The problematic staying power of «voodoo economics»<\/b>
\nRecently deceased President George H. W. Bush was especially fond of foreign affairs and had a most extensive resume in public service prior to becoming president in 1989. These matters are in common agreement as the nation mourns the loss of the 41 st president.
Bush and the persistent currency of «voodoo.» (AP Photo\/David J. Phillip) ASSOCIATED PRESS
It is all the more remarkable that as a rhetorician, Bush said perhaps only four things across his career that have made a mark, that each of these were connected more to domestic than foreign affairs, and that three of them came in just one speech, Bush\u2019s nomination-acceptance in 1988. This was a speech, moreover, co-written by a speechwriter, Peggy Noonan, whose political idol was Ronald Reagan as opposed to Bush himself. The four semi-immortal words of George H. W. Bush were \u201cvoodoo economic policies,\u201d Bush\u2019s jab at Reagan\u2019s economic plan on the campaign stump during the Republican primaries in 1980; and from the 1988 speech, \u201cread my lips, no new taxes,\u201d a \u201ckinder, gentler nation,\u201d and \u201ca thousand points of light.\u201d
In terms of continuing relevance in political debates, \u201cvoodoo economic policies\u201d are the most significant words Bush ever uttered. \u201cVoodoo economics\u201d remains a mainstay every time, in punditry, journalism, scholarship, and speechmaking, through the Trump tax cut of 2017, a push is made in this country for a tax cut. Nothing else Bush ever said has that kind of staying power. Here is a rhetorical means that carries force in political maneuvering more than a generation after the first time it was uttered. Its companion in the history of political rhetoric is presidential contender William Jennings Bryan\u2019s use of the metaphor, in 1896, of a \u201ccross of gold,\u201d which has dogged every debate about the role of gold in monetary arrangements since.
The staying power of \u201cvoodoo economics\u201d remains in defiance of its particulars, which are flawed to the point of hopelessness. Bush used the term in the 1980 Pennsylvania primary as Reagan endorsed New York Rep. Jack Kemp\u2019s proposal for a 30% cut in income-tax rates. Bush was clear about what was \u201cvoodoo\u201d about the tax cut. It would result in an increase in the inflation rate of the same magnitude. A 30% tax cut would result in an additional 30 percentage points of inflation.
This was the substantive whole of the \u201cvoodoo economics\u201d phrase. The materials Bush used in preparation to unveiling the phrase, and his justifications for using it in the wake of the primary, make this point unambiguous. Inflation was running at a 20% yearly rate as of April 1980, and Bush saw tarring Reagan with the inflation brush as a winner.
Since 1980, an incorrect sense has arisen that Bush was mocking the \u201cLaffer curve\u201d implications of the tax cut, that a cut in rates could lead to high revenue. This is incorrect, in that given that the tax code was unindexed at the time, a 30% on top of a 20% inflation would have led to a phenomenal increase in federal receipts in every current economic and tax model. That is to say, in his voodoo economics charge, because it referred to the tax cut\u2019s certain inflationary impact, had to imply that Reagan promised a historic surge in government revenues in the 1980s.
Alternatively, Bush could have felt that the immediate budget deficits occasioned by a big tax cut would be inflationary while declining to think through the tax-receipt implications of a mega-inflation. In either case, \u201cvoodoo economics\u201d was a mess. Either it implied that revenues would be enormous, or it failed to realize they had to be, given inflation. What is certain is that \u201cvoodoo economics\u201d referred specifically, and exclusively, to the inflationary impact of Reagan\u2019s tax plan.
Reagan got his big tax cut as president in the early 1980s. Inflation collapsed from the 20% rate of April 1980 (8-10 percent had been the norm in the 1970s) to 3% for good. Bush had his signs, his directions off in his voodoo economics play. Inflation did not soar up to 30, it sunk down to 3.
This extreme statistical embarrassment has done nothing to diminish the staying power of voodoo economics as a political-rhetorical force into our own day. The chief legacy of the most significant thing George H. W. Bush ever said was to sap the quality of political discourse. Voodoo economics did not make sense. That Bush called on it, and that we still call on it, reflects a lack of interest on the part of everyone involved in having better political rhetoric. It is an example of fecklessness\u2014the facing of serious situations with gamey nonsense.
From 1982 to 1989, total tax revenues in the United States\u2014the metric of Arthur Laffer\u2019s curve\u2014rose at a 4.4% real per annum rate. From 1989-92, under President Bush and his tax increase, that rate fell to 1.6% as the huge noninflationary economic growth of the Reagan years paused as the economy digested Bush\u2019s tax increases.
Robert L. Bartley, the Wall Street Journal editor and supply-side economics principal, wrote in 1988: \u201cWith Ronald Reagan\u2019s mantle falling on the man who coined the epithet \u2018voodoo economics,\u2019 what will become of the Reagan economic policies?…. Among supply-siders, there is an uneasy sense\u2026.that \u2018everyone knows\u2019 that a tax increase is \u2018inevitable.\u2019\u201d When George H. W. Bush increased taxes in 1990, he affirmed that his fundamental commitment was not to the nation\u2019s economy or its fiscal solvency, much less to the Reagan legacy, but to the bullheaded campaign rhetoric he had trotted out and made his own in the 1980 presidential primary.
I\u2019m a professor who\u2019s interested in our economic history and the theory that went into making it \u2013 for good or ill. On this column, called Past & Present, I write about how history can help illuminate the economic challenges we face today, and how very often historical s…
Brian Domitrovic is author, with Larry Kudlow, of JFK and the Reagan Revolution: A Secret History of American Prosperity (Portfolio, 2016)<\/p>\n