the last decade. The Huffington Post notes that accidents in 2014 were down 42 percent since 2006. Meanwhile, Amtrak ridership on the Northeast corridor from Boston to Washington, D.C., hit an all-time high in 2014. Amtrak accounts for over three-fourths of air and rail travel between Washington and New York, and two congressman happened to be on the same train last night: Sen. Tom Carper of Delaware, who got off shortly before the derailment, and former Congressman Patrick Murphy, who was on it. Boardman says even the popular Northeast corridor is starved “of the vital capital necessary to maintain and expand upon that success.”
A 2013 report from the American Society of Civil Engineers gives the state of U.S. rail infrastructure a C+, slightly higher than the infrastructure grade for the nation as a whole (D+). By 2040, Amtrak expects traffic in the congested Northeast corridor to quadruple today’s ridership. “To meet future demand in the Northeast Corridor for both Amtrak and the eight commuter railroads that use the corridor, estimated investments are about $10 billion over the next 15 years to achieve a state of good repair and to increase train capacity by 40%,” ASCE writes. “Maintaining adequate track capacity to address expanding passenger and freight needs is among the largest challenges in creating a competitive passenger railroad network.”
Republicans don’t view passenger rail as energy-efficient travel that could only exist with public funds, but a sign of government mismanagement. Mitt Romney, while campaigning in 2012, said, “The subsidy for Amtrak, I would eliminate that.” But passenger rail, particularly the dream of bullet trains nationwide, is exactly the kind of project that necessitates government assistance—just like the transcontinental railroad did. Conservatives may liken it to a boondoggle, but California is constructing the nation’s first bullet train, at an estimated cost of $68 billion, with federal subsidies making up $3.3 billion of the secured funding. Amtrak puts estimates of the amount needed for an East Coast high-speed rail route at upwards of $110 billion. The private sector won’t take the risk on such a high startup cost. Yet, the House appropriations bill is clear: Not only does Amtrak receive less money, but “no funding is provided for high-speed rail.”
In April, the National Journal cited conservative funding battles as a main reason why America struggles to keep its rail functional and lags so far behind Western Europe and East Asia, which have faster, more efficient trains. Tea Party Republicans are responsible for shuttering the 2009 stimulus’ $8 billion in funds to connect 80 percent of the country to high-speed trains—the bulk of which would have gone to California, Florida, Wisconsin, and Ohio. But when Republican governors Rick Scott, Scott Walker, and John Kasich swept into office in three of the four states, they rejected the hundreds of millions of dollars in federal money. The funds were redirected to other transportation upgrades. But Walker later changed his mind, deciding that his state could use $150 million for Amtrak upgrades after all.
By: Rebecca Leber, The New Republic, May 13, 2015
“Jeb Bush Is Terrible At Foreign Policy”: Running As A Bush On Foreign Policy In 2016 Is Folly
There are many reasons George W. Bush was unpopular when he left office. A big one was the Great Recession, which crested and crashed down on the world in his last few months in office. Then there was Hurricane Katrina, the 2005 New Orleans debacle that helped kneecap Bush’s second term in office not long after it started. But the most enduring stain on Bush’s tenure is the Iraq War.
Not only is Iraq still a mess — worse, America’s mess — but the effects of toppling Saddam Hussein are being felt in everything from Iran’s expanding influence in the region to Islamic State’s rise. So it’s odd that former Florida Gov. Jeb Bush, making his case for following his older brother and father into the White House, would double-down on the Iraq War.
Even knowing that Iraq didn’t have weapons of mass destruction, Jeb Bush told Fox News’ Megyn Kelly on Sunday, he would have still invaded Iraq in 2003, “and so would have Hillary Clinton, just to remind everybody, and so would almost everybody that was confronted with the intelligence they got.”
First, let’s dispatch with that pathetic blame-sharing nonsense. Hillary Clinton — if, for some reason, voters had elected her right after her husband — would not have invaded Iraq, and neither would President Al Gore. Both probably would have invaded Afghanistan, because, after all, that country’s Taliban government was sheltering the terrorist group that had just murdered nearly 3,000 Americans, destroyed a cluster of skyscrapers, and damaged the Pentagon.
But Iraq was a textbook war of choice. There was some faulty intelligence, but it was being pushed and exaggerated by a Bush White House that wanted to invade Iraq already. I don’t think that’s even in dispute anymore.
Nobody named Clinton has ever invaded Iraq — in fact, since Somalia’s “Black Hawk Down” incident, Democrats bomb countries; they generally don’t send in ground troops. Two presidents named Bush have invaded Iraq. Voters remember that.
And just how unpopular is the Iraq War now? Last summer, some major news organizations asked voters.
In an NBC News/Wall Street Journal/Annenberg poll from June 2014, 71 percent of respondents said the Iraq war “wasn’t worth it,” including 44 percent of Republicans. A CBS News/New York Times poll from the same month similarly found that 75 percent of respondents said the war was not worth the costs, including 63 percent of Republicans and 79 percent of independents. Another June 2014 poll, from Quinnipiac, was a bit more favorable, with only 61 percent saying that “going to war with Iraq” was “the wrong thing.” In all those polls, the Iraq War disapproval numbers have continued to inch upwards.
The biggest obstacle to a President Jeb Bush was always going to be his last name — a polite way of saying his brother. He knows that. He even jokes about it.
But because of family loyalty or pride, or the advisers he has hired from his brother’s administration, or core convictions, Jeb Bush isn’t willing to throw his brother under the bus. From a tactical standpoint, it must be helpful having a father and brother who have collectively won three presidential elections, but acknowledging in public that George W. Bush is your most influential adviser on Middle East affairs? That’s something different.
Jeb Bush seems determined to win this or lose this as a card-carrying member of the Bush dynasty.
Is that a deal-breaker? Well, people who care about foreign policy often lament that voters don’t. But that’s not going to help John Ellis Bush. Because while most voters probably do vote on pocketbook issues, Republican voters are fired up about foreign policy, especially the sort of engaged partisans who vote in primaries.
And they’re revved up about foreign policy because that’s what Republican lawmakers and politicians and pundits have been attacking President Obama on since the economy improved enough, ObamaCare started showing positive dividends, and Osama bin Laden’s death under Obama’s command became a part of American history.
“Attacking President Obama’s record on Israel and Iran is now one of the biggest applause lines for presidential candidates,” note Josh Kraushaar and Alex Roarty at National Journal, in a write-up on a poll about how Republicans believe 2016 will be a foreign policy election.
Jeb Bush is going to have to step up his game if he wants to ride the GOP’s foreign policy wave. His big coming out party on the subject wasn’t promising — even with his A-list of Bush-linked advisers, he “delivered a nervous, uncertain speech on national security,” reported Tim Mak and Jackie Kucinich at The Daily Beast, “full of errors and confusion.”
That’s something Jeb Bush can fix. After all, none of the Republican governors, former governors, senators, former CEOs, or celebrated pediatric neurosurgeons running against him have much experience with war or international diplomacy or other key elements of foreign policy, either.
But running as a Bush on foreign policy in 2016 is folly. Even if the Dick Cheney wing of the Republican Party pushes him through the primaries, it’s poison in a general election. Jeb Bush has a tough choice to make: Does he want to try to resuscitate his brother’s foreign policy reputation, or does he want a shot at the White House?
By: Peter Weber, The Week, May 11, 2015
“Leader Of The Leave-Me-The-Hell-Alone Coalition”: Rand Paul Is Fighting For Your Privacy—Unless You’re A Woman
“The right to be left alone is the most cherished of rights,” Kentucky senator and presidential aspirant Rand Paul said over the weekend in San Francisco. He was there to sell himself to the young tech elite as a civil-liberties crusader; the only candidate willing to take an uncompromising stand against government surveillance. He cares so deeply about privacy that he’s planning to filibuster the renewal of parts of the Patriot Act.
But the leader of “the leave-me-the-hell-alone coalition” is simultaneously, albeit more quietly, arguing that women should have little privacy in their healthcare decisions. “The government does have some role in our lives,” Paul said at a summit organized by the anti-choice Susan B Anthony List in April, by which he meant making abortion illegal. Paul describes himself as “100 percent pro-life.” Along with all of the other Republican presidential candidates he supports a bill that resurfaced this week in the House that would ban abortion after 20 weeks of pregnancy.
Recently Paul has become something of a champion for anti-abortion groups that are trying to reframe the abortion debate so that pro-choice views seem extreme. Pressed by reporters last month to clarify whether his support for abortion bans includes exceptions, Paul deflected the question by calling up the specter of late-term abortions. “Why don’t we ask the DNC: Is it OK to kill a seven-pound baby in the uterus?” he said to a New Hampshire journalist. No matter that only 1 percent of abortions in the United States occur after 21 weeks of pregnancy; claiming Democrats endorse the “killing” of babies is an easy way not to account for his selective support for personal liberty.
Paul’s hypocrisy isn’t new. Indeed, one of the long-standing ironies of American politics is that the people who decry government meddling in, say, healthcare are the ones calling most vociferously for the government to step in to regulate women’s bodies. As Katha Pollitt noted in Pro, conservatives like Paul never would propose to restrict access to guns, despite the tens of thousands of deaths caused by gun violence in the United States each year. Only when it comes to women does “life” trump individual freedom.
It’s still worth pointing out how inconsistent Paul’s advocacy for civil liberties is (and on issues beyond abortion), since that’s the platform he’s using to distinguish himself. If Paul really believed in “the right to be left alone,” he’d demand that women be allowed as much control over their bodies as their phone records.
By: Zoe Carpenter, The Nation, May 12, 2015
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