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In 1982, with the economy struggling badly and unemployment pushing 11%, President Reagan agreed to a tax increase. Under the thinking that dominates Republican thought in the 21st century, such a policy would, of course, represent true insanity. After all, “everyone knows” tax increases “kill jobs.” If there was already a jobs crisis, why would Reagan dare do such a thing?
At the time, the right was livid, and made all kinds of drastic predictions about the consequences of this misguided policy. Bruce Bartlett, a former official in the Reagan administration, this week flagged a letter U.S. Chamber of Commerce president Richard Lesher sent to Congress in August 1982, analyzing the proposed tax increase:
“If H.R. 4961 is passed in these troublesome economic times, we have no doubt that it will curb the economic recovery everyone wants. It will mean a lower cash flow as more businesses pay more taxes, with a depressing effect on stock prices. It will reduce incentives for the increased savings and investment so badly needed to improve productivity and create more jobs. It will mean higher prices for many products and services. It will increase government costs in caring for those who, because the economy is held down, cannot find employment.”
As Bruce noted in his column, “It would be hard to find an economic forecast that was more wrong in every respect.” He added that it wasn’t the Chamber that had it backwards.
Economist Arthur Laffer told his clients on July 26, 1982, that the Tax Equity and Fiscal Responsibility Act, which raised taxes by about one percent of GDP, “will stifle economic recovery,” “retard economic growth,” and undercut “the economy’s ability to enter into a period of expansion.” On August 20, 1982, he told his clients that TEFRA “will tend to lengthen and deepen the recession.” Writing in the New York Times on September 12, 1982, economist Norman Ture said the administration’s claim that TEFRA would promote economic growth was “bizarre.” He said it would “weaken the impetus for economic growth” and make the economic recovery “less certain and less vigorous.”
All of this, we now know, wasn’t even close to being right. Almost immediately after Reagan raised taxes by quite a bit, the economy began to soar.
This isn’t just some historical footnote. This is worth keeping in mind because the basics of modern Republican economic thought are, quite literally, always wrong. It’s not a matter of ideological or philosophical differences — these questions have been put to the test, repeatedly for decades, and the tenets of conservative economic policy have an unyielding track record of failure.
It’s awfully embarrassing, or at least would be if they were called on it more.
Perhaps the only good thing about modern Republican economic thought is how easy it is to recite its pillars: tax increases always make the economy worse, tax cuts always make the economy boom, and public investment will always make the economy worse.
But pesky facts keep getting in the way.
In 1982, Reagan raised taxes and the right assured Americans this would be a disaster. The right was wrong, and the economy boomed.
In 1993, Clinton raised taxes and the right was even more certain this would be a disaster. The right was wrong again, and we instead saw the longest and strongest sustained recovery in recent memory.
In 2001, Bush slashed taxes and the right swore up and down this would work wonders. The right was wrong again, and the Bush policy failed spectacularly in every possible way.
In 2009, Obama spent heavily to turn the economy around and the right predicted a disaster. The right was wrong, and conditions improved almost immediately. The economy that had been in a tailspin, hemorrhaging jobs, began growing and creating jobs.
How do Republicans explain this? That’s not a rhetorical question. I seriously want to know how and why they believe their uninterrupted track record of failure should be overlooked. Indeed, here we are in 2011, and the same conservatives — in many cases, literally the self-same people — are still convinced that if we only follow their advice this time, and ignore history, economists, and common sense, we’ll be amazed by the results.
There was a point in the 1970s when Democrats lost a lot of credibility on military and national security issues, and Republicans became the credible party when it came to wars, being “tough,” and keeping people safe. Though this is beginning to change, much of the mainstream is stuck in this sort of thinking — the GOP is just assumed to know what it’s talking about when it comes to the military.
If politics made more sense, Republicans would be experiencing a similar dynamic on economic policy right now. It’s not that they’d just shut up altogether, but there’d be a built-in skepticism with the American mainstream. The GOP would keep talking about the economy, but Americans would unconsciously question their judgment. After all, they couldn’t really know what they’re talking about when it comes to the economy, because they’re Republicans, and “everyone knows” this is their weak point.
In some ways, that’s one of the great disappointments of the post-2008 era. By the end of the Bush presidency, the GOP was permanently discredited on the economy. It’s too bad the mainstream forgot to notice.
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DAY on June 25, 2011 11:59 AM:
Irrelevant: A different Reagan (the REAL one) different times, and a different congress.
Curious, that Laffer et al are still the same. . .
c u n d gulag on June 25, 2011 12:01 PM:
Steve, you 'Silly Wabbit,' I know you know this:
Conservatism can not fail!!!
It can only be failed.
And if there was any failure, it was only because the efforts were NOT conservative enough.
So, if these tax cuts didn't work, it's because they weren't steep enough.
Just keep cutting, and 'ponies,' and 'lollipops,' and 'jobs,' will rain down and be so plentiful, we'll have negative unemployment in our nation of millionaires.
Or, so they hope - that their 'horseshit' theories will still 'stick' about tax cuts creating wealth and 'jobs.'
And to say otherwise, you're just not to be taken as a "Serious Person!"
That's why you only see the people that are always wrong - they're "serious," and the Krugmans and Bakers of the world are just clowns.
And this, children, is why we can't have nice things.
Ron Byers on June 25, 2011 12:04 PM:
The Republican economic "model" sounds like common sense. It promises great riches for the rich. The opinion makers are rich. Most of them aren't smart enough to think outside the box. None of them look at the evidence. They are op-ed writers and editors after all.
Most important, many of the op-ed writers and newspaper editoral board members who push the Republican economic theories have been pushing them for decades. None of those people are willing to admit a mistake.
Mark-NC on June 25, 2011 12:06 PM:
There was a time when I thought that Republican policy was a failure. Then it occurred to me that failure is a metric. Their policies were a failure - to me!
Their metric is different than ours. To a Republican, failure is continuing the things the government does that help other people. Failure is a strong middle class, failure is anything other than corporate rule.
They will feel successful if they can destroy Medicare, Medicaid, Social Security, the FDA, Clean Air, Clean Water, Welfare, bank regulations that keep banks from screwing the public, etc.
Sadly, when they are successful, the country will be a sewer - and only the pigs will be happy.
DelCapslock on June 25, 2011 12:08 PM:
I'd be all for letting the Republicans set tax policy as they pleased, if one loophole-proof law were passed first that made it illegal for any individual or corporation to own assets in excess of say, 10 million dollars. Any profits beyond that would be required to be invested back into national infrastructure, education, and health care. It could be called the "Anti-Wealth Hoarding Act".
Schtick on June 25, 2011 12:23 PM:
"It's awfully embarrassing, or at least would be if they were called on it more."
Don't you have to have pride to be embarrassed? How can corporate whores have pride when all they do is lick the feet of their daddys?
please fire whomever wanted the crapcha
Robert Abbott on June 25, 2011 12:43 PM:
In 1968, the Congress passed the Revenue and Expenditure Control Act which imposed a 10% tax surcharge as a means of cooling down the economy to fight inflation. It didn't work. Business kept investing and the economy and inflation roared ahead. Taxes have nowhere near the power Republicans claim for them.
j on June 25, 2011 12:47 PM:
The rethugs are getting violent, I hope the book is thrown at Prosser for the assault on a fellow judge in Wisconsin before he pulled everything away from the unions.
lou on June 25, 2011 12:49 PM:
I posted the following comment in the previous blog about sabotage, but it fits here too. Others above said about the same.
To the GOP, the US has become their private ideological testing ground. They respond to critics by claiming that they failed in the past because their ideology was diluted or defiled. It was not pure enough. Now, Obama and the democrats are the main obstacle in their path to purity -- to proving that when ideological purity arrives their shit will turn to gold for everyone. On this path if they can stymie the progress of the liberals, if they can prove what failures the democrats have been, then they can wash that failure with the proof of their own, yet to be proven ideology. If that sounds like a double negative, it is. But that, in short, is the republican ideology and why they have to keep failing and keep the country failing to prove how right they are or will be when everyone is locked in on their righteous path. Don't look at the record. Only tomorrow counts.
Objective Dem on June 25, 2011 12:54 PM:
I recently saw an old saying, possibly on this blog about Marxist from the middle of the last century. It was something along the lines of the Marxist doesn't care about the facts in the real world, but the facts in their theory. This sounds like Republican economic theory.
The other comment is I remember when Reagan was elected he promised increased military spending and lower taxes without increasing the deficit. The reality of course was a huge increase in the deficit.
kevo on June 25, 2011 1:11 PM:
From Reagan to Romney - those who would subscribe to supply-side economics believe not in our human community, and have allowed themselves to proclaim their self-righteousness for all, including their God, to witness!
Theirs will be a hellish downer when they realize we no longer demand what they wish to supply! -Kevo
JW on June 25, 2011 1:21 PM:
Called on it? By whom?
What this country desperately needs is a 2nd party.
VinnyD on June 25, 2011 1:57 PM:
When Clinton got the Congress to pass "the biggest tax increase in history" as the Republicans kept calling it, the predictions from the Republicans were even more dire. The result was unemployment around 3%, inflation near zero, and a surplus for several years running.
VinnyD on June 25, 2011 1:59 PM:
Aach, I thought I had got to the end of your post. I see you covered Clinton.
philat on June 25, 2011 2:04 PM:
Good article, and the Dems ought to keep reminding folks about this, as well as the tax increases under Clinton, 1993, which were terrible that over 20 million jobs were created. Then came George W. and GOP, huge tax cuts for the well-to-do, and in the next six years or so, before the recession, all of 5 million jobs created. Can anyone talk sense into the Republicans? Doubtful, isn't it...elephants never forget, do they?
walt on June 25, 2011 2:07 PM:
JW, we desperately need two national parties. What we have today is one national party (the Democrats) and one regional party from the South and its ideological outposts (the Republicans). The trouble is that the regional party only need supply culture-war twaddle to its zealous believers whereas Democrats have to persuade, deal, and compromise. This is why we have the current crisis. The regional party has no real affinity or loyalty to the nation as a whole. It has its dogma and catechism but no real commitment to anything beyond itself. Democrats can't simply emulate the regional party without collapsing the national project itself. I wish there were real patriots on the right but I don't confuse neo-Confederates with that wish.
Goldilocks on June 25, 2011 2:07 PM:
Economic talk for Republicans is window dressing. They don't care about economics, other than the kind that keeps wealth trickling - or flooding - up.
dj spellchecka on June 25, 2011 2:30 PM:
the tax fairy answers all prayers. Sadly for the gop, the answer is always "no."
beb on June 25, 2011 2:31 PM:
When I first heard the phrase "It's OK if you are a Republican" I thought it was used in an ironic sense but over time it has become clear that it is literally true. Republican are never called to account for anything they do or get wrong. They always get a pass on stuff that would send a Democrat into retirement.
Goldilocks on June 25, 2011 2:36 PM:
@philat, you say the Dems ought to keep reminding folks about this. If they kept reminding themselves about this, that would be enough.
cld on June 25, 2011 2:40 PM:
Republicans are outside the tent pissing in.
Everyone in the tent is drowning, but the issue is never their piss.
Why?
DAY on June 25, 2011 2:42 PM:
A well regulated militia, adequately provisioned, will be able to defeat a force much superior in numbers, but ill led, and easily distracted by unimportant skirmishes.
Provided, of course, that said militia is "well regulated" by Karl Rove, and "adequately provisioned' by Frank Luntz.
paul on June 25, 2011 2:43 PM:
Of course the republicans are lying. That goes without saying these days. There are two graveyard-funny things about this, though:
1) The argument that tax increase hurt the economy is as basic a keynesian argument as you can get. Coming from people who have repeatedly declared that keynesian theory is baloney.
2. There is actually a difference between now and 1982, in that then there was plenty of room for the fed to lower interest rates and encourage expansion, while now there's not. But that difference is meaningless in the face of the GOP's lunacy about "deficit reduction".
vhh on June 25, 2011 3:52 PM:
The Stalin clique in the Soviet Communist Party in the 1930s proceeded with collectivization of agriculture even in the face of dramatic evidence---a collapse in net production, starvation, cannibalism, and millions of deaths in the Ukraine. You read about this and ask how could a supposedly technocratic government ignore obvious facts? And the answer is, that what they were striving for primarily was not to feed the country efficiently, but to destroy what they perceived as their political enemies, the middle class, the bourgeoisie, the so called kulaks (prosperous peasants, the practical definition of which was a family with two cows). So they did not care how many died, as long as it furthered their goal of ideological domination. And so, civil society in the usual sense was destroyed in the USSR to achieve the goal of Communist party domination of all facets of society. The GOP right wing (which is now pretty much the entire GOP) show the same recklessness regarding the US economy, established structures for helping people, wars (which are always good under GOP presidents and always bad under Democratic ones). As with the Jacobins and the Leninists, for these fanatics the end justifies the means. The latest example of GOP ideological extremism is Georgia, which in its zeal to discourage illegal immigrants from residing in Georgia, has managed to discourage ALL immigrant farm workers from coming to Georgia at all. So crops will rot in the fields, and Georgia's largest source of income will suffer. The GOP response? Put prisoners and parolees in the fields at substandard wages. An infamous slave state reverts to slavery.
PaulR on June 25, 2011 4:33 PM:
In the fourth paragraph, is the word "just" missing from the second sentence? "He added that it wasn't JUST the Chamber that had it backwards" seems to describe Bartlett's point better.
JD on June 25, 2011 4:43 PM:
Every one of your readers NEEDS to foward this to one of the three networks TODAY. That corporate stooges like David Gregory do not ask the usual Sunday talk show Republicans about this heritage of failure is scandalous.
Hieronymus The Troll Braintree on June 25, 2011 5:17 PM:
If rank-and-file liberals would stop obsessing over identity politics and quit looking for excuses to call people who don't automatically agree with them on everything racists, sexists, homophobes etc., they'd have more time to point out that Republicans suck at governing and are intent at screwing everyone who isn't rich. It's no longer race (see Herman Cains), it's no longer sex (see Sarah Palin) and soon log cabin Republicans will become accepted as members in good standing of the Galtian Super Race (see Andrew Sullivan). What we are seeing is nothing less than the resurrection of the class struggle.
Liberals really need to stop living in the past and start living in the past.
PS: Republicans royally suck at national defense too. Democrats are way better.
James Lee on June 25, 2011 6:37 PM:
I think the question that progressive talking heads and progressive leaders need to address when bringing up this point is "Why did raising taxes result in higher economic growth?" or "What is the causal link between economic growth and raising taxes?". Thus far, I have only heard that "we produced X-millions of jobs under the Clinton tax rates" and "the economy boomed when Reagan raised tax rates". What these statements leave out in the mind of the average person is WHY such positive effects happened.
It is much simpler, and therefore more digestable to the average viewer, to say "Well, if we raise taxes at a time when people are struggling, we are going to increase the cost of doing business and therefore kill jobs!" because the link is simple and obvious to recognize. I'd like to see more people explaining the reasoning behind why raising taxes ushered in economic growth. Maybe then we can get the people more on our side.
pea on June 25, 2011 7:50 PM:
The modern GOP has become a cult. They recite their no-tax, no-govt dogma over and over. It is a theology now -- well beyond ideology). To those in the cult, it is a matter of faith, not evidence and logic. Anyone not in the cult is suspect and not "worthy" by their definition.
Danp on June 26, 2011 8:41 AM:
Peter Casparino - You seem to be missing the point that tax increases from historically low rates do not inherently kill economic expansion, as the GOP is arguing.
Sarah B - You can't honestly look at current Dems and argue that they believe "no amount of taxation is enough, no amount of spending is enough." You can however, look at the Grover Norquist pledge and the number of Republicans who have signed it, and argue that there is an extreme obsession going on.
Doug on June 26, 2011 8:58 AM:
Sarah B, it's not "big government" that liberals/progressives fetishize, nor will I instruct you on the proper use of the noun "socialist", but that noun doesn't apply to 99% of those who call themselves progressive or liberals.
At a time when tax rates are at a 60-year low your whining about taxation and spending are just that - whining. Admit to yourself the true state of affairs, you're afraid that somewhere, sometime, somehow someone will receive money from the Federal government and not really need it. And you're damned if YOUR taxes will pay for that! So, what's your feelings about the no-bid Halliburton contracts for providing supplies to the US military in Iraq? Contracts that paid for supplies at many times the cost of the Defense Department usual methods of purchasing supplies? How about unfunded give-aways to pharmacy corporations, aka Medicare Part D?
As for those of us who don't believe in your "faith", for there's no other word to describe such the failed economic/social policy the Republican party has pushed for the past four decades, we'll gladly take facts and reality and craft our responses to those, rather that continue pining for a lost Eden that, in fact, never existed.
"We the People of the United states, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare and secure the Blessings of Liberty to ourselves and our Posterity..."
I can, off the top of my head, make a list of Republican activities that run contrary to even the BASIC ideas covered in every point in the preamble to the Constitution.
"We, the People of the United States.." - not, the corporations, not just the rich, not just those who believe the way YOU do, but ALL the people.
"A more perfect union" - in other words, Federalism. NOT "state's rights", the latter last used to protect slavery, now being used to force women to submit to religious dogma held by a minority; ie, abortion and contraception.
"Establish Justice..." Limiting voter rights because "some" people don't vote the way you want them to. Falsely accusing judges of "activism" simply because you don't agree with their ruling Hint: judges rule on the law, if you don't like the law, get it changed. Democratically, of course!
"Insure domestic Tranquility..." That means more than just building (for-profit) prisons to put people in that disagree with you. It means promoting policies and conditions that will cause the general population to support the government rather than seek its destruction or violent change. See: Rebellion, Shay's, 1786.
"provide for the common defence..." Neither "common" no "defence" are capitalized, which, if you understood 18th century writing styles, means the Founders weren't all that concerned about it. They were, sensibly, afraid of standing armies and thought, incorrectly, Federally directed state militias would suffice. Interestingly enough, the only "wars of choice" I can discover in US history were both instigated under Republican political leadership: The Spanish-American War and Iraq. You may not like it, but lying to the public to gin up a war seems to be a Republican trait.
"promote the general Welfare..." Rather an amorphous term, welfare. It can mean one thing in 1788, canals, roads and a National Bank; another in 1861, land-grant colleges and free land for settlers AND railroads; yet another in the 1930s, the WPA, CCC, TVA, PWA, banking regulations that kept the economy stable for 80 years; and something entirely different in the 21st century. The idea that the "welfare" the Constitution refers to is limited only to the concept of "welfare" held by the Founders is not only fatuous, but dangerous. Times change and the Founders understood that. Which is why the amendment process was included in the Consitution.
The "limited" government that so many Republicans mistake as the core of the Founders' beliefs, never existed. If you wish to find supporters of "limited government", I suggest you look for those who OPPOSED the adoption of the Constitution. I find it extemely ironic, and pitiful, that those who today try to claim the mantle of the Founders, are, in reality, supporters of a political position completely opposed to everything the Founders believed in.
But then, "reality" and Republicans parted company sometime in the 1980s...
David Dickinson on September 15, 2011 10:08 AM:
It should be noted that the positions of Obama and the other neo-liberal Democrats are not significantly different from Republicans on economic issues. Even though Obama is pushing for more jobs, he's still talking about tax cuts -- even for the rich. While incentivized tax deductions for businesses that hire new workers are one thing, income tax cuts for the most wealthy are clearly foolish and destructive, yet Obama barely whispers that maybe we shouldn't have them. He "negotiated" allowing the tax cuts for the rich to be extended last December even though John Boehner had sais that he would vote for a bill that included extensions for only the middle-class tax cuts. When Obama talks about the issue now, it's only a campaign ploy, and not something he actually wants.