During the 1980 presidential primary campaign, George H.W. Bush referred to fellow candidate Ronald Reagan's proposals as "voodoo economics." Reagan won the nomination, and then — surprisingly — selected Bush to be his running mate. Now in a supporting role, Bush claimed he never used this term; a TV replay of him saying just that, however, caused him to recant.
Thing is, Bush was right. Voodoo economics was based on a book written by George Gilder titled Wealth and Poverty and later repackaged by another economist, Arthur Laffer, who gave us the "Laffer Curve." His thesis was that we should seek to locate on the taxing curve — his "Laffer Curve" — the point between zero and 100 percent that would bring in the most tax revenue. The punchline was that point, by his dreamy calculation, is far, far lower on the curve than tax rates were at the time.
Laffer first got involved in politics during the 1978 Proposition 13 property tax initiative fight in California, which passed, slashing property taxes and making it almost impossible for the state to raise sufficient revenue. The Prop 13 fight also mobilized one Ronald Reagan, who was already on board because he had read Wealth and Poverty.
Laffer was now in the first ranks of the so-called "supply-side" economists. More recently, during the 2016 presidential campaign, he became an advisor to Donald Trump.
Thus we come full circle.
The trouble is, Laffer's theory proved to be completely wrong. It truly was voodoo economics, for everyone but the very wealthy. For those 1-percenters, it was an epic windfall — which brings us back to politics. As always, wealth and political power go hand in hand.
Laffer's theory was comprehensively implemented once — in Kansas starting in 2011 by then-Gov. Sam Brownback. The former U.S. senator sliced taxes and cut services, moves right out of Laffer's playbook. Disaster followed. No overall growth. Growing deficits. In June of 2017, even the Republican Legislature there was calling uncle and repealed all of his policies. Brownback resigned last January.
Laffer's explanation? Brownback didn't cut taxes enough.
All the economic mumbo jumbo aside, what we're talking about here is the care and feeding of neoliberalism. Neoliberals talk about smaller government, but in reality they don't really want smaller government. The neoliberal actually wants bigger government — but it's a government that is a facilitator exclusively for those in power.
For the neoliberal, except for matters of national security, policing and what Milton Friedman termed "neighborhood effects," government should not govern at all. Other than this, the true neoliberal envisions no public realm at all. All life is private, and we should commodify everything. Neoliberals would sell off the Grand Canyon and turn it into a privately owned theme park.
As early as 1982, David Stockman, Reagan's first director of the Office of Management and Budget, had discovered, to his dismay, that neoliberalism packaged as Reaganomics was doomed. He writes about this in his book, The Triumph of Politics. Stockman saw it all coming. During the Reagan years, the gross federal debt tripled, from $900 billion to $2.7 trillion. Gerald Ford and Jimmy Carter, in their combined terms, could only double it. Indeed, it took 31 years to accomplish the first postwar debt tripling. Reagan did it in eight.
And given the dramatic and regressive tax cut that Trump rammed through the Congress (right out of the Laffer handbook), the truth of the matter is we ain't seen nuthin' yet.
It's no surprise that the net result of neoliberalism has been rising social and economic inequality, all of which are having profound impacts on governmental and social stability. Meanwhile, our national debt spirals out of control.
Swedish writer Katrine Marcal writes about all this in her must-read book, Who Cooked Adam Smith's Dinner? (Turns out that the godfather of capitalism who identified the "hidden hand" lived at home; his mother cooked his dinner.)
Marcal writes: "The richest 0.1 percent of America's population tripled its share of the national revenue between 1978 and 1999. In Great Britain the richest percentile doubled its share during the same period; from 6.5 percent in 1982 to 13 percent in 2005. And in Russia, after the neoliberal shock therapy, a super-rich elite (think Putin and his buddy Trump) pulled away from the rest of society. Today Moscow has more billionaires than any other city in the world."
And consider this: In 1970, a CEO in the United States earned 30 times as much as an average worker. "In his day, the famous financier J.P. Morgan thought that the average American company CEO didn't need to earn more than 20 times that of an employee. By 2007, this had increased to 364 times."
In Trump's America, Reagan's voodoo economics would seem alive, well and back in the political saddle, at least for the time being. ♦