A tariff “for revenue” was one where a rate was set low enough for the good in question to flow into the country in sufficient quantity to bring in increasing receipts to the government. A “prohibitive” tariff was one that was so high, receipts would go up if a rate were lowered. The “Laffer curve” concept was the most discussed theorem in political-economic debates in the United States in the 19th century.
Instead of figuring out how to raise taxes, Congressional Democrats would do better to work in a bipartisan manner to make the middle class and pro-jobs tax relief just passed into law permanent. A rising tide lifts all boats.
According to the report of one Kemp insider, Reagan, on the verge of his presidential campaign, came to seek Kemp’s endorsement. The Reagan campaign’s purpose was to prevent Kemp from entering the race too, splitting the conservative base. Jack Kemp offered his endorsement in return for Reagan’s endorsement of the Kemp-Roth 30% across-the-board tax rate cut.
That policy was controversial among both Republicans and Democrats. It was famously attacked by Reagan’s chief rival for the 1980 presidential nomination, George H.W. Bush, as “voodoo economic policy.” Reagan, on the advice of his then-top advisors, reportedly intended to check Kemp’s box, pocket Kemp’s endorsement, and never mention the tax rate cut again.
Until, that is, President Carter attacked Reagan’s endorsement of Kemp-Roth as irresponsible. Reagan rose to its defense. Carter doubled down. So did Reagan.
Our friend, Senator Pat Toomey of Pennsylvania discussed tax reform, including SALT deducations, with John Catsimatidis on The Cats Roundtable. Listen to the discussion here (less than 10 minutes long).
Our friend Jerry Bowyer today recalled a 2013 interview he had done with Allan Meltzer back in 2013. After the passing of Mr. Meltzer earlier this week this seemed like another good one to share. Enjoy.
Economist Allan Meltzer, who died Monday, was widely considered one of the postwar era’s greatest monetary economists and the only economist to advise both President Reagan and British Prime Minister Margaret Thatcher.
But only Trump has the power to really work this out, by directing his advisors — all of them — to start focusing on the right question. How to engineer a 3% – 4% economic growth rate? Getting there is not a mulligan.
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The clashing of White House camps is an inevitable artifact of sluggish growth. All President Trump needs to do to bring about a just and lasting West Wing peace is to focus his team better. The way of producing harmony in the West Wing — and popularity in the polls — is for the President to issue a sticky note to each of his economic and political advisors that says, simply “How do we get real economic growth up from 2% to 3% or 4%, and fast?” Trump, alone, has the power to do this.
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Getting growth is an empirical, not an ideological, thing.
Worked for JFK. Worked for Reagan. Worked for Clinton.
Would work for Trump.
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Reagan supported Chairman Volcker’s wringing inflation from the economy. When that was accomplished, and Reagan’s across-the board tax rate cut was fully phased in, America enjoyed a cumulative 3.5+% economic growth rate with a spectacular 7% year. Mr. President? That was huge.
☕ Dan Mitchell also has a new post that while not strictly economic, does matter in the economic realm. As we know, money taxed away from the people is money taken out of the consumer economy.
The recession of 1990-91, foretold by the flash crash in the markets that spooky Friday the 13th in October 1989, remains one of the great oddities of our recent economic history. The 1982-2000 boom was so immense—it resulted in 40 million new jobs, untold number of startups, and a renewed exploration of the American Dream—why did it have even that one interruption, there in the years of President George H.W. Bush?
The reasons are all too relevant to contemporary affairs, namely the matter at hand this spring before the Donald J. Trump administration: should there be a tax reform involving a major cut in tax rates, as roundly promised on the campaign trail?
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In the 1988 presidential campaign, Bush uttered the most (in)famous words of his career: “read my lips, no new taxes.” That was his negative program, no new taxes, as he sought to succeed Ronald Reagan in office. Bush’s positive program was to seek a cut in capital-gains rates.
Capital gains rates had gone up by eight points in 1986, as part of a deal to get the marginal rate of the income tax all the way down to 28 percent—the lowest top rate in the modern history of the income tax. Bush argued, on the trail in 1988, that capital gains rates do not take into account inflation (as the income tax does), and had to be lowered as the top fiscal priority of his administration.