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Trussonomics: Credible and Sane


By Ralph Benko and Jonathan Decker

The London Times, recently published an article intemperately headlined “Incredible or insane? Reagan’s economists give their verdict on Trussonomics” by cub reporter Laith Al-Khalaf fraught with unforced errors.

It analyzes the views of two vintage Reagan era figures on the Truss/Kwarteng supply-side economic package of tax rate cuts and deregulation and on the underlying economic philosophy. The only thing that Prime Minister Truss and Chancellor Kwarteng can safely take away from this story is Laffer’s observation, as reported:

“‘If these policies are allowed to stick, you’re gonna see a very new era of incredible growth, incredible prosperity and great finances. Good medicine cures sick people, not healthy people. I would argue that Britain today has not been healthy for the last several years. And this is a perfect time to come in and to create a set of policies that will create prosperity.’”

Laffer awards highest marks to “Trussonomics.” Unsurprising, as Laffer has long been recognized a leading architect of supply-side economics from the time of the “The Mundell-Laffer Hypothesis” in 1975 to now.

Equally unsurprising? David Stockman’s criticism. Stockman is the supply-side’s own Benedict Arnold.  (We understand that the London readership may consider “Benedict Arnold” a compliment.  We do not intend it as such.)

The article offers a false equivalency between Laffer and Stockman, affording wildly exaggerated prestige to Stockman relative to Laffer. Where to begin?

At the beginning, of course.

The article’s sub headline (presumably the province of the editor, rather than the writer, but still….) begins by getting its facts wrong, twice in one sub head, by calling David Stockman one of “the architects of the president’s 1980’s tax cuts.”  

Stockman wasn’t an architect. He was a policy arsonist.

Moreover, the Reagan tax legislation, especially that of his second term, was not “tax cuts.” It was rate cuts.

Stockman, head of the White House Office of Management and Budget, was fanatic for, and unequivocally the architect of, aggressive federal spending cuts, not tax cuts. Stockman was a key opponent, not an architect, of Reagan’s tax “cut.” 

Second, these were not, per se, tax “cuts.” They, drawn from JFK’s blueprints, were designed to increase, not cut, federal tax revenue by growing the tax base by reducing economically stiflingly high rates

And once they took full effect, they certainly did. Read: More tax dollars flowing to the federal government, not less. 

“OG” supply-siders never proposed “tax cuts.” The Kemp-Roth and Kemp-Kasten legislation were explicitly designed to be tax rate cuts, a distinction with a real difference.

The profound implications were duly noted by Morton Kondracke and Fred Barnes in their biography of Jack Kemp. Reagan’s second big tax package, the Tax Reform Act of 1986 (dropping the top rate from 50% to 28%) was explicitly designed to be short-term revenue neutral.

The big revenue shortfall experienced after Reagan’s first big tax package almost certainly came from Reagan’s White House aides opting to delay, dilute and phase-in the initial round of rate reductions. As Laffer warned Reagan at the time, this was akin to a merchant telling customers that things would be going “on sale” in the future, motivating buyers to postpone their shopping spree (or, when applied to high income earners, postpone realization until the rate cuts were fully phased in, starving the economy in the interim).

Full disclosure, of the baker’s dozen members of Jack Kemp’s supply-side “Cabal,” Ralph Benko, the lead co-author here. was the youngest, latest to join, and, in his own assessment, least consequential. Laffer was among the earliest and most consequential.

Few of the supply-side’s Original Gangsters remain engaged. Kemp, Mundell, Wanniski, Novak, Kristol, Bartley, Ture, Brookes and Bell have gone on to the Great Beyond.

Missing from the duty list?  Supply-side foe, David Stockman, ferocious champion of cutting federal spending. Economic growth? Not so much.

As Kondracke and Barnes described Stockman in The Kemp Era,

“David Stockman—then a supply-side House ally of Kemp’s but later Reagan’s anti-supply-side budget director” … “had convinced Kemp and others that he was a committed supply-sider, but he swiftly turned into one of the leaders of the deficit-hawk, tax-raising, and budget-balancing conventional Republican forces. Supply-siders, including some Kemp allies who got jobs in the Treasury Department, considered Stockman a turncoat and a traitor.”

The affable Kemp was more charitable than that to Stockman. That said, Kondracke and Barnes report that Stockman was a key part of the White House faction that delayed and diluted the Kemp-Roth tax rate cut:

“[Resisting, deferring and diluting the tax rate cut] were Reagan’s top White House staff: the chief of staff, James Baker; his deputy, Richard Darman; the communications director, David Gergen; and the supposed supply-sider Stockman.

“To the horror of the supply-siders, the confusion led to the watering down of Kemp-Roth. By the time Reagan’s cuts were enacted, Kemp’s (and Reagan’s) original 30 percent cut was only 23 percent and its effective date was postponed until October 1981. By then, the economy was plunging into recession.”

In 1981, early in the Reagan administration, Stockman publicly disgraced himself by giving a long, conniving, interview to the Reagan-hostile William Greider of The Atlantic.

Greider wrote a shocking, media-dominating, piece titled “The Education of David Stockman.” Therein Stockman attempted to discredit the supply-side tax plan on which Reagan had campaigned:

“But, I mean, Kemp-Roth was always a Trojan horse to bring down the top rate.”

“A Trojan horse? This seemed a cynical concession for Stockman to make in private conversation while the Reagan Administration was still selling the supply-side doctrine to Congress. Yet he was conceding what the liberal Keynesian critics had argued from the outset—the supply-side theory was not a new economic theory at all but only new language and argument to conceal a hoary old Republican doctrine: give the tax cuts to the top brackets, the wealthiest individuals and largest enterprises, and let the good effects ‘trickle down’ through the economy to reach everyone else. Yes, Stockman conceded, when one stripped away the new rhetoric emphasizing across-the-board cuts, the supply-side theory was really new clothes for the unpopular doctrine of the old Republican orthodoxy. ‘It’s kind of hard to sell ‘trickle down,’ he explained, ‘so the supply-side formula was the only way to get a tax policy that was really ‘trickle down.’ Supply-side is ‘trickle-down’ theory.”

Nonsense! Kemp-Roth, modeled after President John F. Kennedy’s own tax rate cut plan, offered a 30% across-the-board rate cut, benefiting all taxpayers equitably. Inflation had thrust most of us into punitively high brackets. Kemp-Roth was designed to fix that and to restore sparkle to the economy by reversing the Republican orthodoxy of high tax rates and a soggy dollar.

Moreover it was the Democrats, led by Ways and Means chairman Rep. Dan Rostenkowski and House Speaker Tip O’Neill, not Kemp or Reagan, who propelled the dropping of the top rate immediately from 70% to 50%.

In Reagan’s second term, again it was Democrats, Sen. Bill Bradley and Rep. Dick Gephardt, who led the successful crusade to drop the top rate from 50% to 28% (a proposition that carried in robust bipartisan fashion).

It was President Clinton, another Democrat, who dropped the top capital gains rate from 28% to 20%.

Stockman’s purported “Trojan horse” was as much occupied by members of the Trojan army as by the Greeks! 

Of the OG supply-side Cabal Laffer, having deservedly received the Presidential Medal of Freedom from President Trump, and Benko, later the co-author of The Capitalist Manifesto and chairman of the 190,000 follower Capitalist League, are among the few remaining engaged and only, per Melville, alone are escaped to tell thee.

Continuing the London Times’s subtle miscues, it states that “Laffer is not the only ageing economist to lay claim to being the ‘father of Reaganomics.’” 

Not to let facts get in the way of a good story, but … Laffer, who has earned plenty of accolades, has never claimed to be father of Reaganomics.  Laffer has always graciously shared credit, especially with his acknowledged  mentor, the late Nobel-prize winning Robert Mundell. 

Upon Mundell’s death, per The Washington Examiner, “Laffer, who described Mundell as his best friend, said he was grateful to get to work with him for the decades they knew each other. He was the single best economist in the last century, if not longer,” Laffer said. “I was very lucky to be his tag-along throughout his career. He was my mentor and dear, dear friend.’”

Afford credit to Mundell, Laffer, Kemp, or Gilder, as Laffer did in calling Wealth and Poverty “the bible of Reaganomics,” for their role in generating  Reaganomics? Or Steve Forbes, who predicated two presidential campaigns on two supply-side-inflected doctrines, the gold standard and the flat tax? Absolutely.

But …David Stockman? Insert eye-roll emoji here!

Reading on we encounter what in politics is known as a “gaffe.” That’s a polite word for an impolitic truth. David Stockman states: “I don’t know what Art Laffer is talking about.”

No kidding. He didn’t back in the ‘80’s, either.

The article then wanders from accuracy by calling Stockman “Harvard-trained.” True … in a strictly literal sense. Misleading in a journalistic sense, like calling a zephyr a “wind.”

The London Times offers a false equivalency in implying a qualitative equivalence between Stockman’s academic credentials and Laffer’s BA in economics from Yale and MBA and PhD from Stanford

Laffer’s record as an academic prodigy at Yale and Stanford is well documented. Stockman got his undergraduate degree from Michigan State, then spent some time enrolled at Harvard Divinity School, from which he apparently did not graduate.

Per Greider:

“After graduation, he enrolled at Harvard Divinity School, thinking he might become a great moral philosopher in the tradition of Christian social activists. (He was perhaps also thinking like so many other students of the time, that divinity school would extend his deferment from the draft.) At Michigan State, he had dropped the study of agriculture and moved into the humanities. At Harvard, he dropped theology and moved into the social sciences (though he never received training as an economist).”

The internet is replete with references to Stockman’s “graduate degree” from Harvard Divinity School. That said, the Washington Post reported, in 1981, that when Congressman John Anderson offered him a job, “the dream of a divinity degree died forever.”

The miscues continue in reporting Stockman’s characterization of  “trickle down” as a fairy tale. The only fairy tale being told here is the sly implication that supply-siders ever believed in “trickle down.”

Nothing could be further from the truth.

“Trickle down” economics was never supply-side doctrine. It was, and had always been, a rhetorical attack phrase implying something between condescension and callousness on the part of plutocrats.

Trickle down was coined by Will Rogers to use against Herbert Hoover, the supply-siders’ own chief poster child for economic incompetence. The epithet was then appropriated by later Democrats to ridicule, ironically,  supply-siders.  

For Stockman to attribute to Kemp and his fellow supply-siders any fealty to “trickle down” is factually incorrect. Kemp frequently presented himself as a “bleeding heart conservative.”

That said, the supply-siders never believed that tax rate cuts would turn us all into benevolent nuns.  We were pragmatists, not romantics.

The core of the Mundell-Laffer Hypothesis was restoring monetary stability, preferably through restoring the gold standard.  In the event, restoring monetary stability was delegated to Fed Chairman Paul Volcker, who used monetary tightening to slay the inflation dragon. Moving on to tax policy, the supply-siders’ goal was to end nosebleed income tax rates that inhibited people’s productivity.

This would launch a generation of greater equitable prosperity from tax, regulatory and monetary policies encouraging honest pay for honest work, smart investment, and enhancing our human capital through things like education. By thus growing the tax base, it would also provide ample funding for government services.

However, the conservative Establishment, personified by George H.W. Bush, joined in mocking the Kemp-Reagan agenda as “voodoo economics.”  Amazing that Stockman did not exploit that epithet as well. 

Voodoo being a form of magic, he comes close! The London Times gives us Stockman in full floccinaucinihilipilification:

“They want to have magic, which is tax cuts that cause so much growth that you don’t have to cut anything—that was the evil promulgated by Art Laffer,” he says.  “I’m surprised after 40 years that there is a conservative faction in the western world that still believed that complete nonsense.”

Which, of course, is an utter distortion of supply-side, both in theory and practice.  On the social and anecdotal side, soon upon Ralph Benko’s arrival in Washington, in July 1985, he discovered that the various schools of free market advocates never socialized. They spent more time sniping at one another than attacking the dreadful Neo Keynesians running the asylum. 

Benko then convened the dozen DC-based supply-side figures he could locate (in something called a “phone book”) for a social hour at the Apple and Eve in L’Enfant Plaza.

Thus began a monthly social gathering he initially called “the gathering of the supply-side tribes” and eventually renamed the Prosperity Caucus. Intramural civility among free market champions restored, mostly!

Forty years later, this group continues to meet (now with virtual beer and pizza) monthly, at risk of eclipse by Jon Deckers’s monthly gathering of the Capitalist Youth League. 

Kemp, Laffer, Wanniski were all celebrated, in person, by the gathered supply side tribes. Mundell, who would have been welcomed, was shy and elusive.

David Stockman? Not.

On the doctrinal and operational side, as the highly-esteemed economic policy thought leader Dan Mitchell has pointed out, “Reagan was the runaway champion [of reduction of  domestic spending (entitlements plus discretionary) as a share of economic output] but it’s worth noting that the burden of domestic spending also declined during the Clinton years.”

Clinton, following Reagan’s basic formula (and cutting the capital gains rate further while regrettably bumping up the top earned income rate somewhat) created a massive federal budget surplus by holding spending increases to a modest 3% per year. 

Not cutting! 

Stockman, by attacking Truss and Kwarteng for pushing a healthy policy mix which empirically succeeded in fostering equitable prosperity in America and the world, as well as shrinking the size of government relative to the national economy, is, to quote Wolfgang Pauli, “not even wrong.”

But wait!  There’s more!

Laffer, together with two colleagues, both Ph.D.’s, recently published an important book titled Taxes Have Consequences: An Income Tax History of the United States, the first “definitive history of the effect of the income tax on the economy.”

Of it, Ralph Benko recently wrote in his review at Newsmax,

“It makes the definitive case against confiscatory tax rates as counterproductive to equitable prosperity and damaging to government tax revenues. … Much of the political class (the recipient of tax money) remains complicit in the lie. Laffer Curve denialism flies in the face of history and, driving capital out of its most productive uses, impoverishes all.”

One wishes that the London Times would have done some research and at least referred to the documented facts carefully presented by Laffer, Domitrovic and Cairns Sinquefield, rather than reciting unsubstantiated claims made by the supply-side’s most notorious turncoat who was “taken to the woodshed” by President Reagan.

Rather, the London Times lets Stockman rave against Truss:

“’The reaction to the mini-budget was swift, violent and unequivocal,’ says Stockman. ‘It doesn’t take a genius to figure out why the market reacted; there was no mystery. The problem with the Truss budget is not just the tax cuts. In fact, [cutting tax] is a good thing if you paid for it, which they didn’t.’ His solution would be to slash the NHS budget, dismantle the welfare state and, unpalatable to many, abandon the sanctions on Russia so there would be no need for the energy package.”

One also can but ponder with incredulity Stockman’s prescription of cutting back on health care, cutting back on welfare, and cutting back on sanctions imposed on Russia. This is the kind of thinking that Wanniski condemned as “root canal economics.”

Truss and Kwarteng wisely steered clear, and are steering clear, of such penurious policies. Meanwhile, the new British PM and her Chancellor of the Exchequer are experiencing and responding to resistance in their Tory base.

What they confront is very like what Reagan and the original supply-siders faced from a GOP then, in the words of Newt Gingrich, was “worshipping at the altar of a balanced budget.”  Truss and Kwarteng are handling their headwinds well. Much depends on their success.

Most of the Establishment news media is, of course, in league with the Establishment, and is amplifying wild claims meant to discredit the Truss/Kwarteng agenda. That said, as our very own treasonous colonial John Adams once wrote, “Facts are stubborn things.”

The supply-side formula of lower marginal tax rates on a robust base, a steady currency that serves as good money and moderate regulation drove the Dow, which stood at 814 on the day in November 1979 on which Reagan declared for the presidency to its current commanding heights. 

Is the market currently in bear territory?  You bet. That said, that “bear territory” is almost 10X, give or take, higher than the pre-supply-side baseline of 814, inflation adjusted, equivalent to 3352.

Americans are now almost twice as wealthy than we were in 1979, real per capita GDP rising from $30,000 to nearly $60,000. U.S. GDP for 1979, per the St. Louis Fed, was then about $2.7T. It’s now, not inflation or population adjusted but you get the drift, at $24T.

Other nations followed Reagan’s lead in cutting tax rates. Everyone benefited from the stabilization of the dollar, the world’s reserve currency.

World nominal GDP soared, also not adjusted for inflation or demographics but you get the picture, from $11T then to $96T today. Voodoo economics rescued over a billion souls from abject poverty.

Facts are stubborn things.

So, to the London Times’s question, Trussonomics, Incredible or insane?, we answer. No milords. Credible. And if crazy, crazy like a fox.

Reagan followed the prescriptions of Mundell and Laffer channeled by Kemp and others. Despite the opposition of such formidable figures as David Stockman, Reagan thereby rescued America, and then the world, from staggering stagflation.

It was a good run while it lasted. Now stagflation returns.

We champion PM Truss and Chancellor Kwarteng for prescribing effective policies comparable to build the UK back better, to make Britain great again and to lead the world to new heights of equitable prosperity.

And to quote an inscription by Arthur Laffer in a review copy of Taxes Have Consequences, If Reagan and Kennedy could do it so can we.”


Ralph Benko is co-founder and chairman of The Capitalist League and internationally award-winning writer. Jon Decker is a supply-side community organizer and executive director of the Committee to Unleash Prosperity.