The Popular Origins of Neoliberalism in the Reagan Tax Cut of 1981

Journal of Policy History

Volumn 24, Issue 3, 2012, Pages 351-383

  Prasad, Monica ^a  

^a NORTHWESTERN UNIVERSITY   (United States)

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[No Author keywords available]

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EID: 85011466998     PISSN: 08980306     EISSN: 15284190     Source Type: Journal    
DOI: 10.1017/S0898030612000103     Document Type: Article

References (118)

1. E. George Cross III to Secretary Regan and Deputy Secretary-Designate McNamar, 17 February 1981, “Speechwriting: Drafts, Address to Joint Session/Economy Background, 18 February 1981 [4 of 5],” Ronald Reagan Presidential Library (hereafter RRPL).
2. Ronald Reagan, “Address Before a Joint Session of the Congress on the Program for Economic Recovery February 18, 1981.” Public Papers of President Ronald W. Reagan (Washington, D.C.), 18 February 1981.
3. Office of Management and Budget, Historical Tables: Budget of the U.S. Government: Fiscal Year 2010 (Washington, D.C. 2009), table 7.1.
4. See, e.g. Hazel Gaudet Erskine, “The Polls: Some Gauges of Conservatism,” Public Opinion Quarterly 28, no. 1 (August–September 1980): 154-68
5. See Barry Rabe, Statehouse and Greenhouse (Washington, D.C. 2004), on state-level environmental policy, for example.
6. Rick Perlstein, Before the Storm (New York, 2001).
7. James L. Sundquist, Politics and Policy (Washington, D.C. 1968), 42.
8. Allen J. Matusow, Nixon's Economy (Lawrence, Kans. 1998).
9. The “Ronald Reagan 1980 Presidential Campaign Papers, 1964–1980.” Prepresidential records are not subject to the Freedom of Information Act, and these records were only released by decision of the Library and Nancy Reagan. In this article, I have also drawn on several recently released collections from the Hoover Institution and the Library of Congress.
10. Jerome L. Himmelstein, To the Right: The Transformation of American Conservatism (Berkeley and Los Angeles, 1990)
11. Lisa McGirr, Suburban Warriors: The Origins of the New American Right (Princeton, 2001)
12. Bruce J. Schulman, The Seventies: The Great Shift in American Culture, Society, and Politics (New York, 2001).
13. Andrea Campbell, “What Americans Think of Taxes,” in The New Fiscal Sociology, ed. Isaac Martin, Ajay Mehrotra, and Monica Prasad (Cambridge, 2009)
14. for arguments on inflation as the source of the rising unpopularity of taxes, see W. Elliot Brownlee and C. Eugene Steuerle, “Taxation,” in The Reagan Presidency: Pragmatic Conservatism and Its Legacy, ed. W. Elliot Brownlee and Hugh Davis Graham (Lawrence, Kans. 2003), 155-81
15. W. Elliot Brownlee, Federal Taxation in America: A Short History (Cambridge, 2004), 127-33
16. for poll evidence, see William G. Mayer, The Changing American Mind (Ann Arbor, 1993).
17. Bruce Bartlett, “Revolution of 1978,” Jack Kemp Papers, box 89, folder 6, Mueller Kemp, Jack, Economics “Model Notebook” 1975–80 (4 of 4), Manuscript Division, Library of Congress.
18. Irwin Ross, “Jack Kemp Wants to Cut Your Taxes—A Lot,” Fortune, 10 April 1978, Jack Kemp Papers, box 89, folder 5, Manuscript Division, Library of Congress.
19. Quoted in Jon Margolis, “Jack Kemp Thinks He Has a Capital Idea,” Chicago Tribune, 25 June 1978, A2.
20. For other verbatim examples months apart, see, e.g. Bill Steigerwald, “Kemp Blitzes U.S. Government Policy,” Los Angeles Times, 14 October 1979, O8
21. Joseph Sobran, “Bringing Back the Golden Goose,” Washington Post, 22 July 1980, A13.
22. Steven Hayward, The Age of Reagan (New York, 2009), 647.
23. Robert M. Collins, Transforming America (New York, 2006), 69.
24. Isaac William Martin, The Permanent Tax Revolt (Stanford, 2008), see, e.g. p. 50 for an example of inflation inspiring an episode of the tax revolt.
25. Martin Tolchin, “Jack Kemp's Bootleg Run to the Right,” Esquire, 24 October 1978, 59–69.
26. “Roth-Kemp = Tax Cut = Jobs = Economic Growth,” First Monday, June 1978, Campaign 1980, box 459, Research Files–Kemp [Jack] (Hopkins/Bandow), RRPL.
27. “Ronald Reagan Speaks Out on Carter Tax Plan,” CFTR Newsletter, 1 December 1977, Campaign 1980, box 38, Hannaford/CA HQ–Citizens for the Republic–Newsletter, 8/1977–12/1977 (2/3), RRPL
28. “Ronald Reagan Speaks Out: Republicans Ride the Tax Cut Ride,” CFTR Newsletter, 17 July 1978, Campaign 1980, box 39, Hannaford/CA HQ-Citizens for the Republic, Vol. 2, 6/1978–10/1978 2(3) General, RRPL.
29. “A National Survey of the American Electorate,” MayJune 1978, 83, Campaign 1980, box 183, RRPL.
30. Philip Williams and Graham Wilson, “The American Mid-Term Elections,” Political Studies 27, no. 4 (December): 603-9.
31. Jack Kemp, “Initiating an American Renaissance,” 3 February 1979, 2, Campaign 1980, box 473, Research Policy–Issues Material–Kemp, Jack (1/2) (Hopkins/Bandow), RRPL.
32. On interpreting the meaning of midterm elections, see Edward R. Tufte, “Determinants of the Outcomes of Midterm Congressional Elections,” American Political Science Review 69, no. 3 (1975): 812-26
33. Joseph Bafumi, Robert S. Erikson, and Christopher Wlezien, “Balancing, Generic Polls, and Midterm Congressional Elections” Journal of Politics 72 (2010): 705-19.
34. Richard Bergholz, “Reagan Leans Toward Running,” Los Angeles Times, 14 January 1979, A3.
35. “A Statewide Survey of Republican Primary Voters in New Hampshire,” January 1980, 5–7, Campaign 1980, box 193, RRPL
36. “Two Brushfire Surveys of New Hampshire Republican Voters,” February 1980, 10, Campaign 1980, box 196, RRPL
37. “A Panel Survey of Vermont Republicans,” February 1980, Campaign 1980, box 197, RRPL.
38. “A Statewide Survey of Republican Primary Voters in Illinois Wave II,” 9–10 February 1980, 17, Campaign 1980, box 195, RRPL.
39. On Kemp name recognition, e.g. see “A Statewide Survey of Republican Primary Voters in Florida,” November–December 1979, 25–26, Campaign 1980, box 191, RRPL.
40. On Kemp as possible vice-presidential pick, see “Kemp's Talk to Convention May Be Biggest of Career” and “Reagan Nearly Chose Kemp, Aide Reveals,” Jack Kemp Papers, box 382, folder 8, Scrapbooks Vol. 20, 1980, July 15–1981, Feb. 13, Manuscript Division, Library of Congress.
41. Rowland Evans and Robert Novak, “Reagan Talks Out of School,” Washington Post, 12 October 1979, A15.
42. Martin Anderson, Revolution (New York, 1988), 114, 116.
43. Arthur Laffer, quoted in Seymour Zucker, “The Fallacy of Slashing Taxes Without Cutting Spending,” Business Week, 7 August 1978, 62.
44. “Model Notebook K-R: Q&As,” Jack Kemp Papers, box 89, folder 4, Manuscript Division, Library of Congress.
45. Rowland Evans and Robert Novak, “Reagan Talks Out of School,” Washington Post, 12 October 1979, A15.
46. “The President's package will not reduce inflation, or increase saving.” Donald T. Regan Papers, box 176, folder 1, Manuscript Division, Library of Congress.
47. Council of Economic Advisers, 17 March 1981, “The Current Status of the President's Program for Economic Recovery,” Donald T. Regan Papers, box 138, folder 4, Economic Recovery Program, March 17–April 3, 1981, Manuscript Division, Library of Congress.
48. “President's Tax Proposals Economic Rationale,” Office of the Secretary of the Treasury, Donald T. Regan, box 138, folder 3, Economic Recovery Program, Feb. 18–Mar. 3, 1981, Manuscript Division, Library of Congress.
49. Congressional Budget Office, “Congress and the Budget,” 10 April 1981, Alice M. Rivlin Papers, box 26, folder “Congress and the Budget,” 16 April 1981, Manuscript Division, Library of Congress.
50. “Some Initial Strategic and Tactical Considerations for the 1980 Presidential Campaign,” 28 March 1980, Campaign 1980, box 104, Meese, Ed–Campaign Planning–Tactics (3/4), RRPL.
51. “Report on a Focus Group Discussion of the 1980 Presidential Election,” 12–13, Campaign 1980, box 250, Political Ops–General–Polling & Strategy (Wirthlin, Beal) (1/5) (Timmons), RRPL; Meeting 9 July 1980, Campaign 1980, box 105, Ed Meese–Campaign Planning Meetings, July 1980, RRPL
52. Report on a Focus Group Discussion of the 1980 Presidential Election
53. Sean Wilentz, The Age of Reagan (New York, 2008), 141.
54. “Consumer Attitudes Toward Government Taxation and Spending,” 3 September 1980, Campaign 1980, box 252, Political Ops–Issues–Taxes (Timmons), RRPL.
55. Jude Wanniski, “The Campaign Homestretch,” Peter Hannaford Papers, box 6, folder 6-9, Hoover Institution, Stanford.
56. Richard L. Madden, “Anderson, in Manhattan, says Rivals Flip-Flopped,” New York Times, 10 October 1980, quoted in Craig Shirley, Rendezvous with Destiny (Wilmington, Del.: Intercollegiate Studies Institute, 2009), 687.
57. John W. Sloan, The Reagan Effect (Lawrence, Kans. 1999), 164.
58. “A Statewide Survey of Republican Voters in Pennsylvania,” 11 April 1980, Campaign 1980, box 199, RRPL.
59. “Some Initial Strategic and Tactical Considerations for the 1980 Presidential Campaign,” 28 March 1980, 11, Campaign 1980, box 104, Meese, Ed–Campaign Planning–Tactics (3/4), RRPL.
60. David Harvey, A Brief History of Neoliberalism (Oxford, 2005), 43.
61. For an overview of the role of business interests in recent politics that comes to a very different conclusion, see Mark A. Smith, American Business and Political Power (Chicago, 2000).
62. Jacob S. Hacker and Paul Pierson, Winner-Take-All Politics: How Washington Made the Rich Richer—And Turned Its Back on the Middle Class (New York, 2010)
63. Lawrence Lessig, Republic, Lost: How Money Corrupts Congress—and a Plan to Stop It (New York, 2011).
64. Kim Phillips-Fein, Invisible Hands (New York, 2009), xii.
65. See Eugene Steuerle, The Tax Decade (Washington, D.C. 1992), 186-87, for a breakdown of the costs of the tax bill. This means that the largest part of the revenue loss was not “supply side”at all, but “demand side.”
66. See, e.g. The Tax Decade
67. Sheldon D. Pollack, Refinancing America: The Republican Antitax Agenda (Albany, N.Y. 2003).
68. Patrick Akard, “Corporate Mobilization and Political Power,” American Sociological Review 57 (1992): 597–615.
69. Art Pine, “DuPont's Irving S. Shapiro,” Washington Post, 8 February 1981; quoted in Monica Prasad, The Politics of Free Markets (Chicago, 2006), 48.
70. Rowland Evans and Robert Novak, “Big Business is Furious, Too,” Washington Post, 8 June 1981, A15.
71. Joseph White and Aaron Wildavsky, The Deficit and the Public Interest (Berkeley and Los Angeles, 1990), 165.
72. “Cautions from Conservatives,” “Tax Bill ’81 [1 of 2] 2/5 box 10533,” David Gergen Files, RRPL.
73. Kim McQuaid, Uneasy Partners (Baltimore, 1994), 165.
74. See, e.g. Jack Kemp, “Congress’ First Priority: Lower Federal Tax Rates,” Human Events, 27 November 1976.
75. See, e.g. Martin Anderson, Revolution (New York, 1988), 140-63, for a lively denial.
76. Steven Hayward, The Age of Reagan (New York, 2009), 70–71.
77. George Skelton, “Reagan Assails Wall Street's Economic Advice,” New York Times, 29 May 1981, A6.
78. Ronald Reagan, An American Life (New York, 1990), 232, 244.
79. The White House, “President Reagan's Program for Economic Recovery,” April 1981, Craig Fuller Files, OA 10972, Economic/Budget Policy April 1981 (3).
80. David A. Stockman, “Reagan Economic Program II–General Materials [2 of 5],” box OA9020, White House Office of Public Affairs: Records.
81. “Savings and Investment in the Program for Economic Recovery,” White House Office of Public Affairs: Records, OA 9015, “Reagan Tax Cut Plan [4 of 8],” RRPL.
82. Michael Boskin, “Taxation, Saving, and the Rate of Interest,” Journal of Political Economy 86, no. 2, pt. 2 (April 1978): S3–S27.
83. Department of the Treasury, “Background on the President's Tax Program.” Edwin Meese III Files, OA 2990, Background on the President's Tax Program, Binder 1, RRPL.
84. U.S. Congress, Leading Economists’ Views of Kemp-Roth (Washington, D.C. 1978).
85. Quoted in Seymour Zucker, “The Fallacy of Slashing Taxes Without Cutting Spending,” Business Week, 7 August 1978, 62.
86. See, e.g. Paul Krugman, “The Bankruptcy Boys,” New York Times, 21 February 2010, for a recent version of the “starve the beast” explanation.
87. Ronald Reagan, “Address to the Nation on the Economy,” 5 February 1981.
88. See Bruce Bartlett, “‘Starve the Beast’: Origins and Development of a Budgetary Metaphor,” Independent Review 12, no. 1 (Summer 2007): 5–26.
89. Richard G. Darman, “Meeting of Legislative Strategy Group,” 12 May 1981, Craig Fuller Files, box 10972, Economic/Budget Policy, 5/81, RRPL.
90. Charls E. Walker to Richard V. Allen, MC box 1, 013293, 18 February 1981: “There are billions and billions of dollars around the world that will flow into U.S. bonds and stocks just as soon as foreign investors become convinced that the program will work.” However, see Greta Krippner, Capitalizing on Crisis (Cambridge, Mass. 2011), 95, for a discussion of general absence of attention to the role of foreign markets in financing the deficit at this time.
91. Department of the Treasury, “Background on the President's Tax Program.” Edwin Meese III Files, OA 2990, Background on the President's Tax Program, Binder 1, RRPL.
92. David A. Stockman, “Reagan Economic Program II–General Materials [2 of 5],” box OA9020, White House Office of Public Affairs: Records. See also Iwan Morgan, “Reaganomics and Its Legacy,” in Ronald Reagan and the 1980s, ed. Cheryl Hudson and Gareth Davies (New York, 2008), 104.
93. Murray Weidenbaum, “Interest Rates and Monetary Policy,” 7 May 1981, [Economic/Budget Policy, 5/81], box 10972, Craig Fuller Files, RRPL.
94. Martin Anderson, “Memorandum for Governor Reagan,” 22 August 1980, Campaign 1980, box 129, Meese Files–Subject File–Federal Spending [Anderson to RR re: economic conditions], RRPL.
95. Martin Anderson, Revolution (New York, 1988).
96. See Richard Reeves, President Reagan (New York, 2005), 80–81.
97. W. Elliot Brownlee and C. Eugene Steuerle, “Taxation,” in The Reagan Presidency, ed. W. Elliot Brownlee and Hugh Davis Graham (Lawrence, Kans. 2003).
98. R. Kent Weaver, Automatic Government: The Politics of Indexation (Washington, D.C. 1988), 203.
99. In an earlier examination of this episode (Monica Prasad, The Politics of Free Markets, [Chicago, 2006], 45–61), I also failed to notice this.
100. “Talking Points,” Francis Hodsoll Files S.M. Series I: Subject File, box 5, “Tax Bill,” RRPL.
101. John Ehrman, The Eighties (New Haven, 2005), 57.
102. “Voodoo Politics,” Wall Street Journal, 14 January 1982, 29.
103. Wall Street Journal
104. Wall Street Journal
105. See, e.g. Steuerle, The Tax Decade
106. Pollack, Refinancing America.
107. William Greider, The Education of David Stockman and Other Americans (New York, 1982).
108. Jack Kemp, “Statement by Congressman Jack Kemp on Ways and Means Chairman Dan Rostenkowski's Tax Proposal,” 10 April 1981, Jack Kemp Papers, box 134, folder 6, Taxes and taxation General 1979–84, Manuscript Division, Library of Congress.
109. Ronald Reagan, An American Life (New York, 1990), 232.
110. On tax cuts after Reagan, see, e.g. Pollack, Refinancing America; John Micklethwait and Adrian Wooldridge, The Right Nation: Conservative Power in America (New York, 2004).
111. See, e.g. Alan D. Monroe, “Public Opinion and Public Policy, 1980–1993,” Public Opinion Quarterly Volume 62 (1998): 6–28.
112. Harold Wilensky, Rich Democracies (Berkeley and Los Angeles, 2002)
113. Prasad, The Politics of Free Markets.
114. For just a few examples, see William G. Mayer, The Changing American Mind (Ann Arbor, 1993)
115. Smith, American Business and Political Power.
116. Prasad, The Politics of Free Markets, 62-82. Indeed, deregulation began on the left, championed by Ralph Nader and Ted Kennedy.
117. Lessig, Republic, Lost, 2.
118. Walter W. Heller, “The Kemp-Roth-Laffer Free Lunch,” Wall Street Journal, 12 July 1978, 20.