Economic ideas and the political process: Debating tax cuts in the U.S. House of Representatives, 1962-1981

Politics and Society

Volumn 38, Issue 3, 2010, Pages 347-372

  Berman, Elizabeth Popp ^a   Pagnucco, Nicholas ^a  

^a STATE UNIVERSITY OF NEW YORK   (United States)

Author keywords

Congress; Discourse; Ideas; Keynesianism; Supply side economics; Taxes

Indexed keywords

EID: 77956014958     PISSN: 00323292     EISSN: 15527514     Source Type: Journal    
DOI: 10.1177/0032329210373070     Document Type: Article

References (153)

1. See, for example, Sarah Babb, Managing Mexico: Economists from Nationalism to Neo- liberalism (Princeton, NJ: Princeton University Press, 2001);
2. John L. Campbell and Ove K. Pedersen, eds., The Rise of Neoliberalism and Institutional Analysis (Princeton, NJ: Princeton University Press, 2001);
3. Marion Fourcade, Economists and Societies: Discipline and Profession in the United States, Britain, and France, 1890s to 1990s (Princeton, NJ: Princeton University Press, 2009);
4. Stephanie Lee Mudge, What Is Neoliberalism? SocioEconomic Review 6 (2008): 703-731;
5. Margaret, R. Somers and Fred Block, From Poverty to Perversity: Ideas, Markets, and Institutions over 200 Years of Welfare Debate, American Sociological Review 70 (2005): 260-287.
6. See, for example, Daniel Béland, Ideas and Social Policy: An Institutionalist Perspective, Social Policy and Administration 39 (2005): 1-18
7. Sheri Berman, The Social Democratic Moment: Ideas and Politics in the Making of Interwar Europe (Cambridge, MA: Harvard University Press, 1998)
8. Mark Blyth, Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century (Cambridge, UK: Cambridge University Press, 2002).
9. On ideas and interests, see particularly John L. Campbell, Ideas, Politics, and Public Policy, Annual Review of Sociology 28 (2002): 21-38. On the role of discourse, see
10. Mitchel Y. Abolafia, Framing Moves: Interpretive Politics at the Federal Reserve, Journal of Public Administration Research and Theory 14, no. 3 (2004): 349-370
11. Vivien Schmidt, Discur- sive Institutionalism: The Explanatory Power of Ideas and Discourse, Annual Review of Political Science 11 (2008): 303-326.
12. See Isaac William Martin, The Permanent Tax Revolt: How the Property Tax Transformed American Politics (Stanford, CA: Stanford University Press, 2008), on the tax revolt; see
13. Monica Prasad, The Politics of Free Markets: The Rise of Neoliberal Economic Policies in Britain, France, Germany, and the United States (Chicago: University of Chicago Press, 2006), on Reagan's tax policies.
14. U.S. Congress, Congressional Budget Office, How Capital Gains Tax Rates Affect Rev- enues: The Historical Evidence (Washington, DC: Government Printing Office, 1988). Available at http://www.cbo.gov/ftpdocs/84xx/doc8449/88-CBO-007.pdf (accessed December 29, 2009).
15. Congressional Quarterly, Congress Enacts President Reagan's Tax Plan, in CQ Almanac 1981 (Washington, DC: Congressional Quarterly, 1982).
16. For the 1962 and 1964 bills, see U.S. House of Representatives, Committee on Ways and Means, Legislative History of H.R. 10650, 87th Congress, The Revenue Act of 1962, Public Law 87-834 (Washington, DC: Government Printing Office, 1967);
17. U.S. House of Repre- sentatives, Committee on Ways and Means, Legislative History of H.R. 8363, 88th Con- gress, The Revenue Act of 1964 (Washington, DC: Government Printing Office, 1966).
18. Julian Zelizer, Taxing America: Wilbur D. Mills, Congress, and the State, 1945-1975 (Cam- bridge, UK: Cambridge University Press, 1998).
19. Congressional Quarterly, Congress Enacts Major Tax Law Revisions, in CQ Almanac 1962 (Washington, DC: Congressional Quarterly, 1963).
20. Congressional Quarterly, Tax Reductions and Reforms Enacted, in CQ Almanac 1964 (Washington, DC: Congressional Quarterly, 1965).
21. For a contemporary example of this interpretation, see John K. Jessup, Choices Ahead for New Prosperity, Life, August 24, 1962, 72-78.
22. See The Economy: We Are All Keynesians Now, Time, December 31, 1965. Friedman himself later suggested the quote was misleading, saying, "In one sense, we are all Keynes- ians now; in another, no one is a Keynesian any longer. We all use the Keynesian language and apparatus; none of us any longer accepts the initial Keynesian conclusions."
23. See Milton Friedman, Dollars and Deficits: Living with America's Economic Problems (New York: Prentice Hall, 1968), 15.
24. See particularly Michael A. Bernstein, A Perilous Progress: Economists and Public Pur- pose in Twentieth-Century America (Princeton, NJ: Princeton University Press, 2001)
25. Robert M. Collins, More: The Politics of Economic Growth in Postwar America (Oxford, UK: Oxford University Press, 2000).
26. See Collins, The Business Response to Keynes, 1929-1964 (New York: Columbia University Press, 1981)
27. Robert Lekachman, The Age of Keynes (New York: Random House, 1966);
28. Cathie Jo Martin, Shifting the Burden: The Struggle over Growth and Corporate Taxation (Chicago: University of Chicago Press, 1991)
29. Robert M.Solow, a member of Kennedy's Council of Economic Advisers (CEA), later said that the CEA was Keynesian in the short run and neoclassical in the long run.
30. See Solow, The Kennedy Council and the Long Run, in Economic Events, Ideas, and Policies: The 1960s and After, ed. GeorgeL. Perry and James Tobin (Washington, DC: Brookings Institution, 2000), 122.
31. See Amy Elisabeth Davis, Politics of Prosperity: The Kennedy Presidency and Economic Policy (PhD diss., Columbia University, 1988)
32. David J. Stern, Congress, Politics, and Taxes: A Case Study (PhD diss., Claremont Graduate School, 1965) for detailed accounts of the politics behind the economic policy of the Kennedy administration.
33. Quoted in Kyle Crichton, Walter Heller: Presidential Persuader, New York Times, June 21, 1987.
34. See Herbert Stein, The Fiscal Revolution in American (Washington, DC: AEI Press, 1991), 391-395
35. See Stein, Fiscal Revolution in America, 410.
36. Congressional Quarterly, Tax Reductions and Reforms Enacted.
37. Tax Policy Center, Historical Federal Income Tax Rates for a Family of Four (Washington, DC: Tax Policy Center, 2009), http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=226 (accessed December 29, 2009).
38. Representative Steed of Oklahoma, 87th Cong., 2nd sess., Cong. Rec. 108 (1962): 5419-5420.
39. Representative Watts of Kentucky, 87th Cong., 2nd sess., Cong. Rec. 108 (1962): 5341.
40. For statements by these representatives, see 87th Cong., 2nd sess., Cong. Rec. 108 (1962): 5301, 5413, 5388, 5344, 5310, 5401, 5304, 5318.
41. Representative Denton of Indiana, 87th Cong., 2nd sess., Cong. Rec. 108 (1962): 5318.
42. Representative Mason of Illinois, 87th Cong., 2nd sess., Cong. Rec. 108 (1962): 5307;
43. Representative Alger of Texas, 87th Cong., 2nd sess., Cong. Rec. 108 (1962): 5339.
44. Representative Harsha of Ohio, 87th Cong., 2nd sess., Cong. Rec. 108 (1962): 5326.
45. See, for example, Davis, Politics of Prosperity Stern, "Congress, Politics, and Taxes" and Zelizer, Taxing America, 180-182, on the pre-presidential task forces on economic policy and tax policy that made these recommendations.
46. Davis, Politics of Prosperity.
47. The American Presidency Project, John F. Kennedy: Address and Question and Answer Period at the Economic Club of New York, December 14, 1962 (Santa Barbara, CA: The American Presidency Project, n.d.), http://www.presidency.ucsb.edu/ws/index.php?pid=9057 (accessed December 30, 2009).
48. Walter W. Heller, New Dimensions of Political Economy (Cambridge, MA: Harvard Uni- versity Press, 1966)
49. Theodore C., Sorensen, Kennedy (New York: Harper & Row, 1965), 430
50. See also Stein, Fiscal Revolution in America and Davis, Politics of Prosperity on this speech and reactions to it.
51. Davis, Politics of Prosperity, 284.
52. Congressional Quarterly, Tax Bill May Lead to New Government Economic Role, in CQ Almanac 1963 (Washington, DC: Congressional Quarterly, 1964)
53. Congressional Quarterly, "Tax Reductions and Reforms Enacted. See also U.S. House, Committee on Ways and Means, President's 1963 Tax Message, Along with Principal Statement, Technical Explanation, and Supporting Exhibits and Documents Submitted by Secretary of the Treasury Douglas Dillon in Connection with the President's Recommendations (Washington, DC: Government Printing Office, 1963) for the full administration proposal.
54. Davis, Politics of Prosperity, 429-446
55. Zelizer, Taxing America, 193-202
56. John P. Witte, The Politics and Development of the Federal Income Tax (Madison: University of Wiscon- sin Press, 1985), 160-161.
57. Congressional Quarterly, Tax Reductions and Reforms Enacted.
58. Representative Mills of Arkansas, 88th Cong., 1st sess., Cong. Rec. 109 (1963): 17906.
59. Ibid., 17906-17907.
60. Representative Ullman of Oregon, 88th Cong., 1st sess., Cong. Rec. 109 (1963): 17929.
61. Representative Boland of Massachusetts, 88th Cong., 1st sess., Cong. Rec. 109 (1963): 17935.
62. Representative Fino of New York, 88th Cong., 2nd sess., Cong. Rec. 110 (1964): 3579.
63. Representative Griffiths of Michigan, 88th Cong., 1st sess., Cong. Rec. 109 (1963): 17918.
64. For these statements, see 88th Cong., 1st sess., Cong. Rec. 109 (1963): 17933,18097; 88th
65. Cong., 2nd sess., Cong. Rec. 110 (1964): 3557-3581.
66. For inflation data, see U.S. Department of Labor, Bureau of Labor Statistics, "Consumer Price Index (CPI): Historical Data" (Washington, DC: Bureau of Labor Statistics, n.d.), http://www.bls.gov (accessed December 30, 2009).
67. Representative Curtis of Missouri, 88th Cong., 2nd sess., Cong. Rec. 110 (1964): 3572.
68. Most notably in Andrew Mellon, Taxation: The People's Business (New York: Ayer, 1924).
69. Representative Mills of Arkansas, 88th Cong., 2nd sess., Cong. Rec. 110 (1964): 5295.
70. For this "Declaration," see 88th Cong., 2nd sess., Cong. Rec. 110 (1964): 3545.
71. Representative Mills of Arkansas, 88th Cong., 2nd sess., Cong. Rec. 110 (1964): 3559.
72. Representative Curtis of Missouri, 88th Cong., 2nd sess., Cong. Rec. 110 (1964): 5314.
73. Representative Wyman of New Hampshire, 88th Cong., 2nd sess., Cong. Rec. 110 (1964): 3576.
74. Representative Watson of South Carolina, 88th Cong., 1st sess., Cong. Rec. 109 (1963): 18072.
75. Many accounts outlining the rise of supply-side economics have been written. See Patrick J. Akard, The Return of the Market: Corporate Mobilization and the Transformation of U.S. Economic Policy (PhD diss., University of Kansas, 1989)
76. Blyth, Great Transformations; Collins, More; Martin, Shifting the Burden; and Prasad, Politics of Free Markets, among others, for scholarly versions. For good popular versions,
77. see Paul Krugman, Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations (New York: Norton, 1994)
78. Stein, Fiscal Revolution in America. For firsthand accounts
79. see Paul Craig Roberts, The Supply-Side Revolution: An Insider's Account of Policymaking in Washington (Cambridge, MA: Harvard University Press, 1984)
80. David Stockman, The Triumph of Politics: How the Reagan Revolution Failed (New York: Harper & Row, Publishers, 1986).
81. W. Carl Biven, Jimmy Carter's Economy: Policy in an Age of Limits (Chapel Hill: University of North Carolina Press, 2002)
82. Witte, Politics and Development of the Federal Income Tax.
83. Witte, Politics and Development of the Federal Income Tax, 204-208.
84. Few taxpayers were actually subject to this 49 percent rate, however; see U.S. Congress, How Capital Gains Tax Rates Affect Revenues, 34.
85. See Robert Wolcott Johnson, The Pas- sage of the Investment Incentive Act of 1978: A Case Study of Business Influencing Public Policy (PhD diss., Harvard University, 1980) for a comprehensive treatment of the politics behind the 1978 capital gains tax cut.
86. For Carter's introduction of his tax proposals, see The American Presidency Project, Jimmy Carter: Tax Reduction and Reform Message to the Congress, January 20, 1978 (Santa Barbara, CA: The American Presidency Project, n.d.), http://www.presidency.ucsb.edu/ws/index.php?pid=31055 (accessed December 30, 2009).
87. Martin, Permanent Tax Revolt.
88. Art Pine, A Tax Break for the Rich in Election Year? Washington Post, May 21, 1978.
89. Witte, Politics and Development of the Federal Income Tax, 211-215.
90. Income tax rates were not indexed to inflation before the passage of the Economic Recov- ery Tax Act (ERTA) in 1981.
91. Congressional Quarterly, Tax Cut Bill, 1978 Legislative Chronology, in Congress and the Nation, 1977-1980, vol. 5 (Washington, DC: Congressional Quarterly, 1981).
92. See 95th Cong., 2nd sess., Cong. Rec. 124 (1978): 25423.
93. See 95th Cong., 2nd sess., Cong. Rec. 124 (1978): 25425.
94. William Steiger, who was only forty years old, died unexpectedly the following month of a heart attack. For an obituary
95. see J. Y. Smith, Rep. W. A. Steiger Dies, Washington Post, December 5, 1978, C8.
96. Akard, Return of the Market.
97. Krugman, Peddling Prosperity
98. Roberts, Supply-Side Revolution
99. Stockman, Triumph of Politics
100. Congressional Quarterly, Congress Enacts President Reagan's Tax Plan.
101. See 97th Cong., 1st sess., Cong. Rec. 127 (1981): 19538.
102. Representative Steiger of Wisconsin, 95th Cong., 2nd sess., Cong. Rec. 124 (1978): 25427.
103. Representative Stockman of Michigan, 95th Cong., 2nd sess., Cong. Rec. 124 (1978): 25439.
104. For claims that deficits would worsen inflation, see 95th Cong., 2nd sess., Cong. Rec. 124 (1978): 25421, 25478, 25479 97th
105. Cong., 1st sess., Cong. Rec. 127 (1981): 18047, 18858.
106. For claims that deficits would increase interest rates, see 97th Cong., 1st sess., Cong. Rec. 127 (1981): 18047-18053, 18858
107. For a claim that deficits were causing the dollar to col- lapse, see 95th Cong., 2nd sess., Cong. Rec. 124 (1978): 25477.
108. Representative Archer of Texas, 95th Cong., 2nd sess., Cong. Rec. 124 (1978): 25431.
109. Representative Hance of Texas, 97th Cong., 1st sess., Cong. Rec. 127 (1981): 18051.
110. See also 95th Cong., 2nd sess., Cong. Rec. 124 (1978): 25425, 25427, 25431, 25437, and 25442, among others, for similar claims.
111. For mentions of the increase in tax revenues from high-income individuals, see 95th Cong., 2nd sess., Cong. Rec. 124 (1978): 25427-25502.
112. For mentions of the five-year revenue increase, see 95th Cong., 2nd sess., Cong. Rec. 124 (1978): 25442;
113. Cong., 1st sess., Cong. Rec. 127 (1981): 18051
114. See 97th Cong., 1st sess., Cong. Rec. 127 (1981): 18259.
115. Representative Daub of Nebraska, 97th Cong., 1st sess., Cong. Rec. 127 (1981): 18083; see also 18259.
116. Representative Fields of Texas, 97th Cong., 1st sess., Cong. Rec. 127 (1981): 18259.
117. Representative Lagomarsino of California, 95th Cong., 2nd sess., Cong. Rec. 124 (1978): 25436
118. Lagomarsino is most likely referring to Norman Ture here, who served on Kennedy's pre-Presidential Taxation Task Force and as Reagan's Under Secretary of the Treasury for Tax and Economic Affairs, and was also a "key architect" of ERTA;
119. see Zelizer, Taxing America, 180, 367.
120. On Ture, see also Roberts, Supply-Side Revolution;
121. Stern, Congress, Politics, and Taxes
122. Stockman, Triumph of Politics, as well as 95th
123. Cong., 2nd sess., Cong. Rec. 124 (1978): 5252, 21053, 21819; 97th
124. Cong., 1st sess., Cong. Rec. 126 (1980): 5798.
125. Representative Duncan of Oregon, 95th Cong., 2nd sess., Cong. Rec. 124 (1978): 25481
126. Representative Vanik of Ohio, 95th Cong., 2nd sess., Cong. Rec. 124 (1978): 25503.
127. Vanik argues that while government revenues did increase by $54 billion between 1963 and 1968, this was due not to the Kennedy tax cuts but to a combination of increases in Social Security taxes and the economic stimulus of Vietnam War spending.
128. For example, these observations are consistent with the narratives of American economic policy provided by Bernstein in A Perilous Progress and Collins in More.
129. Davis, Politics of Prosperity.
130. Collins notes in More, 52, that during the early days of the Kennedy administration, the offices of the Commerce Department were labeled with signs saying, "What have you done for Growth today?
131. Solow, The Kennedy Council and the Long Run.
132. Politics of Prosperity
133. Stern, Congress, Politics, and Taxes.
134. See 87th Cong., 2nd sess., Cong. Rec. 108 (1962): 5340.
135. Martin, Shifting the Burden, 60.
136. See, for example, 87th Cong., 2nd sess., Cong. Rec. 108 (1962): 5314, 5333, 5346.
137. Davis, Politics of Prosperity, 293.
138. Davis also recounts a story, told to her by James Tobin, about a conversation Treasury Undersecretary Henry Fowler had with a businessman as they traveled by train between New York and Washington. The businessman asked what the tax credit would mean for him, and Fowler, doing some quick calculations, told him it would save him about $200,000. "The man thanked him and then, after studying the num- bers for a few minutes, turned back to Fowler. 'Well say,' he wondered, 'Could I ask you another question? If this would save me $200,000, then why am I against it?
139. See Davis, Politics of Prosperity, 172.
140. We thank Fred Block for reminding us of this point.
141. Collins, More
142. Davis, Politics of Prosperity
143. Zelizer, Taxing America.
144. For example, in January 1963 Bruce Alger (R-TX) said of the recent Economic Report of the President, "It is a sick document. and the cure proposed is more of the same sickness, more Federal control and more Federal aid. Yes, it is Keynesianism part and parcel or less camouflaged by name, known as socialism or collectivism, as contrasted to capitalism, the private enterprise system
145. See 88th Cong., 1st sess., Cong. Rec. 109 (1963): 718.
146. For an example of such an argument, see 88th Cong., 2nd sess., Cong. Rec. 110 (1964): 3572.
147. As House Speaker John McCormack (D-MA) noted during debate over the Revenue Act of 1964, "I also never thought I would see the day when our friends on the Republican side would quote Lord Keynes as an authority.
148. See 88th Cong., 1st sess., Cong. Rec. 109 (1963): 18112.
149. see Myra Marx Ferree, William A. Gamson, Jürgen Gerhards, and Dieter Rucht, Shaping Abortion Discourse: Democracy and the Public Sphere in Germany and the United States (Cambridge, UK: Cambridge University Press, 2002)
150. Ruud Koopmans and Paul Statham, Ethnic and Civic Conceptions of Nationhood and the Differential Success of the Extreme Right in Germany and Italy, in How Social Movements Matter, ed. Marco Giugni, Doug McAdam, and Charles Tilly (Minneapolis: University of Minnesota Press, 1999), 225-251.
151. Martin, Shifting the Burden, 59
152. see also Stern, Congress, Politics, and Taxes.
153. Blyth, Great Transformations.