Ted Frier

Ted Frier
Location
Boston,
Birthday
April 02
Title
Speechwriter
Bio
Ted Frier is an author and former political reporter turned speechwriter who at one time served as communications director for the Massachusetts Republican Party, helping Bill Weld become the first Bay State Republican in a generation to be elected Governor. He was Chief Speechwriter for Republican Governor Paul Cellucci and Lt. Governor Jane Swift. Ted is also the author of the hardly-read 1992 history "Time for a Change: The Return of the Republican Party in Massachusetts." So, why the current hostility to the Republican Party and what passes for conservatism today? The Republican Party was once a national governing party that looked out for the interests of the nation as a whole. Now it is the wholly-owned subsidiary of self interest. Conservatism once sought national unity to promote social peace and harmony. Now conservatism has devolved into a right wing mutation that uses divide and conquer tactics to promote the solidarity of certain social sub-groups united against the larger society while preserving the privileges of a few.

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OCTOBER 15, 2012 12:39PM

Romney/Ryan and That Supply-Side Black Magic

Rate: 10 Flag

Last Thursday's debate between Vice President Joe Biden and Congressman Paul Ryan witnessed something extraordinary: A Republican candidate making his way through a 90-minute debate without once invoking the blessed memory of Ronald Wilson Reagan.

The omission was doubly puzzling since it's now becoming much clearer that the way Paul Ryan and Mitt Romney intend to make the math work on their $5 trillion plan to cut all taxes down to 20% is to once again rely on the voodoo magic of Reagan's supply-side economics and the Fool's Gold that tax cuts pay for themselves.

Ryan and Romney stubbornly refuse to spell out which tax deductions they would eliminate in order to pay for their 15% tax cut across all income brackets, rightly reasoning that these "loopholes" for home mortgage interest, employer provided health care, 401K contributions and much else are popular with the middle class and, if cut, would almost surely cause middle classes taxes to go up, by as much as $2,000 per household according to some estimates.

Thus, when pressed how they would bring federal income taxes down without either adding to the deficit or shifting tax burdens from the rich to the middle class and poor, Romney and Ryan take refuge under Arthur Laffer's famous curve by responding: "Economic growth."

"Let's get a tax policy that encourages growth and investment, and doesn't just penalize people for being successful,'' said Romney during the Republican primary after unveiling his plan to slash marginal tax rates.

Yet, as today's Boston Globe reports, economic growth resulting from tax cuts is still required to balance Romney tax plan, and here is where "the harshest disagreements arise."

According to the Globe, the Congressional Research Service last month examined the historical relationship between top marginal tax rates and economic growth going back to 1945. It found none. Repeat: None. "Top tax rates appear to have little or no relation to the size of the economic pie,'' according to the report.

The Globe noted that the nonpartisan Tax Policy Center also said Romney cannot deliver all the tax cuts he promised to the wealthy without raising taxes on the middle class.

Further, the Joint Committee on Taxation said that even if Romney eliminated every deduction in the tax code, he and Ryan would only be able to pay for a 4% cut in tax rates -- far short of the 15% cut they are proposing to bring all rates down to 20%.

In reply, notes the Globe, President Obama has argued that Romney's "trickle-down'' policies have a 30-year track record of concentrating wealth at the top while producing record deficits and without robust economic growth - a pitiful record that perhaps explains why Romney introduced the clunky expression "trickle-down government" in their first debate in order to change the subject.

As the Globe notes, onetime supply-side proponent and Reagan domestic policy adviser Bruce Bartlett says Republicans should forever retire the idea that tax cuts pay for themselves. He was particularly harsh in his assessment of wealthy individuals and corporations who continue to back this doctrine, saying "it is in the best interests of rich people to want to believe this [because] it justifies cutting taxes, especially at the top.''

In last week's debate, Congressman Ryan seemed to suggest the idea that tax cuts produce economic growth was original with Democratic icon John F. Kennedy when JFK proposed jump starting a sluggish economy by bringing top marginal rates down from their punitive World War II level of 91% on top incomes to a "more sensible" 65%.

As I noted earlier, the 91% top rate was not primarily designed to raise revenues but rather as a regulator to keep inflation under control in the over-heated economy America had to have to fight a world war. President Eisenhower kept the rates in place throughout his two terms in office largely for that purpose. And when Kennedy proposed reducing taxes to stimulate the economy he was opposed by traditional fiscal conservatives in the Republican Party who worried about the impact tax cuts might have on budget deficits.

Bartlett studied the Kennedy tax cut, which was finally enacted in 1964 when President Lyndon Johnson cut the top marginal rate from 91% to 70%, and estimated only about a third of revenues sacrificed by the cut were recovered through growth, says the Globe.  

The Romney campaign also cites 1986 when Reagan and House Speaker Thomas P. "Tip'' O'Neill Jr. reduced top rates from 50% to 28%. After that cut, says the Globe, "the growth rate remained relatively steady, then slumped and the economy fell into a recession in the early 1990s."

Now, Paul Ryan was merely playing for effect when he threw President Kennedy's name in Joe Biden's face at their debate last week because, as Ryan surely knows, the idea that tax cuts are stimulative is standard with Keynesian economics, as well. This is why the Obama $800 billion stimulus package that Republicans are so eager to dump on was almost equally divided between direct government spending and tax cuts.

No one disagrees that cutting taxes will stimulate the economy, just as no one contests that throwing gasoline on a campfire will cause it to temporarily burn hotter.  The more important question is whether such stimuli are sustainable - whether putting more wood on a fire or blowing on its embers might be a better way to keep it going than fueling it with "liquidity," just as whether it really makes sense (if ones goal is more jobs and economic growth in this country) to give finite tax dollars to wealthy investors who might plant them overseas as Mitt Romney has done with his Bain Capital investments in China.

If the problem with our economy is not inadequate demand, as Democrats say, but rather that the rich do not have enough money in their hands, as Republicans contend, then what were we to make of the record $2 trillion in free cash currently sitting idle with America's banks and corporations - a large portion of which I would submit is being sequestered so as to deliberately suppress the economy to Obama's disadvantage in order that America's plutocracy can get the compliant Romney puppet regime these oligarchs so obviously desire.

There is a reason Paul Ryan did not bring up Ronald Reagan's name in his debate with the Vice President last week.  It's because when Reagan jumped into the deep end of the supply-side pool he immediately found himself underwater as deficits began to rise - eventually increasing from $700 billion when Reagan came into office in 1980 to $3 trillion when he left.

History shows that right after passing the largest tax cut in American history, Reagan raised taxes eleven times throughout his term, including the largest corporate tax increase in history, which Joshua Green said would be "utterly unimaginable for any conservative to support today."

Ronald Reagan was never afraid to raise taxes, says historian Douglas Brinkley, who edited Reagan's diaries. "He knew that it was necessary at times. And so there's a false mythology out there about Reagan as this conservative president who came in and just cut taxes and trimmed federal spending in a dramatic way. It didn't happen that way. It's false."

Reagan raised taxes rather than allow the nation to drown in a sea of red ink -- unlike today's Republicans whose oath to Grover Norquist and the anti-tax leaguers is apparently more binding than the one they take with right hand raised and left hand on the Bible.

And so, when a mocking Joe Biden said in his own way that Congressman Paul Ryan was no Jack Kennedy, the Vice President might also have added that Paul Ryan and Mitt Romney are no Ronald Reagan either.    

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.....and much fun was had by all!

"R"
.
This is another glaring example of pathological lying on the part of Republicans. They feel free to resurrect the infamous and aptly-named Laffer Curve because the public has veeeery short-term memory.

While Laffer deserves discredit as the economic guru behind supply-side Voodoo Economics, the truth is his theory states only that there is an optimum tax rate. Duh.

But even if one concedes that revenues increased when the maximum rate of 92% (under Eisenhower) was reduced to 70% (under Kennedy), correlation is not causation. But if one insists on causation, then one must grant that the Bush tax cuts were a cause of drastically decreased revenues.

The even uglier truth, tho, is that Supply-Siders knew better all along, as George H W Bush admitted when he called it what it was Voodoo Economics. David Stockman eventually confessed the truth -- the real aim of tax cuts was not increased revenues; the aim was to the starve the beast and get rid of govt altogether -- and with it, rid the corporatocracy and the rich of taxes, unions and regulations.
You raise a truly horrific prospect, which I have been loath to speak. That is the probability banks and lenders in particular have been manipulating their institutions value to the economy for political gain. You use the term "sequestered."

I personally don't doubt it for a minute. What else explains the scarcity of funds following the bail-out? But to prove it, that is to say, find documentation that it was intentional or that there were go-betweens the private and political interests would be the story certainly of the latter part of this year.

But of course, even with a story like that, given the current polarity, it is dubious it would lead to many more defections from ideological assumptions.
I like your analysis.

There is a reason why those who would benefit the most from top one percent tax cuts have to rationalize that such tax cuts benefit the whole country by creating jobs. When the wars you do not want to chip in to pay for are fought by others losing life and limb, it is preferable not to appear greedy by conceding the cuts will only help you and a few others.
Romney / Ryan are essentially running a "Vote for Brand X" campaign. They raise the specters of all that's wrong with our current situation and then saying: "Not happy with Obama?, vote for us, no detail needed." You don't need the details of the Romney / Ryan economic plan, whether they prove out mathematically or not, all you need to know, or believe, is that the current administration is bringing you down so vote for us and we'll lift you up. They're banking on that large segment of the American electorate that can be classified as "low information voters", who will make, if not informed before they vote, the following conclusion: "The economy's in the crapper, Romney's a businessman so he knows about the economy, so let's give him a shot, what have we got to lose."



The "Brand X" strategy worked well for Romney during the clown fest that was the Republican primaries so he thinks that's the way to go now. In reality it's nothing but old wine in new bottles. The real challenge before November 6 is for Obama & Co., to disabuse the low information voters of the notion that because Romney was a businessman he can or will do something that will be of benefit to them. If not, it's game over.
looking for reason in the sales pitch of politicians is a practical measure of the intelligence and character of the listeners, as much as the speakers.

it's a struggle for power and the only rule is, don't get caught till after the election.
Thoughtful and informative as usual! rated.
As an American living abroad I get my news mostly from "print" sources and it is incredibly annoying to see that this presidential election is as close as it is. I'm no Obama zealot by any stretch but Romney is simply a terrible candidate and I'm amazed anyone who isn't fabulously wealthy would even consider voting for him.
I'm a little surprised that there was no correlation between cutting high marginal tax rates and increased revenues. In the UK where 90%+ continued well into the 60s, there was widespread avoidance by anyone who could (e.g. setting up offshore companies to keep revenues out of the UK, recording albums elsewhere). That essentially disproves the Laffer curve. As for the Reagan analogy, Tom C said everything I might have. Stockman admitted as much in the first few years of the Reagan presidency.
I agree with Steven J.'s take on this. The approach is deliberately shallow and cynical. I lived through the Reagan Recession of 1981-82 when the unemployment rate in western Colorado exceeded 18% and the local Republican-controlled newspapers, so piously-Christian, all faithfully and loyally refused to print that fact. I had to read the Denver papers originating 300 miles away to find out what was happening on the Western Slope. The lcoal Christian/conservative axis was in total denial for the duration. I will never forget that.
Where are all these Bain Capital dollars and jobs that went to China while Romney was running it? By my estimates, Romney created over 100,000 jobs in America, "destroyed" almost none (the "corporate raiding" end of Bain Capital actually created 100 American jobs under Romney's tenure), and yeah, they created an incredible investor surplus for their investment customers as well, besting the S&P 500 by 20% under Romney's leadership.

Turns out, Romney is not stupid, nor is he an assbag. He just plays one on TV (during campaign season).
Um, Donegal, the early 80s "double dip" recession had nothing to do with Reagan. The 1989/90/91 (whenever one points to the start of that particular economic downfall...for me, Black Friday was the "kickoff party") one was all Reagan, though.

If you can't blame the economic woes of 2009-10 on Obama, you can't blame the economic woes of 81-82 on Reagan...fair is fair (in reality, you shouldn't blame any of it on any president, with the exception of Bush '43, but whatever...)
Here's the thing, for the Constitutionally ascribed powers of Executive Office, Reagan was a good president. His relationship with Gorbachev and the (who knew) gravitas with which he carried himself probably kept us out of WWIII (or, as some might otherwise choose to call it, the end of the human race).

Like even the Democrats of the time, he was a little too fervently anti-communist, and his ideas about lowering taxes were demonstrably incorrect (a thing he did in the Income Tax for everyone, but when looking at total Federal Taxes, a thing he only did for the very upper class...all while signalling $300 billion/yr deficits as opposed to the $50 billion/yr deficits that the country had stably run on prior to that...much like Bush 43 has ushered in the era of the $2 trillion deficit), but these are things for Congress to decide. The President's job is foreign policy and, should Congress declare war, leader of the military. Problem is, without declaring war, we're in a constant state of war, so we're allowing for discussion of duties that should be well outside the purview of the Executive Office.
The Laffer curve, which is the theory Reagan based his tax cuts on is a bell-shaped curve, not a straight line. Tax rates are on the X axis, tax revenue along the Y. If you are to the left of the peak, raising tax rates will decrease revenue, if you are to the right, tax revenue will increase.

What does this mean? It means that if Reagan's tax cut from 70% to 50% increased tax revenue (and whether it did is debatable and far more complex that simply looking at the growth of the deficit in the face of increased spending), it does NOT imply that cutting rates from 35% to 28% will also increase revenue.

This should be pretty obvious. If your tax rate is 10%, you will work that extra hour of overtime. If it is 90%, you won't bother. If your tax rate is 10%, an extra $1,000 monthly mortgage payment will cost you $900. If it is 90%, it will cost you $100. In which case are you more likely to buy that bigger house?

The sad thing is that the Republicans once paid attention to economic theory, now they are resorting to rules of thumb with little analysis behind them.
Malusinka,

That is true and also where the left hasn't quite grasped the human nature aspect of achievement. I ran a region for a medical company and one year they came out with a commision plan that had a decreasing % once the size of the deal hit a certain threshold. What do you think happened to a group of individuals hired because they were motiviated to achieve and make money?
We had multiple deals cut at or below the threshold at significant discounts. We lost tremendous margin and some reps were fired as a result. Fired for all the reasons they were hired.
What is good for the country should be good for the individual as well. When achievement is handcuffed, you make a person either deceitful or unproductive, it is human nature.
Jay,
The "left" created the middle class. The "left" created the most effective, longest-lasting, most solid, sustainable economy in the history of America. Democrats did that with cooperation from Republicans and, despite the brain-dead rhetoric of the Right, the biggest industrial businesses and CEOs in America.

It was during that time of expansion when wages, productivity and profits rose in concert that a few angry little minds created Movement Conservatism in total opposition to that New Deal.
It took 50 years of demagogic wedge issue attacks, but they finally saved Americans from the freedom-robbing oppression of good jobs, high wages and single income families.

"...left hasn't quite grasped the human nature aspect of achievement."

You don't know what the hell you're talking about, as usual, but that bit of reality-contradicting ignorance is particularly egregious.
Jay,

I have no problem at all with your general formulation about Homo Economicus, "Economic Man," and the role of risk, reward and incentives. Neither do I quibble with the idea that prudance and self-reliance are valuable and the problem of dependency on government is a real one, though vastly overstated and shamelessly exploited by the privileged class in order to justify not paying more to support our society. I won't even say "their fair share" because I'll keep morality out of this.

One of the advantages I think I've been given during my travels across the political spectrum from right to left is that I can see the grain of truth that resides in most positions -- and how these truths are obscured by the sort of crude dichotomies you get from a cult leader like Ayn Rand who wants to separate the world into makers and takers, producers and parasites -- leading to Romney's 47% and Paul Ryan's 30% who he says don't believe in the American Dream. Even if true, a serious national leader should never seek to divide the nation so brutally. Are there lazy people who take advantage of the system? Of course. But does that mean we should end welfare -- not only as we know it but altogether? Of course not. My wife was once chief of staff for the state's department of housing and community development and no one got angrier at abuses of the system than the people she worked with -- even though putting people in affordable housing was their mission. Go figure.

In another vein. Here is a story idea I am working on for later. Out in Illinois there are protests in front of the Bain Capital-owned plant of Senesta. It's one of those classic small communities that has only a few major employers, Senesta being one. Even though it makes a profit, Bain is closing the plant and outsourcing it to China. To add insult to injury the employees are having to train their Chinese replacements.

Now, here is my question: Once the plant is dismantled and its parts and jobs shipped overseas, does that now make Senesta's displaced workers part of Mitt Romney's 47% of irresponsible people who cannot take responsibility for their lives because they are dependent on government? It is a fair question since Romney's comment on that video made a moral judgment on the fitness of people who've been harmed by Romney's brand of what Newt Gingrich called "predatory corporate capitalism."

I am re-reading Joseph Schumpeter's book, Can Capitalism Survive. And Mr. "Creative Destruction" Schumpeter was the original Austrian school economists (Austria's finance minister before the Nazi invasion) who said that if a society wanted to enjoy the dynamism of free market capitalism it had better create an adequate safety net to handle situations like the one playing out in Illinois in which an entire community faces extinction.

This is what ideologues do. They simplfy reality to make it more easily understandable and digestible to large masses of people -- the better to herd them in directions that serve the interests of ideological leaders.
"...No one disagrees that cutting taxes will stimulate the economy.."

I do disagree. Anyone who believes different is a Laffer-curve voodoo neocon Reagan Economist. This theory has been widely discredited, except among right-wing REpublicans, who LOVE the simplicity of this lie.

Taxes and the Economy are not directly related. Economic activity follows well-documented business cycles, and taxation or tax reduction simply have no direct correlation.
All the intellectual achievements of the past century are being damaged by the right wing political apparatus. Economics is only one of them. All the contributions of the English religious revitalization (the Tractarians), out the window. Science-- never happened. History-- hey, we can make this stuff up! Parson Weems did, and so can you! Sociology-- forget about it. There's no such thing as good government.
What we are supposed to accept instead of these things is something unthinking, and rather brutal.
Ted you conveniently overlook the fact that Reagan was betrayed by a Democrat majority House and Senate who lied about the deal they cut to not raise taxes in return for concessions made by Reagan. You also, like most liberals conveniently overlook the more than 20 million jobs created by Reagan supply side economics in a severe recession. At least in 1980's Democrats were not so lock and step entrenched that they allowed the Reagan magic to work on the vital measures that facilitated the recovery that Obama could only wet dream over as the President does not possess a business savvy bone within him. The truth must come out whether progressive ideology wants it to see the light of day or not.
I'm a bit flabbergasted at your use of the Globe, a supermarket tabloid, as the source for your article reference. Does the Globe not stretch credibility when it comes to actual reporting standards?
Hey skypixieo, let's define Voodoo economics such as Keynesian economics, a model used by Democrats to justify their bungling deficits and pathetic job numbers that was admittedly scribbled on a napkin while at a club in DC. What is wrong with the people on this site? They want to pay more tax? They just have to have more government control? They just can't exist without suffocating legislation? There is a definition its called being a drone, a statist, a collectivist. You just can't bare to have freedom.
Hey skypixieo, let's define Voodoo economics such as Keynesian economics, a model used by Democrats to justify their bungling deficits and pathetic job numbers that was admittedly scribbled on a napkin while at a club in DC. What is wrong with the people on this site? They want to pay more tax? They just have to have more government control? They just can't exist without suffocating legislation? There is a definition its called being a drone, a statist, a collectivist. You just can't bare to have freedom.