STRAYER: Remember the woodshed when cutting taxes

Published 8:00 am Thursday, December 28, 2017

I learned all I know about tax reform and tax simplification, supply side economics, trickle down economics and free market reform from a handful of people beginning in the 1970s and ‘80s, right on through the rest of my working life in Washington.

First, there was former U.S. Rep. David Stockman, my first “boss.”  During his first term in Congress in 1977, when I began working for David in his Congressional office, he befriended a young arrogant Stanford University professor named Arthur Laffer.

A few years earlier, in 1974, Laffer came up with the Laffer Curve, a hypothesis that foretold that deep tax cuts for individuals and corporations would spur the economy enough to pay for the lost tax dollars through an increase in productivity that would generate enough new tax  revenue.

While David Stockman and Art Laffer were perfecting the Laffer Curve’s impact on supply side economics, the two of them drew many other young, brilliant freshman congressmen including Al Gore, Phil Gramm, Newt Gingrich, Dan Quayle, and Jack Kemp into their inner policy circle. This bipartisan group met in Stockman’s office, so I got to see first hand how all this tax cut business would lead to more prosperity while solving the deficit problem.

David Stockman went on to the White House when Ronald Reagan became president, and served as the director of the Office of Management and Budget.

I returned to Michigan and became the press secretary for the Michigan House of Representatives. However, I stayed in touch with Stockman, and watched Reagan’s economic policies take shape.

Just a year after Stockman became OMB director, he told a reporter that supply side economics was merely the old “trickle down” theory of the redistribution of wealth. Trickle down economics is when you cut the taxes of corporate America, hoping that their tax savings will be reinvested to help the national economy and working-class Americans.

The comment from Stockman led to his fateful trip “to the woodshed,” when President Reagan chewed him out and reduced his role for the rest of his administration.

It wasn’t until 1993 when Bill Clinton became president that the federal government actually ran up a surplus of federal revenue, thanks to the supply side economics of the previous administrations. That money was quickly spent, and the supply side experiment ended because Congress couldn’t rein in government spending.

It ended until Wednesday, Dec. 20, 2017, when the U.S. Congress enacted its long-awaited Tax Cut and Jobs Bill. The new law has a $1.5 trillion price tag and a proposed $2 trillion long-term debt.

The new law will increase working people’s take-home pay, double the individual tax deduction, increase the Child Tax Credit, and lower five of the seven different tax brackets, among other things.

Now that Congress has enacted the tax cut package they have worked on for nearly four decades, the senators and congressmen will need to begin cutting the budget to keep the economy strong.

Or, they can wait to see if the principles of the Laffer Curve and supply side economics can weather the budget cutting debate that will begin in 2018.

They may need a torrent, not a trickle.

A native of Niles, Jack Strayer moved back home in 2009 after living and working in Washington since 1976.