1 00:00:00,120 --> 00:00:03,400 Speaker 1: For too long, We've lived with a tax system that 2 00:00:03,520 --> 00:00:06,160 Speaker 1: is a blot, a stain on the shining mantle of 3 00:00:06,160 --> 00:00:10,040 Speaker 1: our democratic government. We've quietly tolerated a tax code which 4 00:00:10,200 --> 00:00:13,080 Speaker 1: we know as an outrage, one riddled through with special 5 00:00:13,119 --> 00:00:17,439 Speaker 1: privileges and inequities that violates our most fundamental American values 6 00:00:17,440 --> 00:00:20,320 Speaker 1: of justice and fair play. Our tax system could only 7 00:00:20,360 --> 00:00:23,400 Speaker 1: be described as Unamerican. Well, there are two things we 8 00:00:23,400 --> 00:00:26,320 Speaker 1: can do about it. We can either declarate of fifteenth 9 00:00:26,360 --> 00:00:29,560 Speaker 1: the day of National Mourning, or we can change the system. 10 00:00:29,800 --> 00:00:33,479 Speaker 1: The tax system must no longer be poverty's accomplice an 11 00:00:33,479 --> 00:00:38,520 Speaker 1: American opportunity society begins with an expanding, healthy economy. I'll 12 00:00:38,560 --> 00:00:41,880 Speaker 1: be sitting at that desk, taking up a pen and 13 00:00:42,000 --> 00:00:44,760 Speaker 1: signing the most sweeping overhaul of tax code in our 14 00:00:44,840 --> 00:00:48,560 Speaker 1: nation's history. After almost three years of commitment and hard work. 15 00:00:49,200 --> 00:00:52,280 Speaker 1: One headline in the Washington Post told the whole story. 16 00:00:52,720 --> 00:00:56,560 Speaker 1: The impossible became the inevitable, and the dream of America's 17 00:00:56,560 --> 00:01:06,039 Speaker 1: fair Share tax plan became a reality. On this episode 18 00:01:06,040 --> 00:01:09,640 Speaker 1: of News World, I want to talk about President Ronald 19 00:01:09,640 --> 00:01:14,119 Speaker 1: Reagan and the fortieth anniversary of the signing of the 20 00:01:14,280 --> 00:01:17,720 Speaker 1: three year tax cut which was a revolution in American 21 00:01:17,760 --> 00:01:21,120 Speaker 1: fiscal policy. But I also want to put into context 22 00:01:21,640 --> 00:01:27,040 Speaker 1: two very different things. One is how a big new 23 00:01:27,080 --> 00:01:31,760 Speaker 1: idea emerges and how it becomes public policy, because I 24 00:01:31,760 --> 00:01:35,080 Speaker 1: think we have so many parts of our government today 25 00:01:35,480 --> 00:01:38,679 Speaker 1: that have to be profoundly rethought. And I think that 26 00:01:38,760 --> 00:01:43,160 Speaker 1: the rise of supply side economics and the Reagan three 27 00:01:43,240 --> 00:01:46,679 Speaker 1: year tax cut is a great case study in being 28 00:01:46,720 --> 00:01:50,320 Speaker 1: able to get something done that really does shift the 29 00:01:50,360 --> 00:01:54,080 Speaker 1: direction of the country. The second is that the Reagan 30 00:01:54,160 --> 00:01:58,720 Speaker 1: tax cuts came at a moment in time when Jimmy 31 00:01:58,760 --> 00:02:02,960 Speaker 1: Carter had so screwed everything up that you had massive inflation, 32 00:02:03,640 --> 00:02:07,440 Speaker 1: massive unemployment. They had what they called the Misery Index, 33 00:02:07,840 --> 00:02:13,080 Speaker 1: which was adding together the unemployment numbers and the inflation numbers, 34 00:02:13,680 --> 00:02:16,959 Speaker 1: and Carter, ultimaly I think, piqued at something like twenty 35 00:02:17,000 --> 00:02:20,720 Speaker 1: one or twenty two when you added the two together. Reagan, 36 00:02:20,919 --> 00:02:24,160 Speaker 1: in response to it, had developed as a campaign theme, 37 00:02:24,760 --> 00:02:29,680 Speaker 1: when your neighbor's unemployed, it's a recession. When you're unemployed, 38 00:02:29,720 --> 00:02:33,400 Speaker 1: it's a depression. And when Jimmy Carter's unemployed, it's a recovery. 39 00:02:34,000 --> 00:02:37,959 Speaker 1: And he just hammered Carter, leading to the largest electoral 40 00:02:38,000 --> 00:02:42,160 Speaker 1: college victory against an incumbent president in modern times because 41 00:02:42,200 --> 00:02:45,560 Speaker 1: the country ultomaly concluded that both in foreign policy, where 42 00:02:45,560 --> 00:02:48,600 Speaker 1: we had the Iranian hostage crisis that went on for 43 00:02:48,680 --> 00:02:52,520 Speaker 1: over a year, and in domestic policy, where everything seemed 44 00:02:52,560 --> 00:02:55,720 Speaker 1: to be falling apart, you had gasolene lines, you had 45 00:02:55,880 --> 00:02:58,720 Speaker 1: shortages of all sorts of things. You had a famous 46 00:02:59,200 --> 00:03:02,960 Speaker 1: Jimmy Carter speech which was dubbed the Malaise Speech after 47 00:03:03,040 --> 00:03:07,399 Speaker 1: some Harvard professor who'd written a book about America and malaise. 48 00:03:07,800 --> 00:03:10,840 Speaker 1: But actually Carter never uses the word malaise. He just 49 00:03:10,960 --> 00:03:13,600 Speaker 1: looked like malaise. If you go back and read it, 50 00:03:13,800 --> 00:03:16,600 Speaker 1: the speech is sort of pathetic. I mean, here's a president, 51 00:03:16,639 --> 00:03:20,200 Speaker 1: I say, saying, you know, things are really hard, and 52 00:03:20,280 --> 00:03:22,800 Speaker 1: we may have to get by on the last and 53 00:03:22,840 --> 00:03:25,720 Speaker 1: we really can't solve any of these problems, and Reagan 54 00:03:25,800 --> 00:03:28,120 Speaker 1: came along instead. Of course, you can solve all these problems. 55 00:03:28,440 --> 00:03:31,359 Speaker 1: All you need is leadership who have the right principles. 56 00:03:31,840 --> 00:03:34,120 Speaker 1: So I think it's important I to go back and 57 00:03:34,160 --> 00:03:36,520 Speaker 1: look at how this happened. And I'm going to try 58 00:03:36,560 --> 00:03:41,600 Speaker 1: to cover in this podcast two different stories. The story 59 00:03:41,680 --> 00:03:45,200 Speaker 1: of the rise of a policy that was very radical 60 00:03:45,240 --> 00:03:49,600 Speaker 1: when it began and then became almost the dominant explanation 61 00:03:49,680 --> 00:03:54,040 Speaker 1: of the economy. And second, the story of actually getting 62 00:03:54,040 --> 00:03:57,440 Speaker 1: it passed and the hard work that involved in what 63 00:03:57,560 --> 00:04:14,760 Speaker 1: it meant to the American political system. So let's start 64 00:04:14,800 --> 00:04:18,920 Speaker 1: in the mid seventies. In the mid nineteen seventies, the 65 00:04:18,960 --> 00:04:21,919 Speaker 1: dominant economic model, which grew out of John Maynard Keynes, 66 00:04:22,560 --> 00:04:26,440 Speaker 1: basically said, you can only have a certain level of unemployment, 67 00:04:26,920 --> 00:04:29,440 Speaker 1: and if you try to get more than that, you're 68 00:04:29,440 --> 00:04:33,320 Speaker 1: going to cause inflation, and so you're really trapped into 69 00:04:33,800 --> 00:04:38,720 Speaker 1: a weak economy. And the people who professed us believed it, 70 00:04:39,279 --> 00:04:42,680 Speaker 1: and they thought that it was basically a zero sum game, 71 00:04:43,400 --> 00:04:46,840 Speaker 1: and they believed in what was called demand side economics. 72 00:04:46,880 --> 00:04:49,160 Speaker 1: And this is where you get the great debate over 73 00:04:49,240 --> 00:04:53,640 Speaker 1: supply versus demand. The demand side economist, growing out of 74 00:04:54,080 --> 00:04:57,440 Speaker 1: Keynes's great works, basically said, look, in order to get 75 00:04:57,440 --> 00:05:00,000 Speaker 1: the economy growing again, you've got to prop up demand 76 00:05:00,040 --> 00:05:01,880 Speaker 1: and people have to go out and they have to 77 00:05:01,920 --> 00:05:06,200 Speaker 1: buy things. The supply siders said, that's exactly opposite. What 78 00:05:06,360 --> 00:05:10,240 Speaker 1: you have to do is create the incentives so that 79 00:05:10,360 --> 00:05:14,320 Speaker 1: people will build new factories, create new products, and then 80 00:05:14,640 --> 00:05:18,799 Speaker 1: you will mop up the inflation by production, and so 81 00:05:19,240 --> 00:05:22,800 Speaker 1: you can have a system where you have high employment 82 00:05:22,880 --> 00:05:27,360 Speaker 1: levels and low inflation because the high employment levels are 83 00:05:27,400 --> 00:05:31,480 Speaker 1: actually producing goods and services that mop up the money. Now, 84 00:05:31,480 --> 00:05:33,920 Speaker 1: if you think about it for a minute, where Biden 85 00:05:33,960 --> 00:05:39,000 Speaker 1: has got ess which is about fifty times worse than Carter. Literally, 86 00:05:38,960 --> 00:05:42,040 Speaker 1: if you look at the scale of the Carter deficits 87 00:05:42,400 --> 00:05:44,840 Speaker 1: and you look at the Carter program, and then you 88 00:05:44,839 --> 00:05:50,719 Speaker 1: look at Biden's, it is staggeringly dumber and staggeringly more destructive. 89 00:05:51,120 --> 00:05:53,840 Speaker 1: I mean, you had three and a half trillion dollars 90 00:05:53,839 --> 00:05:57,280 Speaker 1: in one bill to an economy that's already overheated, and 91 00:05:57,360 --> 00:06:01,760 Speaker 1: you're just begging for very high levels of inflation, which 92 00:06:01,920 --> 00:06:03,920 Speaker 1: they may actually want because if you get a high 93 00:06:04,000 --> 00:06:06,440 Speaker 1: enough level of inflation, you get rid of the national 94 00:06:06,480 --> 00:06:10,320 Speaker 1: debt because the dollar becomes useless. As somebody once said, 95 00:06:10,320 --> 00:06:13,440 Speaker 1: in the Carter years, they dreamed that they'd become a millionaire, 96 00:06:13,720 --> 00:06:15,960 Speaker 1: but a big mac cost a million dollars. So it's 97 00:06:16,000 --> 00:06:19,200 Speaker 1: been sort of a break even experience. Well, that's the 98 00:06:19,279 --> 00:06:23,040 Speaker 1: danger we have right now. And of course you've already 99 00:06:23,040 --> 00:06:27,359 Speaker 1: had a significant shift towards higher prices, greater scarcity and 100 00:06:27,520 --> 00:06:30,440 Speaker 1: more inflation, and only the first six or seven months 101 00:06:30,480 --> 00:06:35,080 Speaker 1: of the Biden administration. So in the mid nineteen seventies 102 00:06:35,520 --> 00:06:41,040 Speaker 1: a group came along which combined Nobel Prize winners and popularizers. 103 00:06:41,360 --> 00:06:44,839 Speaker 1: Shoot Winnisky, who was not an economist, but who was 104 00:06:44,880 --> 00:06:47,839 Speaker 1: the chief economic writer for the Wall Street Journal and 105 00:06:47,920 --> 00:06:50,720 Speaker 1: who used the Wall Street Journal as the base of 106 00:06:50,760 --> 00:06:57,280 Speaker 1: his communicating supply side economics. You had Robert Mundel at Columbia, 107 00:06:57,320 --> 00:07:00,919 Speaker 1: who was a Nobel Prize winning economist. Everybody agreed that 108 00:07:00,960 --> 00:07:03,520 Speaker 1: he was brilliant and that you had to pay serious 109 00:07:03,520 --> 00:07:08,240 Speaker 1: attention to him. And you had people who were popularizers. 110 00:07:08,640 --> 00:07:11,440 Speaker 1: The most famous of them was an economist who had 111 00:07:11,440 --> 00:07:14,520 Speaker 1: a very solid track record as an economist, but who 112 00:07:14,520 --> 00:07:18,080 Speaker 1: really became famous as a popularizer, and that was Art Laugher. 113 00:07:18,760 --> 00:07:21,840 Speaker 1: And the reason Laugher became so famous is the one 114 00:07:21,960 --> 00:07:24,120 Speaker 1: night he was at dinner and he said, let me 115 00:07:24,240 --> 00:07:28,200 Speaker 1: explain how the system works. And he drew a curve 116 00:07:28,400 --> 00:07:31,880 Speaker 1: and it's just a very simple curve, and he said, look, 117 00:07:32,640 --> 00:07:36,040 Speaker 1: the higher the tax rate, the less revenue you're going 118 00:07:36,080 --> 00:07:39,720 Speaker 1: to get. The lower the tax rate, the more revenue 119 00:07:39,760 --> 00:07:41,760 Speaker 1: you're going to get. And the reason is when you 120 00:07:41,800 --> 00:07:44,680 Speaker 1: get to a high tax rate, people avoid it. So, 121 00:07:44,840 --> 00:07:48,640 Speaker 1: for example, when taxes were at ninety percent, there was 122 00:07:48,680 --> 00:07:51,960 Speaker 1: a huge industry of tax shelters where people would come 123 00:07:51,960 --> 00:07:55,000 Speaker 1: along and say, you know, if you invest in oil wells, 124 00:07:55,080 --> 00:07:59,400 Speaker 1: or you invest in paintings or whatever, we can basically 125 00:07:59,760 --> 00:08:03,240 Speaker 1: take them off your income. See, you'll pay much lower taxes. 126 00:08:03,640 --> 00:08:07,240 Speaker 1: So you created an incentive to hide from the tax 127 00:08:07,280 --> 00:08:10,560 Speaker 1: system because it was so high. One of the examples 128 00:08:10,560 --> 00:08:14,400 Speaker 1: that Laugher used was literally true. There were two bridges, 129 00:08:14,880 --> 00:08:17,760 Speaker 1: one of them in the Philadelphia Camden area. One of 130 00:08:17,800 --> 00:08:21,040 Speaker 1: them charged fifty cents and the other charged ten cents. 131 00:08:21,920 --> 00:08:25,440 Speaker 1: Guess which bridge had the most traffic, obviously the ten 132 00:08:25,480 --> 00:08:28,480 Speaker 1: cent bridge. And guess which bridge raised the most money 133 00:08:28,840 --> 00:08:32,000 Speaker 1: The ten cent bridge, because people would avoid the fifty 134 00:08:32,000 --> 00:08:35,920 Speaker 1: cent bridge. And his point was people are very sensitive. 135 00:08:36,440 --> 00:08:40,280 Speaker 1: Jack Kemp, who as a congressman, former football quarterback and 136 00:08:40,760 --> 00:08:44,960 Speaker 1: guy who really thought about popular ideas and how to 137 00:08:45,080 --> 00:08:48,360 Speaker 1: communicate them to everyday people. But people would say, well, 138 00:08:48,360 --> 00:08:52,360 Speaker 1: how quickly will this change? And Kemp's answer was, dropped 139 00:08:52,400 --> 00:08:56,080 Speaker 1: five dollars on a sidewalk and see how long it 140 00:08:56,120 --> 00:08:59,319 Speaker 1: takes somebody to pick it up. He said, because if 141 00:08:59,360 --> 00:09:02,920 Speaker 1: you changed and you moved towards a supply side and 142 00:09:03,040 --> 00:09:06,240 Speaker 1: SENTI driven system, people are going to change their behavior 143 00:09:06,320 --> 00:09:10,199 Speaker 1: almost immediately because they're going to realize, I'm going to 144 00:09:10,400 --> 00:09:12,800 Speaker 1: get to keep more of my own money. I have 145 00:09:12,840 --> 00:09:15,400 Speaker 1: a huge incentive to go out and be productive and work. 146 00:09:16,120 --> 00:09:18,679 Speaker 1: And so I came along at about this point. I 147 00:09:18,760 --> 00:09:21,640 Speaker 1: ran for Congress in seventy four and lost, and that 148 00:09:21,880 --> 00:09:25,720 Speaker 1: point we were still into demand side economics and the 149 00:09:25,760 --> 00:09:28,880 Speaker 1: real breakthrough hadn't occurred. And in nineteen seventy six I 150 00:09:28,960 --> 00:09:31,760 Speaker 1: ran for the second time. I went to Savannah, Georgia 151 00:09:31,800 --> 00:09:34,840 Speaker 1: to the Republican State Convention, and the keynote speaker was 152 00:09:34,920 --> 00:09:39,640 Speaker 1: Jack Kemp, and his explanation and supply side economics was 153 00:09:39,800 --> 00:09:43,680 Speaker 1: so compelling, so real, that I became a convert. I 154 00:09:43,720 --> 00:09:46,240 Speaker 1: became his accolade, and he and I sat out and 155 00:09:46,280 --> 00:09:49,800 Speaker 1: talked that day, and I began designing my whole campaign 156 00:09:50,280 --> 00:09:54,200 Speaker 1: around supply side economics and the concept that what if 157 00:09:54,240 --> 00:09:57,040 Speaker 1: we could do dramatically better. Now this was with Gerald 158 00:09:57,040 --> 00:09:59,600 Speaker 1: Ford as president, and while things weren't as good as 159 00:09:59,600 --> 00:10:03,400 Speaker 1: they could, they were not yet a disaster. What happened 160 00:10:03,559 --> 00:10:08,000 Speaker 1: was Ford left office with inflation at about five point 161 00:10:08,080 --> 00:10:12,560 Speaker 1: seven eight percent, Jimmy Carter came in, followed the standard 162 00:10:12,600 --> 00:10:17,160 Speaker 1: liberal demand side model, and because unemployment had reached seven 163 00:10:17,160 --> 00:10:20,559 Speaker 1: point four percent, so Carter decided that we would spend 164 00:10:20,600 --> 00:10:22,840 Speaker 1: our way out of it. Does it sound at all familiar? 165 00:10:23,200 --> 00:10:26,480 Speaker 1: Does this remind you of Biden's recent idiotic comment that 166 00:10:26,800 --> 00:10:31,160 Speaker 1: higher spending will actually be anti inflationary, a comment that 167 00:10:31,240 --> 00:10:34,920 Speaker 1: only a loon could have made this crazy. But it's 168 00:10:34,920 --> 00:10:38,280 Speaker 1: actually what virtually every left wing economists believes, except for 169 00:10:38,360 --> 00:10:41,959 Speaker 1: Larry Summers, a former Democratic sector the Treasury, and a 170 00:10:42,000 --> 00:10:45,280 Speaker 1: Harvard PhD former president of Harvard, who has been publicly 171 00:10:45,320 --> 00:10:48,120 Speaker 1: saying they are just going to get an amazing level 172 00:10:48,120 --> 00:10:51,320 Speaker 1: of inflation out of the spending program. But all the 173 00:10:51,360 --> 00:10:55,600 Speaker 1: traditional classic liberals are very big on creating a demand side. 174 00:10:55,960 --> 00:10:57,880 Speaker 1: We're going to give all of you money. As the 175 00:10:58,200 --> 00:11:00,920 Speaker 1: former chairman of the Federal Reserve, An Anchy, once said, 176 00:11:01,360 --> 00:11:04,959 Speaker 1: if necessary, he would take helicopters and drop cash from 177 00:11:05,000 --> 00:11:08,480 Speaker 1: the helicopters. A perfect example of a demand side thinking, 178 00:11:08,800 --> 00:11:11,640 Speaker 1: if I give all of you enough cash, somehow the 179 00:11:11,679 --> 00:11:13,600 Speaker 1: economy will work. No, if I give all of you 180 00:11:13,760 --> 00:11:16,400 Speaker 1: enough cash, you're going to ruin the dollar, or you're 181 00:11:16,440 --> 00:11:19,160 Speaker 1: going to have massive inflation and the economy is still 182 00:11:19,160 --> 00:11:21,640 Speaker 1: not going to work. Because that's not the problem. The 183 00:11:21,720 --> 00:11:25,520 Speaker 1: problem is how do I incentivize people to invest and 184 00:11:25,600 --> 00:11:28,080 Speaker 1: to go to work. And if I can't get you 185 00:11:28,080 --> 00:11:30,280 Speaker 1: to go to work and I can't get you invest, 186 00:11:30,880 --> 00:11:32,760 Speaker 1: nothing I do is going to matter, and we're just 187 00:11:32,760 --> 00:11:36,439 Speaker 1: going to increase the inflation rate. So by seventy eight, 188 00:11:36,960 --> 00:11:40,000 Speaker 1: as I ran for the third time, we actually produced 189 00:11:40,280 --> 00:11:44,840 Speaker 1: an entire four page newspaper which was applying supply side. 190 00:11:45,000 --> 00:11:47,120 Speaker 1: We showed how it would apply to you if you 191 00:11:47,120 --> 00:11:49,440 Speaker 1: had a three year tax cut. Here's what would happen 192 00:11:49,440 --> 00:11:51,800 Speaker 1: at the grocery store you get a three year tax cut. 193 00:11:52,040 --> 00:11:54,360 Speaker 1: Here's what would happen for small businesses if you had 194 00:11:54,400 --> 00:11:56,920 Speaker 1: a three year tax cut. Here's what would happen to 195 00:11:57,000 --> 00:12:00,800 Speaker 1: building factories in your town. And so was all designed 196 00:12:00,800 --> 00:12:05,400 Speaker 1: around this concept. Now. The fascinating thing historically, and part 197 00:12:05,400 --> 00:12:08,760 Speaker 1: of the reason I wanted to share my personal memory 198 00:12:08,760 --> 00:12:12,440 Speaker 1: of the fortieth anniversary of the Reagan tax cuts is 199 00:12:12,880 --> 00:12:16,400 Speaker 1: Reagan was not yet a supply sider in nineteen seventy eight. 200 00:12:16,400 --> 00:12:20,320 Speaker 1: Reagan was still just part of the general economics He 201 00:12:20,400 --> 00:12:24,600 Speaker 1: instinctively knew that taxes should be lower, and that's because 202 00:12:24,960 --> 00:12:27,800 Speaker 1: he saw in World War Two that at a ninety 203 00:12:27,800 --> 00:12:30,520 Speaker 1: two percent top rate, he had friends who would make 204 00:12:30,559 --> 00:12:34,040 Speaker 1: one movie, get into that bracket and quit. They wouldn't 205 00:12:34,040 --> 00:12:36,320 Speaker 1: make any more movies that year because they saw no 206 00:12:36,400 --> 00:12:38,679 Speaker 1: reason to work for the federal government while they got 207 00:12:38,679 --> 00:12:40,720 Speaker 1: to keep eight percent of what they were earning. So 208 00:12:40,880 --> 00:12:45,640 Speaker 1: Reagan knew that high taxes were very destructive, and he 209 00:12:45,720 --> 00:12:48,840 Speaker 1: had an instinctive feel. He also knew that John F. 210 00:12:48,960 --> 00:12:53,160 Speaker 1: Kennedy's tax cuts were actually effective and had helped launch 211 00:12:53,200 --> 00:12:56,160 Speaker 1: the economy and economic growth. Kennedy was the one who 212 00:12:56,200 --> 00:13:00,640 Speaker 1: actually began bringing the tax rates down, not Reagan. Ironically, 213 00:13:00,960 --> 00:13:05,120 Speaker 1: the Republicans, because they were still traditional economists, mostly opposed 214 00:13:05,120 --> 00:13:08,720 Speaker 1: the Kennedy tax cuts. So you had this weird moment 215 00:13:08,960 --> 00:13:12,720 Speaker 1: where you had a Democrat president fighting for a tax 216 00:13:12,760 --> 00:13:16,000 Speaker 1: cut against a Republican group who were opposed to the 217 00:13:16,040 --> 00:13:18,760 Speaker 1: tax cut, which is I think an example that the 218 00:13:18,800 --> 00:13:21,880 Speaker 1: Republican Party on occasion really is a stupid party and 219 00:13:22,000 --> 00:13:24,840 Speaker 1: does things that you can't explain by any reasonable basis, 220 00:13:25,400 --> 00:13:27,840 Speaker 1: a concept which by the way, might apply to the 221 00:13:27,840 --> 00:13:31,679 Speaker 1: senators who are helping pass the infrastructure bill. So in 222 00:13:31,679 --> 00:13:37,319 Speaker 1: that context you end up with Reagan kind of intrigued 223 00:13:37,360 --> 00:13:41,680 Speaker 1: with tax cuts, not yet bought into supply side. Laugher 224 00:13:41,760 --> 00:13:45,520 Speaker 1: hadn't convinced him, Mundel hadn't convinced him. And I actually 225 00:13:45,520 --> 00:13:48,800 Speaker 1: talked to Kemp in seventy nine. I was now a 226 00:13:48,840 --> 00:13:52,680 Speaker 1: freshman congressman and I was sort of kemp sidekick, and 227 00:13:53,520 --> 00:13:57,000 Speaker 1: we were wandering around propagandizing for supply side economics and 228 00:13:57,080 --> 00:14:01,720 Speaker 1: tax cuts. Jack, with enormous help from then Republican National 229 00:14:01,760 --> 00:14:05,560 Speaker 1: Committee Chairman Bill brock Zach, had led a tax cut clipper, 230 00:14:05,600 --> 00:14:08,320 Speaker 1: an airplane that Brock had paid for it the Republican 231 00:14:08,400 --> 00:14:12,160 Speaker 1: National Committee which went around the country with Senator Bill 232 00:14:12,240 --> 00:14:14,800 Speaker 1: Roth and Congressman Jack Kemp, who with the two co 233 00:14:14,960 --> 00:14:19,000 Speaker 1: sponsors of the Kemp Roth tax cuts. So they went 234 00:14:19,160 --> 00:14:22,160 Speaker 1: wandering around the country and during the seventy eight campaign, 235 00:14:22,640 --> 00:14:25,760 Speaker 1: I was busy campaigning on the Kemp Roth tax cuts 236 00:14:25,840 --> 00:14:28,920 Speaker 1: during the seventy eight campaign, and in the summer seventy nine, 237 00:14:29,280 --> 00:14:32,360 Speaker 1: Kemp said to me, I'm going to go out to California. 238 00:14:32,560 --> 00:14:35,000 Speaker 1: Reagan's invited me to the ranch. We're going to have 239 00:14:35,120 --> 00:14:37,320 Speaker 1: lunch and I'm going to tell him, if he will 240 00:14:37,360 --> 00:14:41,400 Speaker 1: adopt the kemp Roth tax cuts, I'll share his campaign, 241 00:14:42,080 --> 00:14:44,440 Speaker 1: and if he won't adopt the kemp Roth tax cuts, 242 00:14:44,440 --> 00:14:46,560 Speaker 1: I'm going to run for president because I think we 243 00:14:46,600 --> 00:14:50,080 Speaker 1: should have a pro tax cut candidate. So he came 244 00:14:50,120 --> 00:14:52,520 Speaker 1: back a couple of days later with a huge smile, 245 00:14:52,960 --> 00:14:56,440 Speaker 1: and Reagan had said yes, and he feld a great anecdote. 246 00:14:56,440 --> 00:15:00,440 Speaker 1: He said, at one point, somebody came in and said 247 00:15:00,480 --> 00:15:04,080 Speaker 1: that the former governor of Texas who was running, was 248 00:15:04,120 --> 00:15:08,080 Speaker 1: the choice of the Wall Street big businesses, and Reagan 249 00:15:08,200 --> 00:15:11,000 Speaker 1: was the choice of small businesses. And Reagan broke into 250 00:15:11,040 --> 00:15:14,960 Speaker 1: this huge smile and just thought Wall Street versus Main Street, 251 00:15:15,200 --> 00:15:33,920 Speaker 1: said I think we can live with that choice. Reagan 252 00:15:34,000 --> 00:15:37,920 Speaker 1: then began campaigning on a three year tax that. Now 253 00:15:37,960 --> 00:15:41,720 Speaker 1: it's important to remember this was a very radical idea. 254 00:15:42,440 --> 00:15:45,480 Speaker 1: This was as radical as our proposal in the nineties 255 00:15:45,520 --> 00:15:49,400 Speaker 1: to balance the federal budget or to reform welfare. And 256 00:15:49,480 --> 00:15:53,400 Speaker 1: so you had, for example, George H. W. Bush, who 257 00:15:53,440 --> 00:15:57,680 Speaker 1: was running for president, called it voodoo economics, which, of course, 258 00:15:57,720 --> 00:16:00,520 Speaker 1: once he got nominated to be vice president, actually didn't 259 00:16:00,560 --> 00:16:03,080 Speaker 1: quite mean it. It was good voodoo economic explain then 260 00:16:03,360 --> 00:16:06,120 Speaker 1: but it just gives you a flavor that this was 261 00:16:06,200 --> 00:16:10,640 Speaker 1: not an automatic slam dunk idea. The Establishment was appalled. 262 00:16:11,200 --> 00:16:14,880 Speaker 1: Barbara Cannibal was the ranking Republican on the Ways and 263 00:16:15,000 --> 00:16:18,160 Speaker 1: Means Committee. He was Jack Kemp's next door neighbor in 264 00:16:18,560 --> 00:16:23,760 Speaker 1: upstate New York, and he hated Kemp because Kemp, who 265 00:16:24,080 --> 00:16:27,600 Speaker 1: was on Appropriations, was running around the country talking about 266 00:16:27,640 --> 00:16:30,840 Speaker 1: tax policy, and Connibal knew that Kemp didn't know anything 267 00:16:30,840 --> 00:16:33,880 Speaker 1: about tax policy, and Connibal was supposed to know about 268 00:16:33,880 --> 00:16:38,080 Speaker 1: tax policy. And Cannibal was a very traditional establishment guy 269 00:16:38,400 --> 00:16:41,840 Speaker 1: and he thought this supply side stuff was crazy. So 270 00:16:42,040 --> 00:16:46,000 Speaker 1: you had real splints over this. Reagan gets the nomination 271 00:16:46,560 --> 00:16:52,240 Speaker 1: and the fall campaign basically is Carter's stagflation. And stagflation 272 00:16:52,320 --> 00:16:54,680 Speaker 1: was a term that was invented in that period to 273 00:16:54,800 --> 00:17:00,440 Speaker 1: describe very high inflation with very high unemployment simultaneously. And 274 00:17:00,600 --> 00:17:04,800 Speaker 1: Carter had a real crisis because he'd appointed Paul Volker 275 00:17:05,320 --> 00:17:09,600 Speaker 1: chairman of the Fudderal Reserve. And inflation ultimately is a 276 00:17:09,680 --> 00:17:13,440 Speaker 1: monetary problem. It's a question about how much money is available. 277 00:17:13,800 --> 00:17:16,880 Speaker 1: If there's no new money, you don't get inflation. If 278 00:17:16,880 --> 00:17:19,280 Speaker 1: there's a huge amount of new money, you get inflation. 279 00:17:19,840 --> 00:17:23,480 Speaker 1: So the Fudder Reserve has a tremendous capacity to cut 280 00:17:23,480 --> 00:17:26,440 Speaker 1: off inflation if it wants to. The problem is, the 281 00:17:26,480 --> 00:17:30,639 Speaker 1: technique for cutting off inflation is really high interest rates, 282 00:17:31,320 --> 00:17:35,800 Speaker 1: and really high interest rates killed jobs. So Volker was 283 00:17:35,920 --> 00:17:39,679 Speaker 1: under enormous pressure by this time, I was a sophomore member, 284 00:17:40,000 --> 00:17:43,040 Speaker 1: and early in the regans he was under enormous pressure 285 00:17:43,119 --> 00:17:46,240 Speaker 1: from every central bank in the world because the American 286 00:17:46,280 --> 00:17:50,520 Speaker 1: inflation was beginning to infect all the value of currency worldwide, 287 00:17:50,920 --> 00:17:52,920 Speaker 1: and so they all wanted him to get the inflation 288 00:17:53,000 --> 00:17:56,080 Speaker 1: under control. And he came back and said to Regan, 289 00:17:57,080 --> 00:17:59,159 Speaker 1: I can break the back of inflation, but it's going 290 00:17:59,200 --> 00:18:04,400 Speaker 1: to take a very painful, huge increase in interest rates, 291 00:18:04,880 --> 00:18:08,199 Speaker 1: and that's going to put tremendous pressure on the market. Well, 292 00:18:08,560 --> 00:18:11,159 Speaker 1: Reagan has just run against the guy who had totally 293 00:18:11,280 --> 00:18:14,639 Speaker 1: mismanaged the economy. Would be a lot like having to 294 00:18:14,640 --> 00:18:17,880 Speaker 1: follow Joe Biden, except I think the Biden problems will 295 00:18:17,880 --> 00:18:21,959 Speaker 1: be ten to twenty times worse than Carter. But nonetheless, 296 00:18:22,000 --> 00:18:26,639 Speaker 1: Reagan had inherited a really bad economy, and in parallel 297 00:18:26,720 --> 00:18:29,359 Speaker 1: to Reagan, this is one of those great ironic moments 298 00:18:29,400 --> 00:18:37,240 Speaker 1: in history. In nineteen seventy nine, Margaret Thatcher won an 299 00:18:37,240 --> 00:18:39,960 Speaker 1: election as Prime Minister a Great Britain, the first woman 300 00:18:40,000 --> 00:18:45,240 Speaker 1: to become prime minister. She was an extraordinarily hardline Conservative. 301 00:18:45,960 --> 00:18:51,359 Speaker 1: She one time was asked at the Conservative Party conference 302 00:18:51,880 --> 00:18:54,560 Speaker 1: what their policies were, and she reached into her purse 303 00:18:55,000 --> 00:18:57,720 Speaker 1: and she pulled out a copy of High Constitution of 304 00:18:57,840 --> 00:19:01,960 Speaker 1: Freedom and she slammed it on the desk and she said, 305 00:19:02,440 --> 00:19:05,960 Speaker 1: this is our policy. We are for freedom and we 306 00:19:06,000 --> 00:19:11,320 Speaker 1: are against socialism. So Thatcher was following very parallel and 307 00:19:11,359 --> 00:19:15,840 Speaker 1: slightly ahead of Reagan, a policy of very tough anti inflation, 308 00:19:16,400 --> 00:19:22,000 Speaker 1: cut taxes and regulations, encourage entrepreneurship, deliberately endure the pain, 309 00:19:22,560 --> 00:19:24,840 Speaker 1: and say to people up front, this is going to 310 00:19:24,920 --> 00:19:27,040 Speaker 1: be hard, but we're going to get through it. And 311 00:19:27,080 --> 00:19:28,840 Speaker 1: when we get through it, we're going to be wealthier, 312 00:19:29,320 --> 00:19:32,800 Speaker 1: more successful, more competitive, and you and your children will 313 00:19:32,800 --> 00:19:36,920 Speaker 1: have a better future. Reagan really liked Margaret Thatcher in 314 00:19:36,960 --> 00:19:40,040 Speaker 1: some ways, he was her sidekicker. She was his sidekick, 315 00:19:40,400 --> 00:19:45,960 Speaker 1: and trying to shift from the liberal demand side, high inflation, 316 00:19:46,119 --> 00:19:50,840 Speaker 1: high deficit, big government spending model towards a supply side. 317 00:19:51,359 --> 00:19:56,080 Speaker 1: Cut taxes, encourage entrepreneurs maximize the rate of investment and 318 00:19:56,160 --> 00:19:59,480 Speaker 1: create jobs. Well, that was going to be a very 319 00:19:59,560 --> 00:20:04,440 Speaker 1: tough transition, and the only way it would work would 320 00:20:04,440 --> 00:20:07,520 Speaker 1: be if there was a huge tax cut, because the 321 00:20:07,560 --> 00:20:11,680 Speaker 1: tax cut would enable people to offset the pain that 322 00:20:11,720 --> 00:20:14,800 Speaker 1: the Federal Reserve would be deliberately cause it. Remember, the 323 00:20:14,840 --> 00:20:17,720 Speaker 1: Federal Reserve at this point is desperate to get inflation 324 00:20:17,760 --> 00:20:20,560 Speaker 1: under control, and they're about to cause a lot of pain. 325 00:20:21,520 --> 00:20:26,480 Speaker 1: So Reagan had an enormous interest in getting the three 326 00:20:26,560 --> 00:20:30,679 Speaker 1: year tax cut passed. Now, he didn't have control of 327 00:20:30,720 --> 00:20:32,800 Speaker 1: the House. He had picked up a lot of seats, 328 00:20:33,160 --> 00:20:35,919 Speaker 1: but he had not gotten to a majority. He did have, 329 00:20:36,080 --> 00:20:38,680 Speaker 1: when a great shock to everybody, control of the Senate, 330 00:20:38,720 --> 00:20:43,520 Speaker 1: which nobody expected. But we picked up something like five 331 00:20:43,680 --> 00:20:46,720 Speaker 1: Senate seats by a total margin of seventy five thousand votes, 332 00:20:47,359 --> 00:20:50,719 Speaker 1: and it was one of those moments when by the 333 00:20:50,840 --> 00:20:54,439 Speaker 1: narrowest of margins, we were in charge. Now again, that 334 00:20:54,520 --> 00:20:57,080 Speaker 1: didn't make it easy because the head of the Senate 335 00:20:57,119 --> 00:21:01,640 Speaker 1: Finance Committee, Backwood of Oregon, thought that Reagan program was crazy. 336 00:21:02,080 --> 00:21:06,280 Speaker 1: And Howard Baker, the Republican leader in the Senate, set 337 00:21:06,320 --> 00:21:08,719 Speaker 1: at one point on the record that this is a 338 00:21:08,800 --> 00:21:11,600 Speaker 1: riverboat gamble. We have no idea if this is going 339 00:21:11,640 --> 00:21:15,320 Speaker 1: to work, which is hardly the kind of battlecry you 340 00:21:15,359 --> 00:21:17,919 Speaker 1: want out of your Senate majority leader trying to pass something. 341 00:21:18,400 --> 00:21:24,159 Speaker 1: But Reagan did have the largest electoral victory over an 342 00:21:24,160 --> 00:21:28,359 Speaker 1: incumbent president in modern American history. Because he had brought 343 00:21:28,400 --> 00:21:30,639 Speaker 1: in the Senate as a majority, and because he had 344 00:21:30,640 --> 00:21:32,800 Speaker 1: picked up a whole lot of House seats, he was 345 00:21:32,840 --> 00:21:38,080 Speaker 1: seen as somebody who legitimately had popular support for his 346 00:21:38,119 --> 00:21:41,680 Speaker 1: initial program, and so he was able to focus now. 347 00:21:41,880 --> 00:21:45,919 Speaker 1: He was also helped by having picked Jim Baker to 348 00:21:46,080 --> 00:21:50,479 Speaker 1: be his chief of staff. Baker is one of the 349 00:21:50,560 --> 00:21:54,640 Speaker 1: remarkable figures in American history. Born to a very, very 350 00:21:54,680 --> 00:21:59,480 Speaker 1: wealthy Texas family, he records that his earliest memory was 351 00:21:59,560 --> 00:22:03,160 Speaker 1: waking up at about three on his grandfather's private train 352 00:22:03,600 --> 00:22:08,480 Speaker 1: going across Texas. He became the name partner in the 353 00:22:08,560 --> 00:22:12,960 Speaker 1: Baker Law firm. He ran for office without great success, 354 00:22:13,480 --> 00:22:19,480 Speaker 1: but he was an extraordinary manager and an extraordinary strategist, 355 00:22:20,040 --> 00:22:22,800 Speaker 1: and when Reagan brought him in, he brought in the 356 00:22:23,000 --> 00:22:28,000 Speaker 1: missing piece of enormous entrepreneurial drive inside the White House. 357 00:22:28,520 --> 00:22:31,480 Speaker 1: Reagan was a great visionary, but he also understood that 358 00:22:31,520 --> 00:22:34,159 Speaker 1: he couldn't both be the visionary and the manager, and 359 00:22:34,240 --> 00:22:37,399 Speaker 1: so he found somebody who became his partner in changing 360 00:22:37,440 --> 00:22:42,280 Speaker 1: American history at almost every level. So Baker set out 361 00:22:42,280 --> 00:22:44,119 Speaker 1: a firm rule, and this is a great example of 362 00:22:44,119 --> 00:22:47,159 Speaker 1: how you passed legislation. They got all the Cabinet the 363 00:22:47,160 --> 00:22:50,400 Speaker 1: other in a room and Baker said, the President will 364 00:22:50,440 --> 00:22:54,800 Speaker 1: accept no invitations for the next six months unless they 365 00:22:54,880 --> 00:22:59,199 Speaker 1: relate to cutting taxes. So if you want the President 366 00:22:59,240 --> 00:23:03,040 Speaker 1: to do something, figure out some event where he's going 367 00:23:03,080 --> 00:23:07,480 Speaker 1: to talk about tax cuts, because otherwise he ain't coming period. 368 00:23:07,840 --> 00:23:11,240 Speaker 1: And by the way, your job as a cabinet secretary 369 00:23:11,320 --> 00:23:13,800 Speaker 1: is to talk about tax cuts and to deliver votes 370 00:23:13,840 --> 00:23:17,320 Speaker 1: on the tax cuts. So this was a true full 371 00:23:17,359 --> 00:23:20,800 Speaker 1: court press. As a junior member of the Reagan team, 372 00:23:21,320 --> 00:23:23,320 Speaker 1: I was privileged a number of occasions to go down 373 00:23:23,359 --> 00:23:26,720 Speaker 1: to the White House with my colleagues, and it was 374 00:23:26,760 --> 00:23:29,840 Speaker 1: a real sense that we were on a mission, that 375 00:23:29,920 --> 00:23:32,359 Speaker 1: this was a crusade, and that we were going to 376 00:23:32,440 --> 00:23:37,080 Speaker 1: change America to a more productive, more dynamic, more entrepreneurial country, 377 00:23:37,520 --> 00:23:41,640 Speaker 1: and that getting this passed was a really, really big 378 00:23:41,800 --> 00:23:45,960 Speaker 1: historic deal. Now in the House, we didn't have a majority. 379 00:23:46,359 --> 00:23:49,520 Speaker 1: Bob Michael, who was the most effective minority leader in 380 00:23:49,720 --> 00:23:55,560 Speaker 1: modern times, was maneuvering, and Tip O'Neill, unlike Nancy Pelosi, 381 00:23:56,040 --> 00:23:59,919 Speaker 1: was playing by the rules, and so O'Neill recognized the 382 00:24:00,080 --> 00:24:03,000 Speaker 1: under the rules he was going to lose enough Democrats 383 00:24:03,480 --> 00:24:06,840 Speaker 1: because back then they still had Democrats who were relatively conservative. 384 00:24:07,200 --> 00:24:09,760 Speaker 1: And if you were a Texas or a Georgia or 385 00:24:09,800 --> 00:24:13,520 Speaker 1: an Alabama Democrat, you wanted to vote with Ronald Reagan 386 00:24:14,160 --> 00:24:17,880 Speaker 1: because he was wildly popular in your district. So when 387 00:24:17,880 --> 00:24:21,920 Speaker 1: you combined the Republicans and the Reagan Democrats, we had 388 00:24:22,040 --> 00:24:25,879 Speaker 1: enough votes to pass the tax cut with modification. And 389 00:24:25,960 --> 00:24:30,080 Speaker 1: the modification which was unfortunate was that the first year 390 00:24:30,640 --> 00:24:33,720 Speaker 1: was modified and didn't come in full force, and so 391 00:24:33,880 --> 00:24:36,360 Speaker 1: the second and third years did. But that slowed down 392 00:24:36,400 --> 00:24:38,960 Speaker 1: the impact of the tax cuts. And I think heard 393 00:24:39,040 --> 00:24:41,800 Speaker 1: us in the eighty two recession, but it was the 394 00:24:41,840 --> 00:24:46,160 Speaker 1: cost of getting the build through. So Reagan campaigned brilliantly. 395 00:24:46,440 --> 00:24:50,040 Speaker 1: All of this, of course, remember was interrupted when Reagan 396 00:24:50,160 --> 00:24:55,320 Speaker 1: was shot, which was just an enormous, extraordinary shock to 397 00:24:55,359 --> 00:25:00,480 Speaker 1: the country. And Reagan, who insisted on walk into the 398 00:25:00,520 --> 00:25:04,880 Speaker 1: hospital and who said to the doctors. I hope your 399 00:25:04,920 --> 00:25:10,880 Speaker 1: Republicans recovered very rapidly. And one of the most emotional 400 00:25:11,440 --> 00:25:14,520 Speaker 1: public moments of my life was the day that Reagan 401 00:25:14,640 --> 00:25:17,920 Speaker 1: came into the Congress to deliver a joint Session address, 402 00:25:18,320 --> 00:25:20,920 Speaker 1: which was about forty five days after he'd been shot. 403 00:25:21,840 --> 00:25:25,480 Speaker 1: And it was just astonishing. I mean, the level of emotion, 404 00:25:26,080 --> 00:25:28,720 Speaker 1: it was electric. Well, this is the guy, of course, 405 00:25:28,880 --> 00:25:31,159 Speaker 1: guess what he's talking about. He's talking about why we 406 00:25:31,200 --> 00:25:33,800 Speaker 1: have to pass the tax cuts. So he had an 407 00:25:33,920 --> 00:25:38,000 Speaker 1: enormous emotional force going with him, and the tax cuts 408 00:25:38,000 --> 00:25:59,320 Speaker 1: got passed. Now there's a great side story about how 409 00:25:59,359 --> 00:26:03,199 Speaker 1: the tax cuts gets signed. Reagan had announced to his 410 00:26:03,280 --> 00:26:07,560 Speaker 1: staff early in his presidency that every August he would 411 00:26:07,600 --> 00:26:10,520 Speaker 1: be at the ranch. And Mike Deaver, who was in 412 00:26:10,600 --> 00:26:13,479 Speaker 1: charge of this schedule and was very close to Nancy 413 00:26:13,880 --> 00:26:17,000 Speaker 1: and we've also had been as communications director as a 414 00:26:17,040 --> 00:26:21,000 Speaker 1: governor and candidate, Deaver said, you know, you can't leave 415 00:26:21,119 --> 00:26:24,040 Speaker 1: for an entire month, and Reagan said, well, you know, 416 00:26:24,080 --> 00:26:25,840 Speaker 1: you'd better figure out what you're going to hear me 417 00:26:25,880 --> 00:26:28,080 Speaker 1: do at the ranch, because I'm going to the ranch. 418 00:26:28,480 --> 00:26:31,520 Speaker 1: Because if I go to the ranch one month out 419 00:26:31,560 --> 00:26:34,360 Speaker 1: of every year for the next eight years, I will 420 00:26:34,440 --> 00:26:37,920 Speaker 1: live longer, and if I don't, I won't live longer. 421 00:26:38,480 --> 00:26:40,800 Speaker 1: So this is a matter of life and death. Albeit 422 00:26:40,800 --> 00:26:42,919 Speaker 1: at the ranch, you figure out what we can do 423 00:26:42,960 --> 00:26:45,800 Speaker 1: at the ranch that makes news. So Reagan's up at 424 00:26:45,840 --> 00:26:49,440 Speaker 1: the Reagan Ranch. They set up this table outside that's 425 00:26:49,560 --> 00:26:52,520 Speaker 1: very rustic, and Reagan is there and gives a little 426 00:26:52,560 --> 00:26:57,880 Speaker 1: talk and signs the tax cuts. And it is an 427 00:26:57,880 --> 00:27:06,800 Speaker 1: extraordinary moment because Reagan had fundamentally changed the underlying economic 428 00:27:07,840 --> 00:27:10,800 Speaker 1: nature of how America was going to operate. He had 429 00:27:10,840 --> 00:27:16,040 Speaker 1: moved it from a demand side, which didn't increase manufacturing, 430 00:27:16,480 --> 00:27:20,920 Speaker 1: didn't increase investments, didn't increase productivity, to a supply side, 431 00:27:21,400 --> 00:27:24,879 Speaker 1: which said, if we do all those things, if we 432 00:27:24,920 --> 00:27:28,280 Speaker 1: have more factories, if we have more productivity, if we 433 00:27:28,359 --> 00:27:31,600 Speaker 1: have more production, then prices will go down, by the way, 434 00:27:31,800 --> 00:27:35,320 Speaker 1: something which was proven with gasoline and oil. I actually 435 00:27:35,320 --> 00:27:39,520 Speaker 1: did a book called Gasoline two fifty Cents, which Barack 436 00:27:39,560 --> 00:27:44,280 Speaker 1: Obama attacked because it violated the liberal model that gasoline 437 00:27:44,280 --> 00:27:48,159 Speaker 1: had determanently go up. And the fact is that you 438 00:27:48,280 --> 00:27:52,359 Speaker 1: have a demand side supply side fight over oil and gas. 439 00:27:52,840 --> 00:27:56,159 Speaker 1: And it turns out that if you emphasize the supply side. 440 00:27:56,640 --> 00:28:01,520 Speaker 1: The sheer production crashes the price. So you want inexpensive gasoline, 441 00:28:01,880 --> 00:28:06,200 Speaker 1: maximize production. If you focus on demand and you try 442 00:28:06,240 --> 00:28:09,359 Speaker 1: to get the maximum of people buying gasoline, you guarantee 443 00:28:09,400 --> 00:28:12,399 Speaker 1: that prices are going to go up. So we were 444 00:28:13,000 --> 00:28:18,680 Speaker 1: in a situation in August of nineteen eighty one where 445 00:28:19,200 --> 00:28:22,320 Speaker 1: Reagan is shifting the country and what he's doing is 446 00:28:22,320 --> 00:28:25,879 Speaker 1: he's saying, one, I am going to totally support Paul Woker, 447 00:28:25,920 --> 00:28:27,399 Speaker 1: and I was franking on the other side because I 448 00:28:27,440 --> 00:28:29,639 Speaker 1: knew this is going to cost us seats, which he 449 00:28:30,040 --> 00:28:33,320 Speaker 1: did cost us twenty nine seats in the House in 450 00:28:33,520 --> 00:28:36,520 Speaker 1: nineteen eighty two, because we were a deep procession thanks 451 00:28:36,520 --> 00:28:40,640 Speaker 1: to Paul Woker. But Reagan's point was very much like Thatcher. 452 00:28:41,240 --> 00:28:45,040 Speaker 1: You have to break the back of inflation. Period Well, 453 00:28:45,720 --> 00:28:49,800 Speaker 1: inflation when he took office was thirteen and a half percent. 454 00:28:51,080 --> 00:28:53,400 Speaker 1: When he left office eight years later, it was four 455 00:28:53,520 --> 00:28:55,760 Speaker 1: point eight two percent, and it kept, by the way 456 00:28:55,840 --> 00:28:59,800 Speaker 1: going down. So you had a growing economy with a 457 00:29:00,000 --> 00:29:03,960 Speaker 1: declining inflation rate. People had more real money in their pockets, 458 00:29:04,360 --> 00:29:07,720 Speaker 1: their purchasing power was going up, and Reagan was prepared 459 00:29:07,760 --> 00:29:11,320 Speaker 1: to take the pain as a matter of policy and 460 00:29:11,640 --> 00:29:15,840 Speaker 1: support Wonker in this very tough program at the same time, 461 00:29:16,440 --> 00:29:21,080 Speaker 1: because he had deregulation in a big way and cut 462 00:29:21,120 --> 00:29:25,760 Speaker 1: the federal bureaucracy and dramatically reduced the amount of burden 463 00:29:25,840 --> 00:29:29,479 Speaker 1: that small businesses and manufacturers had to carry. You began 464 00:29:29,600 --> 00:29:34,440 Speaker 1: to get a program where people thought America was the 465 00:29:34,520 --> 00:29:37,880 Speaker 1: right place to invest again. So you had a growing 466 00:29:37,920 --> 00:29:42,520 Speaker 1: economy despite the high interest rates. And by nineteen eighty 467 00:29:42,520 --> 00:29:46,760 Speaker 1: four it was going well enough that Reagan could campaign 468 00:29:46,800 --> 00:29:51,040 Speaker 1: on the slogan Mourning in America. Now. The gap between 469 00:29:51,080 --> 00:29:55,479 Speaker 1: the Malays of Jimmy Carter and four years later Mourning 470 00:29:55,480 --> 00:29:58,440 Speaker 1: in America with Ronald Reagan was in many ways a 471 00:29:58,520 --> 00:30:03,240 Speaker 1: function of supply, eyesight, economics, and the impact of the 472 00:30:03,320 --> 00:30:08,360 Speaker 1: Reagan tax cut. It was a remarkable achievement. It was 473 00:30:08,440 --> 00:30:11,880 Speaker 1: both an economic revolution and an intellectual revolution and a 474 00:30:11,920 --> 00:30:17,680 Speaker 1: political revolution. The tax cuts included an accelerated cost recovery system, 475 00:30:18,080 --> 00:30:22,600 Speaker 1: which accelerated the depreciation tax reductions. And what that meant 476 00:30:22,640 --> 00:30:25,240 Speaker 1: was you bought a new piece of equipment, you could 477 00:30:25,240 --> 00:30:27,720 Speaker 1: write it off faster so you could buy another new piece. 478 00:30:28,000 --> 00:30:31,440 Speaker 1: Because the equipment was changing technology every couple of years. 479 00:30:32,000 --> 00:30:35,640 Speaker 1: It indexed the individual tax brackets with a twenty three 480 00:30:35,720 --> 00:30:39,800 Speaker 1: percent cut an individual tax rates. So you're out here 481 00:30:39,800 --> 00:30:42,840 Speaker 1: working hard, all of a sudden you got much more 482 00:30:42,880 --> 00:30:47,160 Speaker 1: money in your pocket, which incentivises you to save, to invest, 483 00:30:47,240 --> 00:30:50,200 Speaker 1: to be involved. The top tax rate was cut from 484 00:30:50,240 --> 00:30:53,160 Speaker 1: seventy to fifty over a three year period. Well again, 485 00:30:53,520 --> 00:30:56,680 Speaker 1: remember that the federal tax also has a state tax 486 00:30:56,720 --> 00:30:59,080 Speaker 1: on top of it. So if you're in a state 487 00:30:59,120 --> 00:31:03,920 Speaker 1: that is a high tax bracket New York, California being good, examples, Connecticut, Illinois, 488 00:31:03,960 --> 00:31:06,280 Speaker 1: and you start at seventy percent, and then you add 489 00:31:06,320 --> 00:31:09,800 Speaker 1: the state taxes, it really gets to be expensive. So 490 00:31:10,240 --> 00:31:13,000 Speaker 1: the lowest tax rate was cut from fourteen to eleven. 491 00:31:13,920 --> 00:31:17,400 Speaker 1: The real estate tax exemption was increased to six hundred 492 00:31:17,440 --> 00:31:21,440 Speaker 1: thousand dollars from one hundred and seventy five to promote 493 00:31:21,520 --> 00:31:24,719 Speaker 1: capital costs recovery. In other words, they wanted people to 494 00:31:24,760 --> 00:31:26,920 Speaker 1: be able to sell a house, or sell a factory, 495 00:31:27,000 --> 00:31:30,240 Speaker 1: or sell a building and keep most of it. So 496 00:31:30,360 --> 00:31:32,800 Speaker 1: you begin to create modernization. You be in to create 497 00:31:32,800 --> 00:31:35,440 Speaker 1: an incentive to go out and look for new, better, 498 00:31:35,760 --> 00:31:41,000 Speaker 1: more modern Every working taxpayer was allowed to establish individual 499 00:31:41,040 --> 00:31:44,880 Speaker 1: retirement accounts and if it was a step to increase savings. 500 00:31:44,880 --> 00:31:48,080 Speaker 1: And if you look today, the actual assets and individual 501 00:31:48,120 --> 00:31:54,040 Speaker 1: retirement accounts total twelve point six trillion dollars at the 502 00:31:54,120 --> 00:31:56,720 Speaker 1: end of the first quarter of twenty twenty one. Now 503 00:31:56,760 --> 00:32:00,600 Speaker 1: think about that twelve trillion, six hundred billion dollars that 504 00:32:00,800 --> 00:32:05,800 Speaker 1: people have that belongs to them. It's astonishing over a generation, 505 00:32:06,640 --> 00:32:10,240 Speaker 1: how many people as an IRA, and it's astonishing how 506 00:32:10,320 --> 00:32:13,560 Speaker 1: much money that has been saved and put back into 507 00:32:13,560 --> 00:32:18,240 Speaker 1: the system in order to accelerate economic growth because people 508 00:32:18,280 --> 00:32:21,120 Speaker 1: had a real SENTI there was a ten percent exclusion 509 00:32:21,160 --> 00:32:23,920 Speaker 1: on income for two earner married couples up to three 510 00:32:23,960 --> 00:32:27,720 Speaker 1: thousand dollars of exclusion I was put in to offset 511 00:32:27,760 --> 00:32:31,240 Speaker 1: the fact that we actually were charging you more if 512 00:32:31,240 --> 00:32:33,800 Speaker 1: you were married than if you were two single people. 513 00:32:34,280 --> 00:32:38,040 Speaker 1: There was a taxation on windfall profits and that was reduced. 514 00:32:38,720 --> 00:32:40,840 Speaker 1: There was a reduction in the capital gains tax from 515 00:32:40,840 --> 00:32:43,120 Speaker 1: twenty eight to twenty and I'm very proud of the 516 00:32:43,120 --> 00:32:45,640 Speaker 1: fact that the House Republicans, when I was a speaker, 517 00:32:45,960 --> 00:32:50,320 Speaker 1: passed the largest capital gains cut in American history. When 518 00:32:50,400 --> 00:32:55,680 Speaker 1: you cut capital gains tax, you dramatically increase investment, you 519 00:32:55,760 --> 00:32:59,760 Speaker 1: increase economic growth. You modernize the economy, you make it 520 00:33:00,320 --> 00:33:03,120 Speaker 1: for us to compete with China. It's a very important 521 00:33:03,160 --> 00:33:08,760 Speaker 1: thing that most people don't fully appreciate. But capital gains, 522 00:33:08,240 --> 00:33:12,480 Speaker 1: as was once said years and years ago by Alan Greenspan, 523 00:33:12,600 --> 00:33:15,120 Speaker 1: then the Chairman of the Federal Reserve, the ideal rate 524 00:33:15,120 --> 00:33:18,480 Speaker 1: would be zero because it creates so much economic growth. 525 00:33:18,800 --> 00:33:22,680 Speaker 1: It took until nineteen eighty three for the economy to 526 00:33:22,760 --> 00:33:26,680 Speaker 1: turn around because of the vocal, enormous increase in the 527 00:33:26,720 --> 00:33:30,720 Speaker 1: interest rates. But starting in nineteen eighty three, the economy 528 00:33:30,760 --> 00:33:34,400 Speaker 1: began to roll, and in many ways, up until the 529 00:33:34,800 --> 00:33:39,560 Speaker 1: Bush collapse in two thousand and eight, we actually had 530 00:33:40,160 --> 00:33:44,560 Speaker 1: a long stretch of economic growth and of very healthy 531 00:33:44,600 --> 00:33:48,440 Speaker 1: economy as a function of Reagan policies and of those 532 00:33:48,480 --> 00:33:52,400 Speaker 1: of us who fought consistently against it. So I think 533 00:33:52,400 --> 00:33:56,560 Speaker 1: that it's very useful today as we listen and think 534 00:33:56,600 --> 00:34:01,320 Speaker 1: about the anniversary of the Reagan tax cuts, to realize 535 00:34:01,360 --> 00:34:05,200 Speaker 1: that it was important intellectually, it was important economically, it 536 00:34:05,240 --> 00:34:09,960 Speaker 1: was important politically, and as we prepare to try to 537 00:34:10,320 --> 00:34:15,879 Speaker 1: help the country move out of the mess that Joe 538 00:34:15,880 --> 00:34:18,560 Speaker 1: Biden's going to leave it in, I think that Reagan 539 00:34:18,680 --> 00:34:25,000 Speaker 1: and the Reagan economic policy, kill inflation, enable people to invest, 540 00:34:25,920 --> 00:34:31,279 Speaker 1: cut taxes, cut red tape, encourage small business. All those 541 00:34:31,280 --> 00:34:35,040 Speaker 1: steps are going to be as relevant as we begin 542 00:34:35,120 --> 00:34:38,560 Speaker 1: to recover from the disaster that the Democrats are about 543 00:34:38,560 --> 00:34:41,120 Speaker 1: to impose on us. And it's a little bit like 544 00:34:41,200 --> 00:34:42,759 Speaker 1: being able to sit back there at the beginning of 545 00:34:42,800 --> 00:34:45,400 Speaker 1: the Carter years and say, yes, Carter will make a 546 00:34:45,440 --> 00:34:48,120 Speaker 1: total mess, but by the way, Ronald Reagan will come 547 00:34:48,120 --> 00:34:51,399 Speaker 1: along and fix it. I think he can say right now, 548 00:34:51,800 --> 00:34:54,880 Speaker 1: if we apply the principles that Reagan taught us, we 549 00:34:54,960 --> 00:34:58,240 Speaker 1: can come out of this very fast, starting in twenty 550 00:34:58,440 --> 00:35:02,360 Speaker 1: twenty five. And if Kevin McCarthy ends up as Speaker 551 00:35:02,680 --> 00:35:06,280 Speaker 1: and we have control of the House in two twenty three, 552 00:35:06,520 --> 00:35:09,480 Speaker 1: we can begin the process of laying the groundwork so 553 00:35:09,520 --> 00:35:11,360 Speaker 1: we can hit the ground running once we take the 554 00:35:11,400 --> 00:35:15,040 Speaker 1: White House. But I have no doubt, having lived through it, 555 00:35:15,520 --> 00:35:18,480 Speaker 1: if you look at the principles Biden is applying, this 556 00:35:18,640 --> 00:35:22,920 Speaker 1: is Jimmy Carter times twenty or thirty, and it's going 557 00:35:22,960 --> 00:35:26,560 Speaker 1: to be a mess. And having watched what happened with Carter, 558 00:35:26,960 --> 00:35:30,040 Speaker 1: I am confident the American people have the good common 559 00:35:30,080 --> 00:35:35,360 Speaker 1: sense to realize that high inflation, high unemployment, massive debt, 560 00:35:35,840 --> 00:35:39,440 Speaker 1: huge bureaucratic regulations is not a very good road to 561 00:35:39,719 --> 00:35:42,160 Speaker 1: go down and is not a very good way of life. 562 00:35:42,480 --> 00:35:46,360 Speaker 1: And therefore, I think that looking at Reagan and the 563 00:35:46,400 --> 00:35:49,919 Speaker 1: fortieth anniversary of the tax cuts, and looking at all 564 00:35:49,960 --> 00:35:53,160 Speaker 1: of the terrific material that the Reagan Library is producing, 565 00:35:53,200 --> 00:35:55,120 Speaker 1: and if you'd like to know a lot more, you 566 00:35:55,160 --> 00:35:57,200 Speaker 1: can go to the Reagan Library. We have a connection 567 00:35:57,560 --> 00:36:00,400 Speaker 1: on our show page. They have done and am easingly 568 00:36:00,480 --> 00:36:04,000 Speaker 1: good job, and you should make sure that they're material 569 00:36:04,719 --> 00:36:09,320 Speaker 1: explaining supply side economics, explaining the tax cuts, explaining the economy. 570 00:36:09,680 --> 00:36:11,960 Speaker 1: Their material should be in every school in the country. 571 00:36:12,280 --> 00:36:15,439 Speaker 1: And you have an opportunity to have an impact by 572 00:36:15,480 --> 00:36:18,720 Speaker 1: trying to get the Reagan Library material into the schools 573 00:36:18,719 --> 00:36:21,520 Speaker 1: in your community. So I hope you find this useful. 574 00:36:21,880 --> 00:36:24,640 Speaker 1: I'm an optimist, as Reagan was. He always said, you 575 00:36:24,680 --> 00:36:27,600 Speaker 1: ain't seen nothing yet. He was right, you ain't seen 576 00:36:27,640 --> 00:36:30,160 Speaker 1: nothing yet. It's all going to be more exciting and 577 00:36:30,239 --> 00:36:33,360 Speaker 1: more dynamic, and our children and grandchildren are going to 578 00:36:33,440 --> 00:36:36,440 Speaker 1: live in an even better America with even greater opportunities, 579 00:36:36,840 --> 00:36:40,279 Speaker 1: and the world will in the end reject tyranny. In 580 00:36:40,360 --> 00:36:43,640 Speaker 1: favor of freedom, and so I think Reagan's a pretty 581 00:36:43,719 --> 00:36:46,840 Speaker 1: useful benchmark for what could be and what we have 582 00:36:46,920 --> 00:36:56,120 Speaker 1: to work hard to make real again. Thank you for listening. 583 00:36:56,560 --> 00:36:59,160 Speaker 1: You can learn more about the fortieth anniversary of President 584 00:36:59,280 --> 00:37:03,120 Speaker 1: Reagan's tax Us on our showpage at newtsworld dot com. 585 00:37:03,360 --> 00:37:06,440 Speaker 1: News World is produced by Gingwich three sixty and iHeartMedia. 586 00:37:06,960 --> 00:37:11,160 Speaker 1: Our executive producers Debbie Myers, our producers Guards Sloan, and 587 00:37:11,280 --> 00:37:14,800 Speaker 1: our researcher is Rachel Peterson. The artwork for the show 588 00:37:15,280 --> 00:37:18,239 Speaker 1: was created by Steve Finley. Special thanks to the team 589 00:37:18,239 --> 00:37:21,280 Speaker 1: at Gingwish three sixty. If you've been enjoying news World, 590 00:37:21,520 --> 00:37:24,359 Speaker 1: I hope you'll go to Apple Podcast and both rate 591 00:37:24,440 --> 00:37:27,880 Speaker 1: us with five stars and give us a review so 592 00:37:28,000 --> 00:37:31,160 Speaker 1: others can learn what it's all about. Right now, listeners 593 00:37:31,160 --> 00:37:33,640 Speaker 1: to news World can sign up from my three free 594 00:37:33,680 --> 00:37:38,040 Speaker 1: weekly columns at gingwishtree sixty dot com slash newsletter. I'm 595 00:37:38,120 --> 00:37:40,040 Speaker 1: new Gingwich. This is Newtsworld.