“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
“The Knuckles Are Dragging Again”: The GOP Follows Sen. Sessions—Backward
If you want to see where the impulse to reform the Republican Party in a more libertarian direction of limited government, social tolerance, and free markets goes to die, look no further than the recent attacks on immigration and freer trade by Jeff Sessions, the influential senator from Alabama. Every time the GOP seems finally ready to orient itself in a forward-looking, post-culture-war direction, some holdover from an America that never quite existed to begin with blows his whistle and the next generation of would-be party leaders fall into line like the obedient von Trapp children in Sound of Music.
Indeed, Scott Walker has explicitly attributed his remarkable flip-flop on immigration to conversations with Sessions. Just a few years ago, the Wisconsin governor and leading Republican presidential candidate used to favor liberal immigration and a path to citizenship for illegals. Now he’s calling for “no amnesty” and universal, invasive, and error-prone E-Verify systems for “every employer…particularly small businesses and farmers and ranchers.”
The three-term, 68-year-old Sessions is “the Senate’s anti-immigration warrior,” according to Politico, and he wants to curb not just illegal and low-skill immigration but also the number of folks chasing the American Dream under H1-B visas, which apply to “workers in short supply” who are sponsored by specific employers with specialized needs.
In a recent Washington Post op-ed, Sessions complained that “legal immigration is the primary source of low-wage immigration into the United States.” Exhibiting the zero-sum, fixed-pie economic thinking that conservatives and Republicans routinely chastise in liberals and Democrats, Sessions continues, “We don’t have enough jobs for our lower-skilled workers now. What sense does it make to bring in millions more?”
His solution is a time out on foreigners, “so that wages can rise, welfare rolls can shrink and the forces of assimilation can knit us all more closely together.” Only “the financial elite (and the political elite who receive their contributions)” could possibly object, argues Sessions in full populist mode. Immigrants keep “wages down and profits up….That is why [elites] have tried to enforce silence in the face of public desire for immigration reductions.”
Sessions brings the same populist and anti-immigrant animus to his critique of the Trans-Pacific Partnership (TPP), the trade deal the Obama administration is brokering between the United States and 11 other countries. Sessions, along with progressive Democrats such as Sen. Elizabeth Warren and Martin O’Malley, only see the shadowy machinations of elites at work in the reauthorization of Trade Promotion Authority (TPA) or “fast-track” negotiations.
Such rules, which have been standard operating procedure since 1974, allow the executive branch to negotiate terms and then bring the deal to Congress for an up or down vote. Citing “the rapid pace of immigration and globalization,” Sessions wants not “a ‘fast-track’ but a regular track.” He, Warren, and others charge that negotiations under TPA are “secret” and are somehow selling out basic American “sovereignty”—despite the fact that any deal will be voted on by Congress.
Sessions will lose the vote against TPA, just as the Republicans will ultimately lose the battle over restricting immigration. Contra Sessions, there is no clear public desire for reducing immigration, except among Republicans. Fully 84 percent of Republicans are dissatisfied with the current generous levels, a super-majority that only shows how out of touch the GOP faithful is with the rest of the country. Earlier this year, Gallup found that 54 percent of Americans are either satisfied with current levels of immigration or want more immigration. Just 39 percent were dissatisfied and want less immigration, which is 11 points lower than the same figure in 2008.
The majority of Americans embrace immigration for a lot of different reasons. Part of it is our history and sense of national identity and part of it is a basic if unarticulated recognition of what economists on the right and left have consistently found: “On average, immigrant workers increase the opportunities and incomes of Americans.”
Leave aside the fact that immigrants are twice as likely to start their own businesses as native-born Americans. The fact is they tend to be either higher- or lower-skilled than the typical worker, so they complement rather than displace natives. And, as the Cato Institute’s Alex Nowrasteh documents in his exhaustive rebuttal to Sessions’s Washington Post piece, immigrants not only consume less welfare and commit less crime than the average American, they pay taxes (often without any hope of getting the money back) and stop coming when the economy sours. If you think immigrants cause problems, check out the parts of the country that nobody is moving to and you’ll understand that it’s precisely when migrants stop coming that your real troubles are starting.
Sadly, lived reality holds little appeal for Sessions and Republicans such as Walker, who are instead doing their damnedest to turn the party of Ronald Reagan and George H.W. Bush decisively against its long and glorious history of relatively open borders and freer trade. In a remarkable 1980 debate between Reagan and Bush I, the two candidates for the GOP nomination literally outdid themselves not simply in praising legal immigrants but illegal ones: https://youtu.be/Ixi9_cciy8w.
In the 2012 election, Mitt Romney pulled just 27 percent of the increasingly important Hispanic vote. That was despite the fact that Barack Obama is, in Nowrasteh’s accurate term, “Deporter in Chief” who repatriated more immigrants far more quickly than George W. Bush. Hispanics aren’t stupid—44 percent of them voted for immigrant-friendly Bush in 2004. They knew things could always get worse and probably would for them under Romney.
With 2016 coming into clearer and clearer focus—and with Hillary Clinton doing her own flip-flop on immigration and now embracing newcomers—the GOP and its presidential candidates have a choice to make. They can follow Ronald Reagan’s example and embrace libertarian positions on immigration and free trade. Or they can follow Jeff Sessions’s retrograde populism and see just how few Hispanic votes they can pull.
By: Nick Gillespie, The Daily Beast, May 12, 2015
“Florida Gov Scott No Help In Time Of Crisis”: When The Going Gets Tough, Rick Scott Heads Straight For The Airport
Florida Gov. Rick Scott removed his Harry Potter invisibility cloak and flew to Washington the other day.
There he begged for billions of federal dollars from a person he is suing, Sylvia Burwell, the secretary of the Health and Human Services Department. Burwell patiently listened to the governor and, predictably, sent him back to Florida with nothing.
Last summer the feds informed Scott that the government was phasing out a fund that reimburses local hospitals for taking care of low-income patients, basically replacing it with an expanded version of Medicaid.
At first Scott was in favor of the Medicaid move, even though it was a tangent of Obamacare. Then the governor changed his mind. Later, as an afterthought, he sued Burwell and the HHS.
The state Senate supports Medicaid expansion; the House doesn’t. Tallahassee has been paralyzed by the dispute.
In a snit, the House packed up and adjourned the session early, leaving Florida with no budget. Leaders in the Senate were furious.
Remember, these are all Republicans, ripping at each other like addled meerkats.
And where was the newly re-elected Republican governor, leader of the party?
Gone, is where he was — jetting to crucial functions such as the grand opening of a Wawa gas and convenience store in Fort Myers and the debut of a humongous Ferris wheel in Orlando.
It’s impossible to imagine any of the fully functioning governors in Florida’s past — Lawton Chiles, Bob Graham, Jeb Bush, to name a few — vanishing from Tallahassee during a Code Red meltdown of the Legislature.
But Scott isn’t a functioning governor. He is the emptiest of empty suits — no talent for leadership, no muscle for compromise, no sense whatsoever of the big picture.
When the going gets tough, Scott heads straight for the airport. This is what happens when you elect a guy with his own private jet.
Last week’s trip to Washington was pure theater. Scott’s lawsuit over the low-income health funds is a loser, and he knows it. He was trying to do something to give the impression he was awake and experiencing cognitive activity.
In fact, he has been laser-focused on the future — not Florida’s future, but his own. He’s looking ahead to a possible bid for the U.S. Senate in 2018.
(We’ll pause here while you choke on your cornflakes.)
It’s astounding but true — while the legislative process disintegrated in bitter confusion, the governor was airing TV commercials cheerily touting his imaginary accomplishments.
Yes, they were short commercials. And, yes, little of what he claimed to have done for Florida had actually happened, lawmakers having already tossed his proposed budget into the metaphorical Dumpster.
There were no tax cuts, no hefty increase in spending for public schools, no big boost for Everglades funding. Yet Scott’s commercials made it sound like a done deal.
Relax, Florida. All is well!
Perhaps that’s how it looks from 38,000 feet, though not from the rotunda of the Capitol.
It’s weird for a politician to openly resume campaigning so soon after being re-elected, but weird is the norm for the Scott administration. Since the law prohibits a third term as governor, he can only be thinking about Bill Nelson’s Senate seat.
This would be a far-fetched scenario almost any place except Florida, where Scott has already proven that, if you’re rich enough, there’s no such thing as baggage.
Currently he remains one of the state’s most unpopular political figures. He won the November election mainly because his opposition was Charlie Crist.
Yet with money from his “Let’s Get To Work” political committee, the governor has begun the uphill task of inventing a positive legacy upon which to run three years from now.
In the TV commercials, he plays the role of a hard-charging, hands-on visionary, leading Floridians to prosperity one new job at a time. He smiles. He talks. He is, briefly, visible.
Tallahassee is one of the cities where Scott showed his commercials, yet it didn’t move the needle. He was on the plane when he should have been on the ground.
While the Legislature didn’t need any help disgracing itself, Scott’s disappearing act made things worse by validating the public’s view of all state government as insular and incompetent.
As the House and Senate prepare to reconvene next month, desperately trying to salvage some credibility, the governor seems content with his role on the sidelines, essentially a cheerleader for himself.
Coming soon to a Wawa near you.
By: Carl Hiaasen, Columnist for The Miami Herald; The National Memo, May 11, 2015
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