Many have mourned former president George H.W. Bush as the last of his kind. Mostly they eulogize his decency (racist Willie Horton ad notwithstanding), his physical courage, his commitment to public service.
But Bush was end-of-an-era in another crucial way. He may well be the last Republican leader to acknowledge the fundamental fraud of Republican fiscal policy — that tax cuts do not pay for themselves.
Almost 40 years ago, during the 1980 presidential primary, Bush famously characterized the agenda of then-rival Ronald Reagan as “voodoo economics.”
Bush was referring to supply-side policies that claimed tax cuts for the rich would unleash so much growth that they’d generate enough revenue to fund themselves.
Characterizing Reaganomics as “voodoo” was colorful, yes, but it wasn’t crazy. Of course it was ridiculous to claim you could increase tax revenue by cutting taxes.
Bush walked back his criticism after he became Reagan’s vice president. First he denied he’d ever called Reaganomics “voodoo.” Then, when reporters dug up the footage, he said he’d been “kidding,” and, in any case, supported Reagan’s agenda.
But even Reagan knew his fiscal promises were a scam.
Reagan began his presidency with an enormous tax cut, the Economic Recovery Tax Act of 1981. Literally weeks after he signed the bill, his administration began scheming to roll back those cuts — because they were concerned about rising deficits.
Over subsequent years, Reagan endorsed and signed into law 11 different tax increases, as economist and former Reagan official Bruce Bartlett has documented.
In the end, Reagan took back about half the value of his splashy 1981 tax cut, Bartlett estimates.
How did Reagan avoid getting accused of reneging on his promise? He used euphemisms. Those necessary, deficit-plugging tax increases weren’t really tax increases! They were “revenue enhancements” or “receipts strengthening.”
Incidentally, the Reagan budget official who came up with these euphemisms, and thereby helped paper over the lies of supply-siderism, was a genial young fellow named Larry Kudlow — now President Trump’s top economic adviser.
In any case, when the 1988 election rolled around, Bush made the risky decision to publicly commit himself to a supply-side-sounding agenda. “Read my lips: No new taxes,” he pledged.
Officials who served with Bush in the Reagan administration have said they thought immediately this pledge was a mistake, and that Bush likely didn’t expect to keep the promise.
“I was really stunned when he said it,” said John “Buck” Chapoton, who served as Reagan’s assistant treasury secretary for tax policy.
Bush was a Republican in the Eisenhower mold, as tax historian Joseph Thorndike puts it — a conservative who didn’t especially like tax hikes, but who prioritized broader fiscal responsibility over a narrow tax-cutting agenda. He was pragmatic, and pragmatism required dealing with rising deficits through both sides of the budget ledger.
Perhaps Bush counted on the soothing power of the right euphemism. Bush’s own Office of Management and Budget pick made that virtually impossible, though, when he testified before a Senate committee about what kinds of measures the no-new-taxes pledge would apply to. If it looks, walks and quacks like a duck, he said, “it is a duck.” Call it what you like, but a “revenue enhancement” is a tax.
Ultimately, of course, Bush agreed to do the right thing for his country, if not for his political career, by agreeing to a tax increase as part of a 1990 budget compromise. Insurgents in his own party turned against him. And when Bush ultimately lost his reelection bid, the broken pledge was blamed — perhaps unfairly, given that other factors (such as Ross Perot’s independent bid and the sluggish economy) also weighed against him.
As a result, the zombie ideas of Reaganomics only grew stronger.
Bush’s son — who inherited budget surpluses from Bill Clinton — passed massive deficit-financed tax cuts. At the time, the conservative Heritage Foundation laughably predicted the cuts would eliminate the national debt by 2010. Needless to say, that didn’t happen: They added $1.5 trillion to deficits, excluding interest and extensions.
In the years since, professional supply-side shills have continued peddling this fiscal fiction. Last year they crafted the GOP’s $1.9 trillion deficit-financed, top-heavy federal tax cut. Just a few years prior, they convinced Kansas to ax its tax rates, too, resulting in huge, end-the-school-year-early revenue shortfalls. More recently they’ve been working to persuade other states to do the same.
Somehow we keep running the same voodoo “experiment” over and over, relearning the hard way something that was obvious to Poppy nearly 40 years ago.