Reaganomics and Arthur Laffer’s Supply-Side Wisdom
Review by Steve Parkhurst
“It should be known that at the beginning of the dynasty, taxation yields a large revenue from small assessments. At the end of the dynasty, taxation yields a small revenue from large assessments.”
Ibn Khaldun, a 14th century philosopher, may have been the first person to summarize supply-side economics, some 600 years before Congressman Jack Kemp’s Jobs Creation Act was introduced as legislation and supply-side economics was given its name.
The Pillars of Reaganomics: A Generation of Wisdom from Arthur Laffer and the Supply-Side Revolutionaries, edited by Brian Domitrovic, represents a stellar addition to the supply-side economics library. What Brian Domitrovic has done here is he has taken monumental statements, monumental documents, and he has added some context and some history around them, and he has presented them in pretty much their entire original form.
This deeper, modern day context is really enlightening. And invaluable.
From a title that includes the word “pillars,” this book is exactly what you would expect it to be: Foundational documents that outline supply-side economics. What the title doesn’t tell you is that the commentary included in the book spans time from before Reaganomics (in the form of the Kemp-Roth tax bill), to the early days after passage and implementation, to the post-Reagan Presidency era of George H. W. Bush, Bill Clinton, and George W. Bush.
The content is most interesting because it is taken from papers prepared by Arthur Laffer or his staff from 1978 to the present. These papers consist of material not commercially available, even online in this day and age. I tried to Google some of the materials, and that proved a fools errand. For many years, other than in the Laffer archives, these papers may only be readily available because of the work of Brian Domitrovic in reproducing them.
The Pillars of Reaganomics includes original content from Arthur Laffer, Bruce Bartlett, Warren T. Brookes, George Gilder and Stuart Sweet. These writers, in the course of their scholarship, all offered great wisdom from others in the history of tax policy.
For example, Treasury Secretary Andrew Mellon had this to say in his 1924 book, Taxation: The People’s Business:
“The history of taxation shows that taxes which are inherently excessive are not paid. The high rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business and invest it in tax-exempt securities or to find other lawful methods of avoiding the realization of taxable income. The result is that the sources of taxation are drying up; wealth is failing to carry its share of the tax burden; and capital is being diverted into channels which yield neither revenue to the Government nor profit to the people.”
And there is this gem from Ludwig von Mises in his 1949 book, Human Action:
“Every specific tax, as well as the nation’s whole tax system, becomes self-defeating above a certain height of the rates.”
Somewhat billed as a “running commentary” of the supply-side revolution, this volume does prove to be a running commentary, but it’s also a historical document full of historical context. Even saying that could possibly do it injustice in the sense that this is not just commentary, it’s a substantive, well researched, well put together, contextual volume that helps relay what was happening, why it was happening, and how it was happening. This all plays out like a novel at times, even a novel where you know the end of the story, but you forgot about this person or that incident.
Any book about the Ronald Reagan presidency includes timeless quotes from the Gipper, and this book does not disappoint on that score. Bruce Bartlett recalls a classic early-1981 quote from President Reagan in describing the nations economy:
“There were always those who told us that taxes couldn’t be cut until spending was reduced. Well, you know, we can lecture our children about extravagance until we run out of voice and breath. Or we can cure their extravagance by simply reducing their allowance.”
And Milton Friedman wrote this in Newsweek in 1978 to make a similar point:
“I have concluded that the only effective way to restrain government spending is by limiting government’s explicit tax revenue – just as a limited income is the only effective restraint on any individual’s or family’s spending.”
Putting the sheer content of this volume aside for a moment The Pillars of Reaganomics is an outstanding addition to a library simply because of the work involved on the cover, which has an etching of a Ronald Reagan caricature holding a drawing of the Laffer Curve, and the interior of the book covers contain the tiled, gold-colored logo of The Laffer Center which published the book. This is just a really good physical object to hold and will make a great addition to the library of any Ronald Reagan fan or student of supply-side economics.
Because several authors are represented in this book, there are changes in style and wording, but that’s not only because of the writers involved, it’s because of the changes in our language over time. I found that refreshing.
The Pillars of Reaganomics serves as a great place to start an education on what supply-side economics is, how the concept was implemented in various decades, how the numbers stood the test of time, and how the world is looking at the economics policy now. This book is an enjoyable read, it’s not wonky. Let us hope there is more of this to come.
I will conclude this review with the words that open The Pillars of Reaganomics, on the dedication page, because after reading them, you may be as convinced as I was that this book, and potentially this series, is headed in the right direction:
In Memoriam Jack French Kemp.
Paul Ryan and The Way Forward for America
Review by Steve Parkhurst
Congressman Paul Ryan’s first book hit the market back in August. The Way Forward: Renewing the American Idea, on its face, the name may not mean much. Inside, there is much to be learned and even more to be explored. This book is a serious, important work. By a serious, consequential leader.
First, a note: I can’t hide my admiration for Paul Ryan. In fact, Google his name and mine, and you will see the lavish praise I have heaped on him over the years. I think Paul Ryan is the right man at the right time, and this book has helped me solidify that thought. I wanted to guard against fanboy-like admiration for Paul Ryan, and so I held back my review for a couple of months.
I wanted to see what others would say about the book, which allowed me a sort of distance from the instant review I could have written. I wanted to see if others read what I read. I was somewhat surprised at what I saw in that period. Interesting voices from the Left, were kind to the book. Put your RINO attacks back in the holster. That’s not the reason for the kind book words toward Ryan. The kind words stem from real solutions put forward by a serious man who did legitimate research, interviewing and witnessing.
As it turned out, my review is the same regardless of whether it was written two months ago, or today.
As mentioned earlier, I am an admirer of Congressman Ryan. I wanted to read The Way Forward to see what new things I would learn and to see what really drives this man, this leader. On that score, I was not disappointed.
That begins by understanding what “the American idea” really means, what it really is, it is after all, mentioned in the subtitle of the book. Ryan lays this out consistently and frequently: “The American Idea is a way of life made possible by our commitment to the principles of freedom and equality – and rooted in our respect for every person’s natural rights.”
From that premise, the journey begins to unfold and The Way Forward becomes real.
When Paul Ryan got to Washington DC as a young man, he ended up working for and with Jack Kemp, at Empower America. This was the type of a relationship from which a great history springs forth.
In 1992, while Jack Kemp was HUD secretary, he made a trip to Los Angeles in the wake of the Rodney King riots. Ryan recounts this Kemp response to a reporter’s question about making home ownership possible to people with no money.
“Well,” Jack replied, “the way to get money and capital and credit into the inner cities of America and the barrios and ghettos of America is to do something radically different than just transferring wealth through government bureaucracies. It is to empower people directly.”
In one short answer, Jack conveyed the power of the American Idea—and the hard limits of liberal progressivism.
Much of the value of The Way Forward as a book or as a policy prescription, and of Paul Ryan as a leader, can be found in Chapter 7, A Virtuous, Not Vicious, Cycle. I would suggest to you, that if you were only going to read one chapter of the book, read Chapter 7.
Chapter 7 is where we are introduced to Bob Woodson, founder of the Center for Neighborhood Enterprise. It is where we are introduced to Paul Grodell in Cleveland. It is where we are introduced to Outcry in the Barrio and Jubal Garcia in San Antonio. It is where we are introduced to Bishop Shirley Holloway and her House of Help City of Hope, and to Bob Cote and his Step 13.
I have been to Outcry in the Barrio, I have witnessed what Paul Ryan witnessed. As Ryan conveys his thoughts about a ministry like Outcry, and he displays his belief and understanding that the healing being done in such a place is real, having seen that for myself, I have to believe that every one of the places Ryan has mentioned is not only true, but it is the way. When Ryan says he saw a man named “Tony” who had just arrived at Outcry that morning, I’ve been there, I’ve seen that. I have recounted my first visit to Outcry where I saw two men who had arrived that morning.
What Ryan is seeing and saying is real.
These people and each of their operations, or ministries, are examples of what good people can do when they see a need, or a void, and they go after the solution. These neighborhood healers, each in his or her own part of the country operate as the “little platoons” that Edmund Burke once described.
Chapter 7 is where we are re-introduced to Alexis de Tocqueville, and his poignant observation:
“Americans of all ages, all stations in life, and all types of dispositions are forever forming associations. There are not only commercial and industrial associations in which all take part, but others of a thousand different types – religious, moral, serious, futile, very general and very limited, immediately large and very minute. Americans combine to give fetes, found seminaries, build churches, distribute books, and send missionaries to the antipodes. Hospitals, prisons, and schools take shape that way.”
Ryan writes:
Robert Putnam noted that “American history carefully examined is a story of ups and downs in civic engagement, not just downs-a story of collapse and of renewal. Putnam doesn’t believe that just because civic engagement is waning it will forever be receding. He thinks we can rebuild civil society and get the engines of social capital going again.
Ryan goes through a policy prescription where he suggests some ideas, reforms and solutions to many issues of the day. Ryan offers, “Truly helping those in need means recapturing a sense of the dignity of work.” Then he sums up his policy prescription this way:
The point of reforms like these is not to suggest that government has no role in combating poverty, or that some ideal of pure volunteerism can replace the need foe concrete assistance to the Americans in greatest need. The idea, rather, is to get government pulling in the same direction as the grassroots groups that our citizens run-and the way to do that is to infuse the welfare system with the same incentives, priorities, structure, and accountability that are at work in our communities.
Right on!
Ryan concludes the chapter with three compelling paragraphs, which include these thoughts:
Today we’re trapped in a vicious cycle. Too many people are stuck in the poverty trap. Our communities are isolated from one another economically and culturally. We’re seeing stagnation and unemployment, little opportunity for upward mobility and low labor force participation rates. And one of our key assets for turning things around-the associations and institutions that make up our civil society-is being eroded by government overreach rather than reinforced.”
Americans are a generous people. We care about our neighbors when they are in need. But it’s time to start measuring our compassion not by how much we’re spending, but by our results.
My goal is to turn our welfare programs into a bridge instead of a trap, restoring the prospect of upward mobility. Doing so is not just the smart thing economically; it is the right course for a good-hearted country.
Throughout The Way Forward, you can’t help but identify and relate to Ryan’s optimism. For as bad as things got and for as bad as things can be on occasion, Ryan is an optimist until the end. Maybe Paul Ryan was always an optimist. We know Ronald Reagan was an optimist. And Jack Kemp could have distilled his eternal optimism into Ryan during those Empower America days. Optimists reign in the universe of opportunity and prosperity, growth and achievement, freedom and liberty. Our modern day econo-optimists like Larry Kudlow, Arthur Laffer and Stephen Moore, they never stop believing that the right people, the right ideas, the right policies, are all within our grasp. But in order to grasp those things, you have to reach out your hand.
Whether Ryan learned to be an optimist or was just born with the gift, maybe he’ll mention that in his next book. For now, I’m more interested in his understanding (and warning) of our moment in time, both as a movement and as a party:
We need to get back to our message of opportunity, upward mobility, and economic growth, the American Idea, and its promise for everyone. We need to make the case for greater freedom instead of ceding personal choices or responsibilities to the state. We need to emphasize the dignity of work and the primacy of civic institutions. And we need to explain how that vision is relevant and meaningful for every person-no matter their color, creed, occupation, or station in life.
For the Republican Party, this is a matter of political necessity. Preaching to the choir isn’t working, and by the way, the choir is shrinking. But, for me, it’s about a lot more than that. It’s about our common humanity, and the duties we owe to one another. I am inspired by Jack Kemp’s example that we shouldn’t isolate people; we Republicans should include them. That’s the only way those same people, when they vote, will start to include us.
Paul Ryan is not simply saying these things, he is living them out as well. Paul Ryan is looking at problems like poverty, addiction and homelessness and addressing issues Republicans rarely want to touch. As the old baseball axiom goes, “you can’t hit a homerun if you never swing the bat.”
Paul Ryan is proving himself to be a leader for our times, for this moment and for this movement.
I wanted to end this review with the paragraph that Paul Ryan ends the book with, mimicking Ronald Reagan’s farewell address in 1989:
This will not be easy. At times, it will certainly be messy. But when all is said and done, I want to be able to say, “It was tough, but we did our part. It’s what my parents did for me, and when our moment came, it’s what my generation did for you. And that’s why the American dream lives on.”
But I feel the need to return to the night Jack Kemp accepted the 1996 Vice-Presidential nomination in San Diego (this is not mentioned in the book). In that speech, Kemp extolled this truism, worth remembering as you read Ryan’s book:
The purpose of a truly great party is to provide superior ideas, principled leadership and a compelling cause.
Paul Ryan has provided you, provided us, The Way Forward.