December 1, 2008
CONGRESSMAN KEMP’S PLAYBOOK
Conservatives should modernize the supply-side message
JOHN J. MILLER
When Jimmy Carter was elected president in 1976 — with sizable Democratic majorities in both houses of Congress — plenty of pundits speculated about Republicans as an endangered species. A writer for the New York Times contemplated the GOP’s “extinction.” Robert Novak commented on “the long descent of the Republican Party into irrelevance, defeat, and perhaps eventual disappearance.”
Four years later, of course, Americans tossed out Carter and elected Ronald Reagan.
The sources of Reagan’s victory were many, from Carter’s poor performance to Reagan’s impressive political skills. Yet the Gipper also owed a great deal to conservatives in the House of Representatives, especially Jack Kemp. Instead of behaving as powerless members of a vanishing minority party, Kemp and his allies helped create the conditions for Reagan’s success. They pushed an agenda of supply-side tax cuts that redefined their party’s economic principles and shifted American politics rightward. Much of their achievement was rooted in the particular circumstances of the late 1970s, but their accomplishment also suggests that today’s GOP — battered by the blows of November 4 — is far from helpless if it will only show the determination to turn its current dilemma into a new opportunity.
Jack French Kemp Jr. was a Californian who quarterbacked the Buffalo Bills to two American Football League championships in the 1960s. He became a local hero, winning election to Congress in 1970 from a working-class district along the shores of Lake Erie. But it wasn’t a safe seat for a Republican. Unemployment was high. Anxieties were even higher. A natural-born optimist, Kemp became convinced that his political future depended on breaking away from the traditional Republican vision of budget austerity.
The example of John F. Kennedy excited him. For one thing, Kemp shared a set of initials with the former president. For another, JFK had pushed a tax credit for capital investment through Congress — and capital investment was exactly what Kemp thought his beleaguered district needed in order to keep its factories open for business. Later, Kennedy proposed sweeping income-tax reductions as well. So Kemp resolved to make tax cuts his trademark issue. “He really seized on it,” says Randal Teague, Kemp’s former chief of staff. “Every week, we tried to figure out a new way to say the same thing, to get some fresh legs under our message on taxes.”
The challenges were huge. Kemp was a backbencher with the wrong committee assignments. His gridiron exploits were an asset with the public, but they may have hurt him among congressional insiders: Who was this dumb jock with the raspy voice? Moreover, many Republicans were deeply skeptical of tax reduction. They saw themselves as the party of fiscal discipline. Tax cuts meant lost revenue, and lost revenue meant budget deficits; anything else was “voodoo economics,” as George H. W. Bush once put it. Even Barry Goldwater — lionized by many libertarians today — voted against JFK’s tax cuts because he thought they were irresponsible. “The most important thing Kemp did wasn’t with respect to the Democrats,” says Bruce Bartlett, a former staffer. “It was with respect to the Republicans, and convincing them to change their views on balancing the budget.”
Kemp became a supply-side evangelist who believed that tax cuts would not only spur economic growth, but also bring in more revenue for the government. “He had nothing to lose, and when you have nothing to lose you can go pretty far,” says David Smick, a former top aide. Even so, Kemp wasn’t reckless. He was savvy, with a keen eye for hiring top talent. Soon his congressional office was operating as a miniature think tank on the Hill, and Kemp himself was connecting with supply-side intellectuals such as Art Laffer, Robert Mundell, and Jude Wanniski. When they converted Robert Bartley, editorial-page editor of the Wall Street Journal, to their side, they gained a powerful bully pulpit.
The election of 1974 was a blessing in disguise. Republicans took a severe beating, but the losses also clipped the wings of some of the GOP’s most aggressive deficit hawks. The survivors found themselves willing to consider different strategies. The ongoing malaise of the 1970s helped as well. “The supply-side revolution would not have occurred in a successful economy,” wrote Paul Craig Roberts, another Kemp operative, in The Supply Side Revolution, his book on the period. “The deterioration in the economy’s performance was worrisome, and it created an environment in which new policy ideas could get a hearing.”
At the Republican national convention in 1976, Kemp delivered a fiery pep talk: “It’s time for the Republicans to move from defense to offense.” By the next year, his GOP colleagues were eager to run with the ball. John Rousselot of California, a member of the House budget committee, offered a relatively modest tax-cut bill. His legislation lit a fuse. Suddenly, members of Congress from both parties were trying to outdo one another with tax cuts. In 1977, Kemp teamed with Republican senator William Roth of Delaware to introduce what became known as “Kemp-Roth” — an across-the-board income-tax cut of about 30 percent, including a reduction in the top rate from 70 percent to 50 percent. It became the centerpiece of dozens of GOP campaigns that year. “Against all odds, a congressional minority seized the national agenda,” says Brian Domitrovic, an economic historian at Sam Houston State University and the author of The Money Touch, a forthcoming book about the supply-side insurgency.
Kemp was so successful with the tax issue that he began to think about running for the White House. Reagan’s advisers saw Kemp as a threat — a younger version of Reagan, who some thought was too old for the presidency. Instead of battling Kemp, Reagan absorbed his ideas. Kemp decided not to run and backed Reagan, who used the tax issue against Carter. After his election, Reagan signed a version of Kemp-Roth into law. The GOP’s recovery, which had looked so doubtful just a few years earlier, was complete.
So what’s the lesson for today? Obviously, conservatives should persuade Tom Brady to retire from the NFL and run for Congress as a supply-sider. In truth, the anti-tax crusade of the late 1970s probably can’t be duplicated in the near term, even by a quarterback with more championship rings than Kemp. “The starting point on tax rates is too different,” says Bob Carroll of the Tax Foundation. In other words, conservatives are the victims of their own supply-side success: The top tax bracket may be higher than they’d like, but it doesn’t approach the confiscatory rates of yore. The problem of bracket creep — in which wage inflation pushes people into higher levels of taxation without changing their real income — has also become less important as inflation has declined.
Yet the economy is in the doldrums, more so than in the 1970s. Assuming it stays there as the Age of Obama unfolds, Americans may find themselves ready to embrace a big idea from a young Turk once again. “It would take a political entrepreneur, someone who doesn’t respond to the visible side of demand but offers an entirely new product,” says Alan Reynolds, another veteran of the Kemp circle who is now a senior fellow at the Cato Institute. One advantage that a right-of-center political entrepreneur of the 21st century would have over Kemp is a mature infrastructure of supporting institutions, including well-established free-market policy groups and a wide range of conservative publications and websites. The fight would remain difficult, but perhaps not quite as lonely as it was when Kemp began his effort a generation ago.
Reynolds isn’t sure whether such a political entrepreneur inhabits the House today, but he does point to 38-year-old Republican congressman Paul Ryan of Wisconsin as a possibility. Earlier this year, Ryan proposed comprehensive legislation that tackles entitlements and taxes. One of its big ideas is a two-rate modified flat tax. It didn’t catch fire in 2008, and chances are it won’t in 2009 either.
Still, Ryan seems determined. The more the economy stumbles, the more likely a political innovator will get a hearing. And it doesn’t hurt that he learned politics from a good teacher. His old boss? Jack Kemp.