StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



George H. W. Bush and "Voodoo Economics"

21 Dec 2010
Posted by Bruce Bartlett

Sam Houston State University historian, writing on the Forbes web site, has a very odd blog post this morning. He criticizes MIT economist Simon Johnson for attributing the term "voodoo economics" to George H.W. Bush. Domitrovic calls it a "myth" that the elder Bush ever uttered those words. "You'd think there'd be a scrap of evidence dating from 1980 in support of this claim. In fact there is none," he says.

Perhaps down in Texas they don't have access to the Los Angeles Times. If one goes to the April 14, 1980 issue and turns to page 20, one will find an articled by Times staff reporter Robert Shogan, entitled, "Bush Ends His Waiting Game, Attacks Reagan." Following is the 4th paragraph from that news report:

"He [Bush] signaled the shift [in strategy] in a speech here [in Pittsburgh] last week when he charged that Reagan had made 'a list of phony promises' on defense, energy and economic policy. And he labeled Reagan's tax cut proposal 'voodoo economic policy' and 'economic madness.'"

I've attached a PDF file of the Times article to this post for the benefit of the skeptical.

Let me just emphasize that the words "voodoo economic policy" are Bush's words. The source is a reputable one that is easily available even at second-tier universities, so I think this counts as pretty strong evidence to anyone with a reasonably open mind. I think even someone with a Ph.D. in history from Harvard might concede that it is at least a scrap of evidence.

I suppose that is one wanted to be pedantic, one could continue to argue that Bush never said the precise words "voodoo economics," that somehow or other "voodoo economic policy" is something completely different. I will allow others to debate the point.

Or watch him

Or you could just watch Bush, Sr say those words. Around 1:29

http://www.youtube.com/watch?v=DYNWztgHQtI


Bruce, you must not have read the whole thing...

From the sixth paragraph of that blog post:

Bush used the term “voodoo economics” in 1980 as an epithet against the Reagan economic plan, to be sure. But the further step of calling supply-side economics voodoo economics never happened. This is because in 1980, Bush was fully on board with so-called “supply-side” tax changes aimed at getting business to produce more, such things as accelerated depreciation and investment tax credits (along the lines of what President Obama approved of in a part of his own law last week).

But keep going, you're one of the few people in the world making sense these days.


We're in the era of fact-free

We're in the era of fact-free arguments. News media, politicians, historians. It's one of the main reasons we are where we are these days.


Not exactly

It appears that he isn't saying that Bush never said the words, he is saying that Bush never called supply-side voodoo economics.

Unless that story has been reedited.


I think you've misquoted Bush somewhat

“One of the sturdiest myths about supply-side economics is that George H.W. Bush called it ‘voodoo economics’ on the campaign trail in 1980. You’d think there’d be a scrap of evidence dating from 1980 in support of this claim. In fact there is none.”

While I can see how you could view this as Domitrovic claiming that Bush never uttered those words, to stand on that point demonstrates that the rest of the posting went unread, as other posters here have pointed out.

We don't do ourselves any favors by letting outrage over a single passage in a longer piece prevent us from reading the rest of it, and making sure that we understand the context of what we are reading. What Domitrovic is pointing out is that just because a particular reading of an event has become dogma among a certain group of people doesn't mean that it's true - and in this, you have demonstrated yourself to be in the group of people he is criticizing: opponents of supply-side economics are dogmatic to the point of not carefully looking at the facts.

Just because candidate Reagan termed himself a supply-sider doesn't make it so. Therefore, the charge that Reaganomics was labeled “Voodoo Economics” by Bush doesn't mean that he was referring to supply-side economics in general.


A Very Odd Blog Post Indeed

Sorry, but this is a shameless misinterpretation of what the historian actually said as demonstrated by the quote set forth in the second comment, above. The blogger definitely did acknowledge those words were uttered---he simply took issue with the assertion by Johnson that the words were specifically targetted to what is called "supply side economics".

Mr. Bartlett, it is your post that is bizarre. Either you did not read the original article, or you are intentionally distorting what was written. I suspect it is the latter, which frankly doesn't speak very well of your integrity here. It's time for a correction, or better yet, a retraction.


who cares ?

"supply side economics" is the most successful con job to ever hit this country.

Just look at any economic indicator and what do you see ? you see a turn for the
worse in the early eighties. What did the great communicator tell us ? he told us
that it was time to reawaken the industrial giant and proceeded to start nailing
the coffin of our manufacturing sector while the credulous public clapped.


We'll Never Know

We'll never know if supply-side would have worked better for Americans had the productive capacity of the Russian and Chinese populations remained bottled up behind the Iron Curtain. But the evidence is clear that freeing both capital and labor from previously arbitrary national boundaries created enormous wealth for the financiers of wage arbitrage. Today we call it "globalism" as if it some sort of ideology or belief system. It is not. It is simply the logical result of very specific and intentional changes in the regulation of western capital, tariffs and foreign policy by those who understood the tremendous profits to be "earned" from such changes.


Please reread the article and revise your post

Bruce - I don't usually post just to repeat what others have said, but this is a really egregious distortion of the article that you site and, if left unrevised, severely damages your reputation. Brian Domitrovic's article clearly states that "Bush used the term 'voodoo economics'..." His argument is that Bush never called "supply-side economics voodoo economics...Bush was fully on board with so-called 'supply-side' tax changes..."

If you disagree and believe that Bush's use of "voodoo economics" was directed towards supply-side principles, I would be interested in reading that discussion, but the article you cite does not advance that sort of argument at all.


Capital Gains and Games is an

Capital Gains and Games is an excellent blog, representing as it does the views of rational reality-based political economists who consider themselves "conservative". However, the thing that continues to amaze me about CGG is that the authors themselves seem to invariably be shocked that those politicians and commentators who currently call themselves "conservative" are utterly morally and pragmatically bankrupt, and represent nothing more than the greedy desires of the wealthiest vanishingly small fraction of Americans. Bruce, Stan, et al, you really need to accept the fact that what you call "conservative" has nothing whatsoever to do with the on-the-ground reality of American right-wing "conservative" politics and economics today.


The article is still

The article is still incorrect. The historian says:

"Voodoo” referred exclusively to Bush’s dubiousness about Reagan’s claim that his plan would combat inflation."

According to the PDF file (mid 2nd full paragraph on the far right column), Bush criticizes Reagan's claim that he can "cut 210 billion in taxes and still balance the budget."

Bush called Reaganomics voodoo because Reagan claimed that tax cuts increase tax revenue. It wasn't exclusively due to a claim about combating inflation via a tax cut.

The Forbes article also fails to mention Volcker's interest rate hike and what effect it had on inflation. He seems to give all the credit to Reagan's tax cut which is absurd.


Bush's point was arcane

Hi all -- Brian Domitrovic here, author of the Forbes post. The budget deficit politics of 1980 were weird, much different from today's. The chief contentions were over how deficits mattered -- and if they mattered at all. Reagan said that he wasn't going to have a budget deficit, but if he did, inflation would still vanish. Bush said that Reagan was going to have a deficit, and when he did, inflation would hit 30%. It was this specific disagreement that led Bush, in April 1980, to ride to victory in Pennsylvania characterizing the RR plan (but certainly not "supply-side economics") as "voodoo."

It was a savvy move, in the short term, because at that point the public was particularly exercised about the inflation rate -- 1979's whopping 11% was going to be succeeded by 19% in 1980 if the Jan-March trend held. But the study Bush used here was campaign-issue grade. A 30% inflation would lead to something like a 50% increase in federal receipts (on account of the un-indexed nature of the tax code), eliminating any prospect of a budget deficit. Therefore, if deficits caused inflation, the inflation would in turn cancel the deficit and thus any further inflation. So Bush went out on a limb and implied that the Kemp-Roth cut inherently would cause inflation, irrespective of its budget-deficit effects.

This arcane debate (such as it was) was the essence of the "voodoo" charge. That "voodoo economics" has become a general stand-in for "supply-side economics" is to have fun with the historical record.

Now if Bruce does not want us to gum up his board, we can go over these issues at my site on Forbes too.


Still supply economics can rightly be called woodoo

I think Brian Domitrovic post is just a smoke screen.

This excessive digging into who said what and did really Bush mean the supply side economy is junk it is should not distract us from the fact that supply side economic in reality *is* voodoo economics. Like voodoo healers supporters of supply side economics actually made the patient much worse.

Similar to Lysenkoism it was created with explicit goal of supporting particular ideology. Academic supporter of supply side economics actually are pretty close to Trofim Lysenko supporters in all dimensions except one: they are much, much better paid.


Exegesis and Economics

It amazes me how the comments here relate to my personal specialty, Early New Testament and apologists. You see, what they do is come to a subject from a preordained path, and then argue and find fault with others interpretations, and here is the kicker, no matter what the text plainly says. Thus you'll get all sorts of ridiculous explanations as to why Jesus really didn't just quote the Greek version of the Jewish Bible to Pharasitic Hebrew-speaking Jerusalemites, when the text, you know, plainly says he did because that translation isn't allowed in the original Hebrew.

And so here. Now as someone who reads the text with no ideological slant, as a historian (honest) would, it plainly calls Regan's policies "vodoo economics". That is the plain intent (and as someone who lived through it, it was meant to distance Bush from the economic sideshow going on at the time to improve his electability) no matter how you twist and turn a phrase or parse the text so it suits your needs.

Faith-based economics indeed! It seems the same sleight-of-hand is at word here as when apologists analyze text. This will make economics, one day, no better and certainly not allow it to be labeled "science" any longer.


Ah, Memories! I worked at EPI

Ah, Memories! I worked at EPI back during Bush I and wrote a paper on the cuts in the capital gain tax that were on the table then. The paper was forgettable, but it was my favorite title ever: "Deja Voodoo Economics."


Sorry, wingers, Bruce and Simon are right, and you are wrong

Apparently you have infuriated some of your old pals. Too bad they are only proving how desperate they are to defend their latest misinformation campaign.

I see that the quote from the paper is this :"He [Bush] signaled the shift [in strategy] in a speech here [in Pittsburgh] last week when he charged that Reagan had made 'a list of phony promises' on defense, energy and economic policy. And he labeled Reagan's tax cut proposal 'voodoo economic policy' and 'economic madness.'"

Reagan's tax cut proposal is voodoo economics. In other almost identical words: Reagan's supply-side tax argument is voodoo economics. or even better yet: for all you dimwits who still refuse the truth:

REAGAN'S SUPPLY-SIDE ECONOMICS IS VOODOO ECONOMICS!!!

So simple, a kindergardener would see it.

You right-wingers are looking dumber by the day.


Faith based economics

Econiminium has got it exactly right, as Domitrovic evidently was too young to remember the situation, and must parse old texts to divine their meaning.

As an economist at the time, voodoo economics referred to the Reagan and Laffer fairy tales of how tax cuts would lead to an explosion of effort that would bring in more than enough revenue to pay for the cuts, and as well be non-inflationary in a very inflationary environment. Domitrovic really ought to do some oral history rather than just try to divine the news record.

The phrase is of course not a technical economics term, and therefore cannot to said to include one idea and conveniently exclude the others that were clearly part of the discussions of the day.

For me this marks the beginning of the continuing Republican now long record of faith based economics and continued and calculated mendacity.


"Therefore, if deficits

"Therefore, if deficits caused inflation, the inflation would in turn cancel the deficit and thus any further inflation. So Bush went out on a limb and implied that the Kemp-Roth cut inherently would cause inflation, irrespective of its budget-deficit effects."

Inflating away the deficit will cure inflation? Where did that idea come from? I have never heard of that theory before.

I don't recall deficits being of major concern until Reagan's huge deficits caused the federal debt to top a trillion, then it was non-stop deficit stories. However, in 79, inflation, oil, excessive taxation were the economic issues. Working class people were in the top tax bracket due to bracket creep. It seemed like Proposition 13 in 1978 starting a nationwide tax revolt. Concern about the deficit though wasn't the problem (as I recall, I could be wrong), it was high taxes. Debt as a percentage of GDP went from 36% to 33% under Carter.


Using Inflation to Reduce the Deficit

The answer to your question actually appears in the text of your message. Back in 1980 when the debate between Bush and Reagan was occurring, tax rates, deductions, etc were not indexed for inflation. If you watch the debate between Bush and Reagan that occurred shortly after the Pennsylvania primary the positions of the two candidates become more clear. Remember that Bush and Reagan were competing for their own party's nomination. Their basic ideologies were not that far apart and Bush needed something to stir things up and differentiate himself from Reagan. Bush actually advocated $20 billion in what he termed "supply side tax cuts". Reagan, on the other hand, advocated $70 billion (these seem like small sums today). The difference between the two was that Bush advocated higher tax cuts only after the budget would have been balanced. Reagan wanted larger cuts right away. Bush's fears, at least as articulated to the public, always included the risk of inflation, as the historian Domitrovic notes in his article, and in his post here.

Reagan would occasionally get carried away and argue basically that the cuts would pay for themselves, but he usually hedged this by adding that his proposed "cuts" were not really cuts at all. He argued that because the tax code was not indexed for inflation, taxpayers would face huge tax increases if nothing were done about it. In fact, the tax cuts he advocated didn't make up for these built-in decreases, so his argument was that these were really not tax cuts at all---they were merely slowing down the rate of increases. One can quibble over baselines and such but his basic point about built-in tax increases due to inflation was valid, particularly at the rates of inflation that then prevailed.

Of course, in the heat of a primary campaign, candidates are prone to exageration. Reagan often omitted the necessary adjective in the phrase "tax cuts pay for themselves" or its equivalent. He would have been accurate saying "tax cuts will partially pay for themselves", leaving it to economists to debate the degree they would do so. He made the same mistake that you make here---you state working people were subject to the top tax bracket due to bracket creep. That is exageration. It is true that bracket creep did increase tax revenues and, if left unchecked, probably would have decreased the deficit and perhaps even eliminated it.

As to the original point regarding what Bush said and what Domitrovic wrote, it is quite clear that when Bush referred to "voodoo economics" he was referring to the overall Reagan economic policy (as interpreted by Bush). It is equally clear, contrary to what Bartlett alleges, Domitrovic never denied those words were uttered. My objection to this distortion by Bartlett has nothing to do with party affiliation (I am not a Republican), nor has it anything to do with my belief in supply side economics (tax cuts do NOT fully pay for themselves). My objection was to the clear distortion of what another person wrote. That is both rude and intellectually dishonest, despite the attempt by a few here to obfuscate this very simple point by trying to turn the discussion in an entirely different direction as a debate on the merits of so-called supply-side economics.


Still can't read what is written, hey, desperate winger?

Poor Vivian, such an effort, and all for naught. All because you can't read.

You wrote: "it is quite clear that when Bush referred to "voodoo economics" he was referring to the overall Reagan economic policy"

But the article clearly states: "And he labeled Reagan's tax cut proposal 'voodoo economic policy' and 'economic madness.'"

In other words, supply-side economics is voodoo economics.

You really look like the pathetic idiot you are, especially as you came here to attack Bruce as being intellectually dishonest. You should really look in the mirror, you fool.


Reading Comprehension

I think I detect a bit of hatred here (good thing I'm not a Republican) But, in an effort to keep the discussion substantive, I'm going to keep this simple and to the point for the "Republicans are Idiots" poster:

1. The original post by Bartlett, in response to the Forbes article, alleged that the author wrote Bush "never uttered those words" (i.e. "voodo economics"). Perhaps our resident genius could go back and read this sentence of Bartlett's and then go back and read the Forbes article. It would take only third grade reading skills to conclude that the Bartlett allegation was not true, as several other commenters here have pointed out.

2. Second, as to the Washington Post article cited by Bartlett and repeated here by "Republicans are Idiots", a fair reading of that article is that it suggests, but certainly does not state directly, that the "voodoo economics" quote referred to "supply side economics". The portion of the WaPo article that contains a direct quote of Bush does not make this link. The only link is made by the WaPo reporter. Now, if the above poster had really read his material carefully, he would also have noted this comment by the author of the Forbes article:

"The remaining question is, how did “voodoo economics” become conflated, as goodness knows it has, with “supply-side economics.” The fault was journalism’s, I’m sure. My research suggests that it was the WaPo reporter following the Bush campaign who started to make the conflation after the Penna. primary. And we’re still dealing with it today".

Thus, the very source that Bartlett and the above commenter are relying on is the one that, according to the historian, started the whole misconception in the first place. One of the things historians do, is go back and look at primary references and not merely secondary reports. The primary source would of course be Bush's own words and his own speeches rather than the interpretation of an interpretation which is what Bartlett and this commenter are offering. I've looked at the video remarks containing the "voodoo" remark and also subsequent Bush comments made after that (primarily the debate with Reagan immediately following). The direct record clearly suggests, as the historian claims, that the reference was to Reagan's overall policy, and not to supply side economics, per se. As I indicated above, Bush himself advocated a "supply side tax cut", albeit smaller than that proposed by Reagan. Given this, it is hard to understand how the "voodoo remark" could be read as referring directly to "supply side" economics. Unless, of course, one is an "idiot".


Well, some commentators here

Well, some commentators here have said that Bruce is wrong, because the author admits that Bush used the words Voodoo economics, but claims that Bush was being very careful and not referring to supply side economics:

"One of the sturdiest myths about supply-side economics is that George H.W. Bush called it ‘voodoo economics’ on the campaign trail. You’d think there’d be a scrap of evidence dating from 1980 in support of this claim. In fact there is none".

The thesis is implausible. As Bruce points out, the scintillas of evidence, some of Brian admits to, are overwhelmingly against this thesis being true.

Domitrovic enters into Bush's mind, and claims Bush meant something else entirely from what nearly everyone thought he meant at the time, which was that supply side was voodoo.

So Bruce is being a little wrong, in that he is talking past Domitrovic's bizarre claim. But Domitrovic is just being outright silly, trying to invent distinction where none exist, with no real evidence but his interpretations of Bushisms.

Bruce Bartlett should just have a post tag, borrowing the famous phrase: "Not Even Wrong"

Because that describes Domitrovic's argument: it's stupid and self-contradictory. A case study in right-wing revisionary economics


You really are a fraud

For a non-republican, you sure must feel it is important to research ALL the old Bush videos, and interviews, and conclude the way that you did. Pardon me, but I think you have embellished that and are actually just full of crap.

Funny, I just don't believe that you have done any of that, Vivian, or shall I guess, Domitrovic. In fact, you are so overwhelmed by the response against this mis-interpretation, that you will spend endless hours trying to spin the facts that overwhelm your argument in your favor.

You are disingenuous at best, and a complete and utter lying fraud at worst.

In fact, "Vivian", it looks like you are the most vociferous defender of your hero 'historian' Domitrovic.

Coincidence? I do doubt that.

But if you are really not a republican, than you I will add you to the list of idiots.


Voodoo

The mention of Sam Huston University reminded me that it was originally going to be Sam Huston Institute of Technology.


david stockman

i guess everyone must have forgotten about David Stockmand and how he pissed people off by calling Voodoo Economics just what it was, Voodoo Economics.

somethings never change.


It is amazing that so many

It is amazing that so many highly respected economists, many of them sporting the Nobel Prize, continue to rail against supply-side economics and Reagan-led reductions in the top marginal tax rate. These uber-quant, polymaths refuse to look at the data, available in handy form by the Urban Institute/Brookings Institution in the Historical Federal Receipt and Outlay Summary. The ratio of tax revenues to GDP clearly shows over many decades that the decreases in the top marginal rate did not cause the ratio to decline, even when the top rate hit its low of 28%. Deficits can be attributed to a lack of discipline on the spending side even as tax revenues have continued to flow at the rate of GDP growth.


Brian Domitrovic says that he

Brian Domitrovic says that he wrote the following about one year ago; does anyone have a link to the article (it was presumably in Forbes):

"One of the sturdiest myths about supply-side economics is that George H.W. Bush called it ‘voodoo economics’ on the campaign trail in 1980. You’d think there’d be a scrap of evidence dating from 1980 in support of this claim. In fact there is none"


Government spending as a

Government spending as a share of GDP rose steadily until about 1980 even as debt to GDP fell. Debt to GDP exploded under Reagan despite fairly constant spending as a share of GDP. It fell under Clinton, after taxes were increased in the face of unanimous declarations from supply-siders that such a increase would destroy the economy. In fact, revenue surged beyond anything seen in 50 years. Under Bush II taxes were slashed again and despite a real estate bubble that dwarfed the tech bubble, economic conditions never approached anything remotely as good as the '90s. And during this entire time, private saving dwindled to nothing, incomes for the vast majority of people barely budged, and "low" taxes for the rich were subsidized by the payroll tax to the tune of $2.5 trillion. How anyone can support "supply side economics" (at least in its current incarnation) is a mystery for the ages.


"Just because candidate

"Just because candidate Reagan termed himself a supply-sider doesn't make it so. Therefore, the charge that Reaganomics was labeled “Voodoo Economics” by Bush doesn't mean that he was referring to supply-side economics in general."

--------------------------------------------------------------------------------

Shall we parse it beyond recognition in a game of Mental Twister?

1. Reagan proposed an economic policy which was termed "supply-side economics" before the 1980 primary campaign.

2. Bush called Reagan's economic policy proposal "voodoo economics."

Please, let's not insult the intelligence of others by denying the obvious.




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