Kudlow Says Kennedy And Reagan Cut Taxes With Bipartisanship And Civility

By Scott Benjamin

Noted economics commentator Larry Kudlow says the leader of the New Frontier and the father of the New Federalism had more in common than being supply-side tax cutters.

The former CNBC television host said presidents John Kennedy, a Democrat, and Ronald Reagan, a Republican, achieved bipartisanship and “civility” as they spurred economic growth and a strong dollar.

Kudlow, who was an informal advisor to President-elect Donald Trump, a Republican, says he’ll need a similar game plan to achieve his goal of 4 percent economic growth.

“We lacked civility in this election,” he said regarding the bickering between Trump and Democratic nominee Hillary Clinton. Polls showed that they had the lowest approval ratings of any two major party nominees.

Congress has become too polarized over the recent years, said Kudlow who spoke to about 70 people November 27 at the Gunn Memorial Library in Washington and then signed copies of JFK and the Reagan Revolution (250 pages, $29, Penguin Random House), the September release which he co-authored with Brian Domitrovic.

The book provides insight into Kennedy’s massive 1964 tax cut and Reagan’s historic 1981 tax reduction. He said both packages stimulated 5 percent economic growth over several years.

“Growth solves a lot of problems,” Kudlow said. “Jobs, wages, and it helps solve poverty.”

He and Domitrovic stated in the Wall Street Journal in September that the sluggish economic recovery needs a bipartisan tax cut. However, Kudlow said to achieve it, there will have to be a return to the days when Kennedy lobbied reluctant congressmen of his own party and Reagan rounded up 75 opposition party votes in the House through talks in the Oval Office and at Camp David.

“Elected officials in Washington need to say, ‘I can disagree with you with civility and respect,’ ” Kudlow said. “The fact that we disagree does not make us enemies.”

“Kennedy was a very civil man, which you can see by watching the video of his news conferences” said the Redding resident, who considered a bid for the Republican U.S. Senate nomination earlier this year.”

Kudlow, who worked in the Reagan Administration, said the former president believed that, “if we agree 70 percent or 80 percent of the time, then you are an ally, not an enemy.”

Supply side Republicans have cited the Kennedy tax cut as a model since 1977, when their leader, University of Southern California economist Art Laffer, attracted only three reporters when he announced plans for three-year, 33 percent across-the-board tax cut.

By the 1978 midterm election campaign, the Kemp-Roth plan – named after sponsors Jack Kemp, a congressman from Buffalo, and William Roth, a senator from Delaware - was a featured part of the GOP platform. Three years later, Reagan, less than seven months after taking office, signed a three-year, 25 percent tax cut.

Kudlow, who hosts a Saturday mid-day radio show on 770 WABC-AM in New York, said that proposal coupled with a tax reform package that Democrats Bill Bradley and Richard Gephardt helped across the congressional goal line in 1986 further stimulated economic growth.

He said the sub-hero was Doug Dillon, one of three Republicans appointed to cabinet-level positions by Kennedy. Dillon, who had run a large investment firm, convinced Kennedy to sign an investment tax incentive program in 1962 and then lobbied for a two-year across the board tax cut and a reduction in tax loopholes.

“A Democratic president and a Republican treasury secretary change the course of economic policy,” Kudlow declared regarding the proposal that taxes were “too high” and “revenues were too low.”

However, critics say the two tax cuts represent a failed policy.

Washington Post economics columnist Robert Samuelson has called the Kennedy tax cut the worst domestic policy decision in the United States since World War II.

He has stated that it set off an inflationary spiral that produced four recessions between 1969 and 1982 and erased budget discipline by encouraging elected officials to promise lower taxes and increased spending.

Samuelson has written that there have been 47 annual budget deficits and only five surpluses since President Lyndon Johnson signed the Kennedy tax cut in 1964, months following the assassination.

Kudlow said debt can be “a good thing” if it is done to make strategic investments. He said federal debt as a percentage of gross domestic product was lowest under Republican President Gerald Ford, which was “a terrible economic period.”

Additionally, Kudlow said the four presidents that followed Kennedy didn’t adhere to his economic policies.

He said Johnson signed a tax surcharge to help finance the Vietnam War and Republican Richard Nixon increased investment and corporate taxes. He said Ford didn’t turn back Nixon’s tax increases and Democrat Jimmy Carter, who should be lauded for his deregulation program, had little interest in tax reform.

Kudlow said Reagan’s tax cut increased economic growth to about 5 percent and in 1998, when Democrat Bill Clinton was president, helped produce the first budget surplus since 1969.

“You can say that a lot of things happened in the intervening years,” he declared, such as the congressional Pay As You Go budget controls that were enacted in the early 1990s. “I would disagree with that.”

Kemp said in 2006 that in the 25 years since the Reagan tax cut was enacted, there had only been 14 months of negative economic growth.

However, in 1992, eight years after the Reagan tax cuts ended, with an economy saddled with then-record budget deficits, the Clinton campaign ran on the slogan, “It’s the economy, Stupid” and third party candidate Ross Perot made deficit reduction a central theme.

Economist Jared Bernstein, a Ridgefield native who spent two years working for Democratic Vice President Joe Biden, has stated that Republicans haven’t been able to prove that huge tax cuts pay for themselves.

Samuelson and New York Times economics columnist Paul Krugman have stated that the 1990s economic expansion, the longest in America’s 240-year history, that began near the end of Republican President George H.W. Bush’s term and continued through Clinton’s eight years in office was largely due to the Internet boom, a peace dividend and Clinton’s fiscal discipline, particularly after Republicans took control of the U.S. House following the 1994 elections. Clinton reached agreements with Republican House Speaker Newt Gingrich and Budget Committee Chairman John Kasich on deficit reduction and welfare reform.

Both H.W. Bush and Clinton signed tax increases in the early 1990s and Clinton vetoed a $792 billion 10-year tax cut in 1999.

Kudlow said today a Kennedy/Reagan style tax cut would have a profound impact on corporate taxes, which would offset the reduction through increased revenue in five years and that there would be an almost immediate full-scale return on a reduction in the top individual bracket.

“That’s not the case for the middle brackets,” Kudlow said regarding the ability to recoup revenue following a tax reduction. “I concede that.”

“We have abandoned Kennedy and Reagan,” Kudlow said regarding the economic policies of the last 16 years, which have produced an average annual growth of about 2 percent after it averaged 3.5 percent from 1950 to 2000.

However, it appears that those economic policies have been in place.

Former Republican President George W. Bush signed a record $1.35 trillion 10-year tax cut in 2001, similar to the Kennedy and Reagan packages that a decade later was extended by Democratic President Barack Obama for another two years. W. Bush also signed an economic growth package in 2003 that reduced several tax rates.

The nation went from a budget surplus when W. Bush took office in 2001 to a deficit of more than $400 billion by the end of his first term in early 2005 as, among other things, he began financing two wars.

Krugman has noted that Obama canceled the W. Bush tax cut in 2013 and the unemployment rate is below 5 percent, lower than it ever was under Reagan.