Reaganomics Finally Trickles Down To Area Man

Well done, Onion!

Reaganomics Finally Trickles Down To Area Man
October 13, 2007 | Issue 43•41


HAZELWOOD, MO—Twenty-six years after Ronald Reagan first set his controversial fiscal policies into motion, the deceased president's massive tax cuts for the ultrarich at last trickled all the way down to deliver their bounty, in the form of a $10 bonus, to Hazelwood, MO car-wash attendant Frank Kellener.

"Back when Reagan was in charge, I didn't think much of him," Kellener, 57, said, holding up two five-dollar bills nearly three decades in the making. "But who would have thought that in 2007 I'd have this extra $10 in my pocket? He may not have lived to see it, but I'm sure President Reagan is up in heaven smiling down on me right now."

Leading economists say Kellener's unexpected windfall provides the first irrefutable proof of the effectiveness of Reagan's so-called supply-side economics, and shows that the former president had "incredible, far-reaching foresight."

"When the tax burden on the upper income brackets is lifted, the rich and not-rich alike all benefit," said Arthur Laffer, who was a former member of Reagan's Economic Policy Advisory Board. "Eventually."



The $10 began its long journey into Kellener's wallet in 1983, when a beefed-up national defense budget of $210 billion enabled the military to purchase advanced warhead-delivery systems from aerospace manufacturer Lockheed. Buoyed by a multimillion-dollar bonus, then-CEO Martin Lawler bought a house on a 5,000-acre plot in Montana. When a forest fire destroyed his home in 1986, Lawler took the federal relief check and invested it in a savings and loan run by a Virginia man named Michael Webber. After Webber's firm collapsed in 1989, and he was indicted on fraud and conspiracy charges, he retained the services of high- powered law firm Rabin & Levy for his defense. After six years and $7 million in legal fees, Webber received only a $250,000 fine, and the defense team went out to celebrate at a Washington, D.C.-area restaurant called Di Forenza. During dinner, lawyer Peter Smith overheard several investment bankers at an adjoining table discussing a hot Internet start-up that was about to go public. Smith took a portion of his earnings from the Webber case and bought several hundred shares in Gadgets.com, quadrupling his investment before selling them four months later. Gadgets.com's two founders used the sudden influx of investment capital to outfit their office with modern Danish furniture, in a sale brokered by the New York gallery Modern Now! in 1998. After the ensuing dot-com bust, Modern Now! was forced out of business, and Sotheby's auction house was put in charge of liquidating its inventory. The commission from that auction enabled auctioneer Mary Schafer to retire to the Ozark region of Missouri in 2006. Last month, while passing through Hazelwood, she took her Audi to Marlin Car Wash, where Kellener was one of the employees who tended to her car. She was so satisfied with the job that she left a $50 tip, which the manager divided among the people working that day.

"This money didn't just affect one life," Laffer said. "It affected five."

Prior to joining Marlin Car Wash in 2005, Kellener worked for nearly two decades at a local Ford assembly plant that is now defunct. Before that, he was employed by the FAA as an air traffic controller until his union went on strike and Reagan fired him, along with nearly 13,000 others. This is the largest tip he has received in his professional life.

"I thought Reaganomics was nothing more than a mirage that allowed President Reagan to reward his wealthy support base," Sen. Edward Kennedy (D-MA) said. "But two generations later I am seeing Reaganomics in action, and I like what I see. It just took a little longer than I thought it was supposed to."

The tip has not gone unnoticed by the economic team in the current administration.

"Had Mr. Kellener received that money in 1981, like the Democrats wanted, it would only be worth $4.24 today because of inflation," Treasury Secretary Henry M. Paulson, Jr. said during an official announcement of the economic policy's success at a press conference Monday. "Instead, Kellener has a solid $10 to spend right here and now. The system works, and our current president intends to keep making it work."

Kellener, who has cared for his schizophrenic sister ever since her federally funded mental institution was closed in 1984, said that he plans to donate the full $10 to the Republican presidential candidate who best embodies Reagan's legacy.

http://www.theonion.com/content/news/reaganomics_finally_trickles_down

Laffer's Napkin, Reagan's Voodoo Economics Live On

And I thought Bush was an idiot for talking like it was a truism.

For background on whether lowering taxes can INCREASE revenue (aka Reaganomics, Supply Side Economics, Trickle Down Economics, Voodoo Economics) I highly recommend:
http://en.wikipedia.org/wiki/Laffer_curve

Personally, I did a paper on the elasticity of Labor Supply and found it to be rather inelastic. This is all the more so because now most households are locked in to a two income earner situation. The fact that this is all the more so in 2007 than it was in 1980 makes any notion of Reaganomics at this point in history all the more absurd.

From:
http://matthewyglesias.theatlantic.com/archives/2007/08/laffer_press_roundup.php


Laffer Press Roundup
06 Aug 2007 11:38 am

Here's an interesting test case for the press. It seems that at yesterday's GOP debate, Rudy Giuliani derided the idea that higher taxes raise revenues as a "Democratic, liberal" assumption and put forward his alternative view that you generate revenue by lowering tax rates. This is a stunning confession of total ignorance of tax policy and economics by the GOP front runner. So how did the press cover it? Chris Cilizza at the Fix lives down to my expectations by totally ignoring the fact that Giuliani is incorrect:

"There is a liberal Democratic assumption that if you raise taxes, you raise more money," said Giuliani to huge applause from the crowd assembled at Drake University.

Michael Shear in The Washington Post's page A1 story also doesn't care about the merits of the issue:

"Former New York mayor Rudolph W. Giuliani sparked loud applause when he declared that "the knee-jerk liberal Democratic reaction -- raise taxes to get money -- very often is a very big mistake." And Rep. Duncan Hunter (R-Calif.) declared his disappointment in the Democratic push to end the war in Iraq."

Nor does Stephen Braun of The Los Angeles Times care at all whether or not GOP tax policy makes sense:

"Referring to last week's devastating bridge collapse in Minneapolis, the GOP rivals found common ground in insisting that increased private investment from cutting taxes would provide more money to repair the nation's failing infrastructure. And they teamed up in turning their aim at the Democratic Party's presidential field.
Mike Glover at the AP doesn't seem to mention the issue at all. "

Adam Nagourney at The New York Times, by contrast, doesn't go nearly as far as I'd like, but does way better than his colleagues at the major papers. Here he is on the NYT political blog:

"Mr. Giuliani proceeded to explain that when he was mayor of New York he had cut taxes, and that those tax cuts had produced revenues that allowed him to finance bridge reconstruction. (Actually, there’s a good argument that it was the stock market boom in New York that brought all that money into the city’s coffers, but we’ll let that pass for now)."

And here he is teamed up with Michael Cooper in the print edition:

"Mr. Giuliani said that as mayor of New York, he had increased revenues to pay for bridge and road repair by cutting taxes, thereby jolting the economy, and that he would do the same thing as president. The city’s treasury in that period was flush largely with revenues produced by the stock-market boom of the late 1990s."

It'd be nice to see reporters go further than Nagourney does here, but improvements at the margin deserve recognition and the Times is doing a much better job than the Post here.