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Jack Kemp, Tax Reform, And The Way The World Works

By Ralph Benko

Excerpt from

As one of the last living Old Guard veterans of the Reagan Supply-Side Wars I enjoy an unusual historical perspective on the current tax reform efforts occurring in Washington. As Santayana once said, “Those who cannot remember the past are condemned to repeat it.” Follow along.

A long time ago (1985) in a galaxy very close to home (Washington, DC) I came to town yearning to recruit into the Supply-Side. The first major Reagan tax reform then had already been enacted. Thus, much of what I am about to reveal is second-hand yet comes from first-hand accounts from those who were there.

The 1970s were even more of a mess, economically speaking, than today. As I wrote, several years ago, in a piece for The Conservative Review, now pay-walled:

On November 13, 1979, the day Ronald Reagan declared for the presidency, the Dow Jones Industrial Average was at 814. (No, there’s no comma missing.)  …  Supply-side having been picked up from America by many world leaders propelled world annual GDP, then around $11 trillion dollars in 1980, to over $60 trillion today.

Make that around $73 trillion now.

Along came Jack Kemp. A championship football quarterback (and staunch foe of soccer, which he indicted as a form of socialism), Kemp at first was largely dismissed by his peers in Congress as a hail-fellow-well-met-jock. That assessment proved profoundly misguided.

Kemp was brilliant, even inspired, although not conceited. Kemp made himself into the hinge upon which history swung.

Kemp was not possessed of high academic credentials and referred to himself in a self-deprecatory way as a Physical Education major from Occidental College. Yet he was a voracious reader… and a bright light.

As the New York Times put it in a 1985 profile:

THE OLD QUARTERback sneaked in with 52 percent of the vote, and he came to Washington as a freshman Congressman with a lot to learn about public policy. But he began reading widely, mainly in economics, and one bit of history intrigued him: The tax cut enacted during the Kennedy Administration had engendered a strong recovery. Then The Wall Street Journal ran a piece by Jude Wanniski, one of its editorial writers, outlining the theories of Robert Mundell, a Canadian economist. Mundell made the case for ”supply-side economics,” the concept that tax cuts lead to economic expansion and an inevitable increase in tax revenues.

Soon Kemp made contact with Wanniski and other followers of the supply-side faith, particularly Irving Kristol, the editor of The Public Interest. During many months of talk, often far into the night at the Kemps’ house in suburban Maryland, the supply siders refined their thoughts into the Kemp-Roth tax-reduction bill.

”It was a radical idea,” says Charlie Black, a political consultant who worked for the Republican National Committee at the time, ”but politically, it had great value. The Republican Party since Hoover had been viewed as the party of the rich and ‘Big Business.’ After Watergate, the corruption image was added into it. Of the first 10 things people thought about Republicans, eight or nine were negative. It didn’t take a genius to see the way to shake our terrible image was to take Jack Kemp’s bill, and his rhetoric, and spread it to the party’s candidates. For the first time in years, Republican candidates were out there running for something, not just against something.”

There today are many bright, some brilliant, staff members on Capitol Hill. Yet no Member of Congress that I know of has assembled a brain trust to explore, refine, and crusade on a fresh doctrine for general prosperity.

Certainly, there are no signs of any who, even remotely, are inclined to convene a brain trust in their home “far into the night” to explore, refine, and advocate how to get the economy growing, for workers as well as investors, at 3% per year or more. We see attempts to emulate the last Big Thing — quarterbacked by Kemp — not at finding and promoting the next Big Thing.

In addition to his keen intellect and avid curiosity Jack Kemp had other major advantages over the other 434 Members of Congress. (And almost all 100 United States Senators.)

Kemp came from the world of professional sports, all about winning fairly and squarely. As football coach Red Saunders famously said, “Winning isn’t everything, it’s the only thing.”

Most Members of Congress come out of risk-mitigation cultures: lawyers, small business, junior politicians, and so forth. Jack was not reckless. Yet he was prepared to depart from a risk-mitigation strategy, to go outside the Comfort Zone, and go bold in pursuit of championship.

Kemp was a multiple All Star and the leader of a team — the Buffalo Bills — which he led to two consecutive AFL championships. Jack Kemp lived for high achievement. He was not cautious to protect the moderate glory of elective office.

The foundational document of Supply-Side Economics, preceding Jude’s 1978 book The Way The World Works  — which, back around 1980 when I was a provincial country lawyer, converted me to the Supply-Side — was Wanniski’s The Mundell-Laffer Hypothesis–a new way of looking at the world, published in the Spring 1975 issue of The Public Interest.  In essence (pp. 37-38) it held:

In the Mundell-Laffer scheme of things, a common currency is not a utopian fantasy; it has been around before. For decades prior to World War I, the world had a simulated common currency as national currencies were tied to the pound sterling and the pound was fixed to gold. In the years after Bretton Woods (1944) until about 1967, or even 1971, the world had a simulated common currency bound to the dollar. The system was flawed, but still enormously successful.

The later-famous “Laffer Curve,” not yet denominated as such, was but a footnote on page 49. This fountainhead article was about good monetary policy (and, in particular, the gold standard).

Of course, in the event the tax rate cuts propounded by Kemp took political center stage while the core value proposition of Supply-Side economics, a high integrity dollar policy, got relegated to the Fed.

According to a presentation on the 30th anniversary of the introduction of Jack Kemp’s Gold Standard Act of 1984 by Dave Hoppe, Kemp’s chief-of-staff during that era, Jack crusaded relentlessly on the unconventional — even heterodox — Supply-Side idea. Kemp crusaded so relentlessly, according to Hoppe, that other Members of Congress seeing him approaching in a hallway would bail into a cross-corridor to avoid being buttonholed by Kemp and given a long lecture on how Supply-Side economics would cure the national economic malaise.

Jack’s relentlessness paid off. He slowly but surely built a coterie of supporters, including ambitious Young Turk Congressmen, some destined to ride the Supply-Side wave to higher office: Newt Gingrich, Vin Weber, Connie Mack and the faux-Supply-Sider David Stockman among them. Kemp thereby built a potent constituency, if not quite a consensus, in the House for stabilizing the dollar and cutting marginal tax rates.

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