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THE JACK KEMP I KNEW |
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Written by Richard Rahn
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Friday, 08 May 2009 |
Today (5/08),
memorial services will be held at Washington's National Cathedral for a great
American, Jack Kemp, who succumbed to cancer six days ago at age 73.
Arguably, without
Jack Kemp, the Reagan supply-side, high-growth economic revolution would never
have occurred. Mr. Kemp, a young congressman from Buffalo, N.Y., convinced
Ronald Reagan and much of the nation of the wisdom of sharply cutting tax rates
on labor and capital.
When Ronald Reagan
ran for president in 1980, he wisely endorsed a bill - the Kemp-Roth Act - to
cut income tax rates 30 percent across the board. It was a radical idea, but it
worked so well that not even the current president is proposing a return to the
70 percent marginal tax rate that existed in 1980.
Jack Kemp was a very
successful quarterback for the Buffalo Bills who then was elected to Congress
in 1970. Mr. Kemp was a natural-born leader. He had a forceful physical
presence and a quick intellect, and was a gifted orator.
At that time,
Republicans were mired in an uninspiring debate about how much to cut the
budget rather than how to reignite economic growth and job creation. Mr. Kemp
intuitively understood that just cutting budgets was neither a political nor
economic winner for the Republicans or the country.
As the son of parents
who built a successful small trucking company, Jack Kemp understood the
difficulties entrepreneurs face in building any business, and that destructive
tax and regulatory policies can become insurmountable hurdles for most.
In the mid-1970s, Mr.
Kemp assembled a group of highly talented economists and economic writers for
advice and ideas. The group included Robert Mundell, who went on to win the
Nobel Prize in economics, and Art Laffer of the Laffer Curve fame. Norman Ture,
Paul Craig Roberts, Steve Entin and Bruce Bartlett were advisers who later
served as officials of the U.S. Treasury. Bob Bartley, who was editor of the
Wall Street Journal, and Jude Wanniski of the Journals editorial page were also
key advisers.
Despite an absence of
formal education in economics, Mr. Kemp had been reading economic textbooks and
studies and became an intense and incisive questioner of his advisers in order
to formulate his own ideas and clarify his thoughts.
Mr. Laffer was
teaching at the University of Southern California at Los Angeles in the late
1970s. He would occasionally take the "red-eye" into Washington,
arriving at about 5:30 a.m., and I would pick him up at Dulles Airport and take
him to Mr. Kemp's home in Bethesda. There, Jack, dressed in his bathrobe, would
cook breakfast for us while peppering Art with questions and challenging his
assertions.
Later in the day, the
Kemp economic team would often meet in Art's hotel in D.C. to discuss policy
ideas and how best to explain the tax plan to other Republicans, business
people, those in the media and the public at large.
Jack had the
remarkable ability to take economic truths and make them understandable to
everyone - "You cannot hate the employer and love the employee." No
one was better than Jack in explaining how all benefit from a bigger economic
pie. In his own words, he was "a bleeding-heart conservative," and he
understood that without rapid job creation the poor and many minorities would
not have a chance for better lives.
Jack was a
tax-cutting zealot, not because of some abstract philosophical notion, but
because he clearly understood how high tax rates reduced the incentives and
capital needed for job creation - "How many truck drivers do you have if
you cannot afford trucks?"
Despite the charges
from his left-wing critics, Jack never argued that all tax cuts pay for
themselves, but he did believe that modest deficits were preferable to high tax
rates that killed growth. Unlike most other Republicans and almost all
Democrats, Jack did have a plan for getting the United States out of the
stagflation of the late 1970s under the Carter administration, where there was
little growth and a 13.5 percent inflation rate.
The Keynesians of the
time favored monetary expansion to reduce interest rates and high tax rates to
contain inflation. Mr. Kemp and his advisers argued that the Keynesians had it
all backward and the solution was to reduce tax rates to spur the economy and
restrain growth in the money supply to reduce inflation.
Mr. Kemp successfully
sold this idea to Ronald Reagan, who made it the core of his successful 1980
presidential campaign. (In his unsuccessful 1976 campaign, Mr. Reagan had
emphasized cutting spending rather than cutting taxes.)
With Mr. Kemp leading
the charge in Congress, the tax cut plan was passed, the economy soared (7.2
percent in 1984) beyond anyones expectations, and federal tax revenues came in
at a much higher level than either the critics or the supporters of the tax cut
expected.
Mr. Reagan and Mr.
Kemp supported Paul Volcker at the Fed, who did the necessary wringing out of
inflation by restricting monetary growth in the early 1980s, even though many
politicians of both parties were screaming for monetary expansion.
There has been no
politician in recent decades with a better understanding of the consequences of
economic policy than Jack Kemp.
Mr. Kemp, unlike
those in the current administration and the congressional Democrat majority,
knew that without sound money and low tax rates, we could not have a vibrant
economy. Much of the prosperity and job creation we had in the quarter-century
from 1983 to 2007 can be directly attributable to the remarkable efforts and
economic salesmanship of Jack F. Kemp.
We have lost Jack's
voice for his enduring economic principles, just when we need them more than
ever.
Richard W. Rahn is a senior fellow at the Cato
Institute and chairman of the Institute for Global Economic Growth.
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