David Stockman
November 13, 1981: The Atlantic Monthly publishes an interview with David Stockman, the Director of the Office of Management and Budget. It reveals the truth about the current Administration's economic priorities, or "Reaganomics."
Democrats say they told us so. Republicans are furious, that he gave the interview, and that the truth got out.
Let's take a step back. In 1943, with World War II far from being won, President Franklin D. Roosevelt instituted a "Victory Tax," putting the income tax rate for the wealthiest Americans -- including himself -- at a whopping 94 percent. Even after The War, it only dropped to around 90 percent.
In 1963, President John F. Kennedy asked Congress to lower the top bracket to 70 percent. They did, the next year, after his assassination. For this reason, and for his anti-Communism, many conservatives say that if JFK were alive today, he'd be a Republican. That's just stupid.
Ronald Reagan, formerly Governor of California, ran for President in 1980, promising, among other things, to cut income taxes, especially for the wealthiest Americans. The idea was called "trickle-down" economics": Give money to the rich, and it will trickle down to everybody else.
The media called it "Reaganomics." One of his opponents for the Republican nomination, former Congressman from Texas and United Nations Ambassador George H.W. Bush, called it "Voodoo economics." But Reagan won the nomination, and asked Bush to be his running mate, and Bush shut up about it. The Democrats used his line, but it didn't work: Reagan won.
On August 13, 1981, Reagan signed into law the Economic Recovery Tax Act, which lowered the top tax rate from 70 to 50 percent. The legislation was also known as the Kemp-Roth Bill, for its sponsors: In the House of Representatives, Jack Kemp of New York, former All-Pro quarterback; and, in the Senate, William Roth of Delaware.
From Franklin Roosevelt's New Deal onward, American economic operation was based on the idea of demand-side economics: Economic growth and full employment are most effectively created by high demand for products and services. Output is determined by effective demand, and high consumer spending leads to business expansion, resulting in greater employment opportunities. Higher levels of employment create a multiplier effect that further stimulates aggregate demand, leading to greater economic growth.
But "Reaganomics" was based on supply-side economics: Economic growth can be most effectively fostered by lowering taxes, decreasing regulation, and allowing free trade. According to supply-side economics, consumers will benefit from greater supplies of goods and services at lower prices, and employment will increase.
It's also based on what became known as the Laffer Curve. The term came from Jude Wanniski, a journalist who became a self-taught economist. (Aren't all economists self-taught?) On September 13, 1974, Wanniski had lunch at Two Continents, a restaurant at the Hotel Washington in D.C., with economist Arthur Laffer, White House Chief of Staff Donald Rumsfeld, and Rumsfeld's deputy, Dick Cheney.
At this lunch, on a napkin, Laffer sketched out an idea he'd gotten from 14th Century Arab philosopher Ibn Khaldun: It assumed that no tax revenue is raised at the extreme tax rates of 0 percent and 100 percent, meaning that there is a tax rate between them that maximizes government tax revenue. But according to The New Palgrave Dictionary of Economics, estimates of revenue-maximizing income tax rates have varied widely, with a mid-range of around 70 percent -- a lot higher than conservatives would like.
In spite of the inscription to Rumsefeld,
it was Wanniski who saved the napkin.
His widow, Patricia, donated it to the Smithsonian Institution.
Conservatives like to borrow one of those quotes that Benjamin Franklin didn't actually say: "Democracy is two wolves and a lamb voting on what to have for lunch. Liberty is a well-armed lamb." Well, conservatism is feeding steaks to two wolves and ten lambs, and telling the lambs that the wolves will leave crumbs behind, knowing full well that lambs are vegetarian.
Even Arthur Laffer, albeit around 30 years too late, admitted the truth with a similar analogy: "Trickle-down economics is if you feed the horse enough oats, the sparrow will survive on the highway."
The result was that, from outgoing President Jimmy Carter, Reagan inherited an unemployment rate of 7 percent, and, by the end of 1982, his 2nd year in office, it was 11 percent. Did he at least cut the record federal budget deficit he inherited? No, and conservatives can't blame Congress, either: The Republicans controlled the Senate for his 1st 6 years, and Reagan never even submitted a budget with a lower deficit than his 1st, which nearly doubled his 1st.
Late in his 2nd year, he compromised with Congressional Democrats, and raised taxes. That saved his bid for re-election, and, as was said at the time, prevented the former actor from starring in his last and greatest role, The Herbert Hoover Story.
In their December 1981 issue, Atlantic Monthly published an article titled "The Education of David Stockman." Stockman had been an aide to Representative John Anderson of Illinois, who later ran for President in 1980, as one of the Republican contenders who lost to Reagan, and then ran a 3rd-party campaign against Reagan. In 1976, Stockman was elected to Congress from his home State of Michigan. In 1981, Reagan appointed him Director of the Office of Management and Budget, and conservatives loved him for his combative performance in Congressional hearings.
In an interview with reporter William Grieder, Stockman was quoted as referring to Reagan's tax act in these terms: "I mean, Kemp-Roth was always a Trojan horse to bring down the top rate... It's kind of hard to sell 'trickle down.' So the supply-side formula was the only way to get a tax policy that was really 'trickle down.' Supply-side is 'trickle-down' theory... None of us really understands what's going on with all these numbers."
He later recalled "being taken to the woodshed by the President" -- for telling the truth. On August 1, 1985, he resigned from OMB, and later wrote a memoir of his experience in the Reagan Administration, titled The Triumph of Politics: Why the Reagan Revolution Failed, in which he specifically criticized the failure of Congressional Republicans to endorse a reduction of government spending to offset large tax decreases to avoid the creation of large deficits and an increasing national debt.
The top marginal tax rate was lowered to 28 percent in 1988. It slowly increased, under Presidents George H.W. Bush and Bill Clinton, to 39.6 percent in 2000. Under Bush's son, President George W. Bush, the top rate was reduced to 35 percent. Corporate tax rates were lowered from 48 percent to 46 in 1981, 34 in 1986, increased to 35 in 1993, and lowered in stage to 21 in 2018.
The middle class have never truly recovered from "Reaganomics": While things improved starting in 1983, 1993, 2009 and 2021, they always fell under Republicans, in 1990, 2001 and 2020.
Ronald Reagan died in 2004, Jude Wanniski in 2005, and Donald Rumsfeld in 2021. As of November 13, 2022, David Stockman and Arthur Laffer are still alive. Laffer advised Donald Trump's 2016 Presidential campaign. In 2019, Trump awarded Laffer the Presidential Medal of Freedom.
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November 13, 1981 was a Friday -- a Friday the 13th. Baseball was out of season. Football was in midweek. There were 7 games played in the NBA:
* The New York Knicks lost to the Milwaukee Bucks, 95-85 at the Milwaukee Exposition, Convention Center and Arena, or "The MECCA." Since 2014, it has been named the UW-Panther Arena.
* The New Jersey Nets lost to the Boston Celtics, 111-97 at the Boston Garden.
* The Philadelphia 76ers beat the Kansas City Kings, 105-85 at The Spectrum in Philadelphia.
* The Golden State Warriors beat the Houston Rockets, 102-100 at The Summit in Houston. (It's now the Central Campus of Joel Osteen's Lakewood Church.) Moses Malone scored 33 points and grabbed 15 rebounds.
* The Utah Jazz beat their arch-rivals, the Denver Nuggets, 131-124 at the Salt Palace in Salt Lake City. Adrian Dantley scored 38.
* The Los Angeles Lakers beat the Portland Trail Blazers, 119-115 at The Forum outside Los Angeles in Inglewood, California. Calvin Natt scored 34 points in defeat for the Blazers.
* And the San Antonio Spurs beat the Seattle SuperSonics, 119-112 at the Seattle Center Coliseum. George Gervin led all scorers on the day with 47.
And there were 2 games played in the NHL. The New York Rangers played the Buffalo Sabres at the Buffalo Memorial Auditorium. And the Detroit Red Wings played the Washington Capitals at the Capital Centre in the Washington suburb of Landover, Maryland. Each game ended in a 3-3 tie.
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