Jul 1, 1980
The Battle for Reagan’s Mind
“Unless something unforeseen happens, Reagan will probably remain committed at least to the Kemp-Roth program.”
IN MARCH IT BECAME clear that Ronald Reagan would almost certainly be the presidential candidate of the Republican Party this fall. As this reality became apparent it also became apparent that a battle was taking place within the Reagan campaign between what could be called the “libertarian” and “conservative” factions. The outcome of this struggle could tell us a great deal about what Ronald Reagan will be like as president of the United States—something which appears quite likely given the present course of political, diplomatic and economic events.
On the “libertarian” side of Reagan’s advisors are Congressman Jack Kemp of New York; Jude Wanniski, a former editorial writer for the Wall Street Journal; and Professor Arthur Laffer of the University of Southern California. These men are urging Reagan to take a strong position in favor of across-the-board tax rate reduction and a return to the gold standard to stop inflation. They are generally referred to as “wild men” within the Reagan camp, although Reagan has officially endorsed the Kemp-Roth tax bill to cut individual income tax rates by a third.
On the “conservative” side are basically the old line Republican economic advisors: Arthur Burns, former chairman of the Federal Reserve Board; Herb Stein, former chairman of the Council of Economic Advisors; George Shultz, former Treasury Secretary; and others. They oppose the “radical” views of the Kemp-Wanniski-Laffer group and are urging Reagan to adopt a more conventionally conservative economic program: a balanced federal budget, a tight money policy, and floating exchange rates. In other words, they want Reagan to do exactly what President Carter is doing—pursuing a program which has made the Republican Party what it is today, a minority party.
The “libertarian” camp, which threw in with Reagan early while the more conventional Republicans were advising Baker, Bush and Connolly, definitely feels threatened by the “conservatives.” And in an effort to maintain their position the “libertarians” have taken to the media—Wanniski in particular. For months, Wanniski has been filling his newspaper columns with stories about the ongoing battle for Reagan’s mind. Unfortunately, in early April he went too far in a long personal interview in the Village Voice (April 7, 1980). In this interview, Wanniski seemed to take credit for inventing the Laffer Curve, inventing the Kemp-Roth Bill, and taking Jack Kemp, an obscure Buffalo congressman, and making him a major national spokesman for tax reduction. He also made some rather amazing claims for what an across-the-board tax reduction would accomplish, saying it would reduce prostitution, pornography, drug use, and even abortion.
The “conservatives,” of course, seized upon the Wanniski interview (later reprinted in the Washington Post) to ridicule all of the policies proposed by the “libertarian” faction. Some of Kemp’s advisors began urging him to put distance between himself and Wanniski, lest he lose influence with Reagan. And others, familiar with Wanniski’s true role in the tax reduction movement, began trying to set the record straight themselves, lest the ideas associated with Wanniski be discredited. (See Paul Craig Roberts’s article, “Caricatures of Tax-Cutting,” in the Wall Street Journal, April 24, 1980.)
Ultimately, the influence of the ideas associated with the Kemp-Wanniski-Laffer group within the Reagan campaign will be determined by two factors. The first is how well they hold up at the voting booth. Up until now the promise of an across-the-board tax cut has been very popular, especially with blue-collar workers who usually vote Democrat. As the inflation rate begins to subside and the recession takes hold, it will probably become ever more popular. Second, it appears that Reagan himself does generally endorse the tax cut program, as do his most intimate domestic advisors, Dr. Martin Anderson and Senator Paul Laxalt. Thus, unless something unforeseen happens, Reagan will probably remain committed at least to the Kemp-Roth program.
Can Reagan be depended upon to continue supporting tax cuts once elected president? No one can say, of course, since other presidents have been known to renege on campaign promises. In any case, we will know soon, for Reagan will have to begin work on his economic program quickly in order to have any hope of getting it through a Democratic congress. And Reagan knows too well, from the example of Margaret Thatcher, that fast results cannot be depended upon.