This episode explores the profound influence of Reaganomics and its enduring legacy in American economic policy with tax expert and former US Treasury attorney Ed Oswald. He is the author of a new book, “From Ronald to Donald: How the Myth of Reagan Became the Cult of Trump”. Oswald discusses the transition from Reagan’s tax reforms to Trump’s tax policies, highlighting the continuity in supply-side economics and its implications for fiscal policy and the national debt.
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About this episode’s guest: Edwin G. Oswald
Edwin G. Oswald is a partner with the law firm of Orrick, Herrington & Sutcliffe LLP, resident in Washington D.C. He served as an attorney-advisor in the United States Treasury’s Office of Tax Legislative Counsel during the Clinton Administration. He is a Fellow of the American College of Tax Counsel and a frequent lecturer on financing State and local infrastructure and the federal taxation of municipal debt. The book is a personal project of Mr. Oswald’s and the views and opinions expressed herein are those of the co-authors and do not represent the views and opinions of Orrick.
What’s covered in EP238
- Reagan’s economic policies and their impact on the US deficit. (0:00)
- Supply-side economics and its impact on US deficits. (6:55)
- Reaganomics and its impact, and the impact of Clinton administration policies (e.g. NAFTA, repeal of Glass-Steagall). (16:14)
- Reagan and Trump similarities, tax cuts, and budget. (26:24)
- Tax policy and its impact on the economy. (33:22)
Takeaways
- Reagan’s economic policies, particularly his tax cuts, have had a lasting influence on American politics, setting a precedent followed by later administrations including Trump’s.
- Ed Oswald argues that supply-side economic policies from Reagan to Trump show a consistent belief in tax cuts for the wealthy as a means to stimulate economic growth, despite debates about their effectiveness and impact on the national debt.
- Addressing the US debt will likely require a balanced approach of both tax increases and spending cuts, in Ed’s view.
Links relevant to the conversation
Ed’s book: https://www.amazon.com.au/Ronald-Donald-Reagan-Became-Trump/dp/1476690324
Ed’s bio: https://www.edwingoswald.com/
Recent episode with Dan Mitchell on US debt:
Transcript: The Tax Guru the WSJ says has Wall Street’s “Strangest Hustle”: w/ Andy Lee, Parallaxes Capital – EP237
N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.
Ed Oswald 00:00
I think in many ways some of that seed corn was was laid down by Ronald Reagan in terms of, you know, disrespect for government and in frankly, the proper role of government. Although, again, I agree with your point that certainly, you know, Reagan’s cabinet was filled with adults was filled with, you know, many competent people. But still the broadcast far and wide was, government is the problem.
Gene Tunny 00:39
Welcome to the economics explored podcast, a frank and fearless exploration of important economic issues. I’m your host, Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Hello, and welcome to the show. Today we’re joined by Edie Oswald, a prominent taxation expert and lawyer based in Washington DC. He’s a former attorney advisor to the US Treasury Department. And he’s the co author of a new book, from Ronald to Donald how the myth of Reagan became the cult of Trump. In our conversation, we delve into the profound influence that the Reagan administration had on American and global economic policy. We also explore Trump’s relationship with Reagan’s legacy and the potential implications of a second Trump presidency. Okay, I’d love to hear your thoughts on my discussion today with it. Also, please let me know your ideas on how I can improve the show. My contact details are in the show notes. Without further ado, let’s dive into the episode. Enjoy it Oswald is great to be speaking with you about your new book.
Ed Oswald 02:08
Thank you, Jane. Pleasure to be here.
Gene Tunny 02:10
Very good. Yes. From Ronald to Donald I, I learned quite a fair bit about Reagan that I didn’t know. So I enjoyed reading it for that reason. In particular, as someone with Irish ancestry myself, I was, I was surprised to learn, I didn’t realise and I mean, as you point out, or your you and your co author point out, it’s obvious once you realise, you think about his last name, that he had that Irish ancestry and he and for political reasons, it was something he didn’t reveal in the campaign, which I found fascinating and the story about his the origin of his nickname, Dutch, his, his underprivileged background, it’s a rather extraordinary story to to begin with, what did you find most fascinating in your, when researching the life of Reagan for this book? Well,
Ed Oswald 03:06
thank you, Jean. You know, what I found most interesting is, is really subtle, although he didn’t say much about it. Though his relationship with his father. His father was basically a shoe salesman. His father was an alcoholic, that always had a battle with the bottle. I think how Reagan tried to grapple with that somewhat, both in terms of acknowledging it, and then somebody denying it. But I think that did have an impact on his view of the world and how he carried himself. Right.
Gene Tunny 03:43
Yeah, yeah, indeed. That’s interesting, too, because they, you know, Trump has an interesting relationship with with alcohol too, because he, I think his brother was an alcoholic and died of alcoholism or, or an illness related to it. I can’t remember. Exactly. And so Trump himself doesn’t drink. So that’s, uh, yeah, that’s that’s, that’s interesting after that, to go revisit that part of Reagan’s story. To get into the, you know, what most interests me about the book? Is these economic issues, because Reagan’s obviously a pivotal figure in economic history of the 20th century. Would you be able to take us through what was so different or revolutionary even about Reagan’s economic policies for his head?
Ed Oswald 04:34
Yeah, thank you. So, you know, you have to remember the political scene in the United States in the late 70s, where you had, you know, Jimmy Carter was president. We were going through a high inflationary period, we were dealing with the remnants of a gas crisis and energy crisis. We were dealing with the Iranian hostage crisis, it was really quite a dire time and America. And I guess really to mirror what Joe Biden has been saying lately in terms of him wanting the wealthy to pay their fair share. US tax policy, historically had high tax marginal, high, high marginal tax rates, effectively, from the beginning of really World War Two, the wealthy pay their fair share Republican tax rates on the rise in how or the highest marginal rate was, you know, 90 or above, with Nixon, it was 70 or above. So in terms of, you know, the the spectrum of the US taxes, when Reagan came in with, with the notion of something called supply side economics, which is basically the notion that the tax rates in the country are too high. And if we cut tax rates and tax rates significantly, which Reagan did, we can talk more about, primarily towards the wealthy. The economic benefits will trickle down to the lower rungs of the economic spec, that being the wealthy, the wealthy, the well to do, the industrialists will have more capital, they’ll have more money to spend. And therefore, that we’ll juice the economy and move us forward. Move us if you will, out of the Jimmy Carter era. You know, and what, what we can talk more about really the consequences of that. But you know, what that really led to was a ballooning of the US deficit. And a lot of really negative effects that way try to illustrate the highlight in the book.
Gene Tunny 06:54
Yeah, gotcha. So this is the supply side doctrine. And this was based on the Laffer curve is that concept of the Laffer curve? So one of the advisors to Reagan was art laffer. And, I mean, I guess how economists think about it nowadays is that, you know, there’s obviously some efficiency loss associated with taxes and, and that efficiency loss or the cost of taxation, the deadweight loss, so to speak, that increases disproportionately or at a faster rate than the increase in the tax rate. So essentially, I think there’s some there’s some truth to this, that there is an adverse impact. But the the issue is, is where you are on that Laffer curve. And, you know, there’s so they may have got some there may have been some offset from increased economic activity, but there wasn’t enough to to actually compensate for the loss of income from the cut in the rates. So that’s what you’re you’re talking about, isn’t it? So this is actually something that contributed to future deficits. Is that right? Yeah,
Ed Oswald 08:04
I think that’s well said that, you know, I think a well designed tax cut, you know, can lead to, you know, economic growth. And as you say, it’s a struggle a little bit for what that sweet spot is. But really, where supply side economics have gone within the GOP or GOP doctrine or conservative doctrine is that basically, you know, tax cuts, if you will pay for themselves. That’s really that’s really the slogan. That’s not true. Every tax cut does, you know, result in a loss of revenue, and no tax cut will pay for itself. We do state in the book that in that time, 1980 1981, with the highest marginal rate being 70%. It was probably a good time for a tax cut. It was probably a good time to deregulate the economy. But what what we kind of highlight in the book is that, you know, Reagan’s policies really live on some 40 years later, we’re still living with supply side economics within the United States. The notion that tax cuts do not pay for themselves have led to a really a ballooning of the national debt. The national debt when Reagan came into office was slightly less than one tray and and when he left off his office, it was close to 3 trillion. So although Reagan really did rail against the deficit, and the balanced budget, the US deficit increased 171% under Reagan, which, you know, is a bit shocking in terms of his paradigm and the Reagan missed in terms of a budget hawk. Gotcha.
Gene Tunny 10:00
Now these the tax cuts or the supply side economics that was controversial at the time, wasn’t it? As you point out, so George Bush Senior HW Bush, I mean, I think he was a Yale economics major, wasn’t he? I mean, he had, you know, he was a yeah, yes. Yes. And he, as you point out, he famously called it voodoo economic policy. And you also mentioned, David Stockman, what can you remind us? What was Stockmans critique? Was it was he concerned about supply side economics and the logic of it all? Well,
Ed Oswald 10:36
yeah, so David Stockman was the Reagan’s first head of OMB, the Office of Management and Budget, and really his his wing man, if you will, in terms of tax policy, implementing the significant tax cuts, you know, just to give the listeners a sense of perspective, when Reagan came into office in 1980, again, it became president in 81, the highest marginal tax rate in the US was 70%. And when he left in 1988, the highest marginal rate was 28%. So really a dramatic dramatic reduction and the highest marginal rate within the US. So stock when was really he was a former congressman from Michigan, really rate, you know, the point man for the budget, budget policy, tax policy, what the significant tax cuts have on spending and so forth. And I believe that, you know, initially, Stockman was really a disciple. He believed in supply side economics. He believed that the tax cuts would move the economy forward. But the other end of a revolution, and I think he says this, in terms of the Reagan Revolution, is not only do you need a revolution in tax rates, but you need a revolution in terms of spending. And if you’re looking at, if you’re looking at the significant spending on the US side, it’s a big part of his social security, that big targeted because Medicare, big part of it is the US defence budget. And I think that Stockman became more and more alarmed. And he read, he really wrote extensively about this, that this revolution was only one side, it was really a revolution on the revenue side, not the spending side. And ultimately realised, politically, although Reagan ran on this revolution, it was kind of a revolution to name only. And he became more and more alarmed as he got signals from the point persons and within budget, that Reagan is not going to take on significant domestic spending. Hence, I think his chagrin down the road, and also the blurring of the US national debt there. Yeah,
Gene Tunny 13:10
yeah. I think the best case that can be made for and I’m not necessarily advocating for this, but I think the best case that can be made for cutting taxes in advance of spending cuts is that there’s that starve the beast idea, isn’t there? I think that’s the that’s the concept that eventually this will force Congress to make the hard decisions. But I mean, so far that that really hasn’t happened yet. And so you trace this, this policy or this, you see this supply side economics as being influential in future administrations? Can you talk about that, please, Edwin? I mean, what what administration’s or what policies has it influenced? Post Reagan?
Ed Oswald 13:54
Yeah, I’d be happy to. So it’s clearly influenced. George W. Bush, Herbert Walker, his son, who initiated significant supply side tax cuts in 2001. Perhaps more sun are bringing in son of Bush, if you will, in terms of the least, tax policy outlook, he didn’t see the Voodoo that his father did. And then in 2017, really, frankly, Trump’s only Trump’s real signature domestic legislation was the 2017 tax cuts and Jobs Act, which is which was not quite as significant tax cuts as the 2001 George W. Bush, but still quite significant in terms of supply side economics and having, you know, tax cuts weighted towards the wealthy. I would say Jean, you know, one one general observation I would make just in terms of you US policy, US domestic policy, which is, I think, hamstrung the Democratic Party somewhat, is if you if you have one major political party believing that tax cuts pay for themselves, you know, tax cuts are the major elixir that moves the economy forward. And then you have another party that believes in math, or math and science, and they will get into that, too, is very hard for the Democratic Party to say, you know, look, folks, we have large national debt, tax cuts don’t pay for themselves, and therefore we want to raise taxes not lower than, again, if one party believes in math and the other party doesn’t, it really does handicap the Democratic Party, that being Barack Obama, or Bill Clinton, people who were elected later than Ronald Reagan, to really raise rates significantly, because it’s not politically popular. In other words, to get cutting taxes as easy, raising taxes is difficult. It’s kind of like when your mother says eat your vegetables. The first reaction is no, I’d rather have
Gene Tunny 16:14
candy. Yeah, yeah. So yeah, this is an interesting point to explore. So we might go through this. I had Dan Mitchell on the show the other week, he’s got his new book out, the greatest Ponzi scheme on Earth with with Rubin, you know, you know, Dan, if you’ve heard of damage, I’ve heard about the book. Yes, yes. Yes. And I mean, Dan’s argument is that well, actually, I mean, it’s not the taxes is the issue with suspending as the out of control entitlements. So yeah, I guess you can I mean, there is going to be that political debate about what’s the best way to, to, to deal with this with this debt? And I mean, one options, definitely tax increases, which put them in that’s politically unpopular. I mean. Yeah. I mean, maybe that’s the through the mean, your argument is that that’s due to this, this myth of Reagan, the supply side economics, the view that taxes are good for growth and can help pay for themselves? I mean, that’s, that’s a hypothesis that that’s fair enough. But yeah, but I mean, it is, I guess there is a legitimate debate about what the best way to fix the the debt is, and whether in Dan’s argument is that, well, if you just let them raise more taxes, they’ll just find more things to spend it on, and you’re not really going to solve the problem. So how would you like to respond to that at all that otherwise, we’re gonna move on to something else? I just thought I’d make that observation. Because I thought that was an interesting argument from Dan. Yeah,
Ed Oswald 17:44
I mean, briefly, I really think at this point, you know, with an ageing US population, with significant national debt, racked up over 40 years of largely peace and prosperity, I frankly, think there has to be, you know, a balanced approach, there’s got to be, you know, a level of mature adult discussion about both raising taxes. And also, I think, looking at entitlements and looking at spending, looking at the fact that, you know, people are living longer, and it just really needs to be a balanced approach. And I think, a sober discussion, that, you know, there’s no free lunch. Ultimately, this has to be paid for, right now a payment for borrowing from future generations. And, you know, there needs to be a reckoning, if you will.
Gene Tunny 18:39
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Gene Tunny 19:14
Now back to the show. So one thing I want to explore. So you I mean, this is a really damning critique of Reagan and Ngop administration’s. I mean, you’re essentially blaming them for all Well, I mean, maybe this is a mischaracterization, but it’s very strong critique of Reagan, and then how how that has influenced GOP policy in the future. And so you’re right. It was Reagan who said America on a course of hyper capitalism and wholesale industry deregulation. The legacy of Reaganism is all around us heedless consumption. Reduction in the progressivity of the tax code, weaken environmental laws, a war against expertise, and government legitimising structural budget deficits and widening economic Inequality. What I’d like to ask and I’d like you to reflect on is I mean, to what extent is the Democratic Party? Part of the problem here? Right? Because? I mean, I mean, and as an economist, I think the mean, I’m not necessarily criticising some of these policy decisions, because I was probably support would have been supportive of them at the time. But the didn’t do regulation begin under Carter, with the airlines. And then I mean, Reagan, then took on the unions and, you know, did further deregulation, Clinton, the Clinton administration had the NAFTA agreement, which Ross Perot said, created this great, great sucking sound out of the data centre in New Mexico. Glass Steagall was repealed by the Clinton administration, with Rubin and summers. So what’s the Democratic Party’s role in all of this as well, please, Edwin?
Ed Oswald 20:56
Yeah, fair, quite fair question. And I think that, you know, in the wake in the wake of Reagan, in the wake of George Herbert Walker Bush, there was certainly I think, a reset, you know, within the Democratic Party, in terms of thinking about the New Deal, thinking about the the Great Society of Lyndon Johnson, recognising that Americans after 12 years of having a Republican in the White House, that they became accustom and conditioned to lower tax rates. So I think there frankly, had to be, you know, an accommodation, if you want to be a successful political party, saying, at least at that point, we need more government and higher taxes is not going to get you elected, it’s not going to get you elected, you know, post Reagan, the great communicator, the man who really, I think, conditioned Americans to think about our society in tax policy and other things in in very convincing and very convincing ways. So I think there Yeah, I think there were compromises. And I think, though, though, although, you know, Bill Clinton did raise taxes, he did raise the highest marginal tax rate, up to 39.6. If you look at that, by historical standards, it’s you know, it’s way wider the mark. So I think that was kind of an April mentalism post Reagan to move to shift the ball back in a somewhat progressive nature. But it was a compromise given, I think, one Reagan’s presidency and to the way that, you know, US society had to evolve at that point. Yeah.
Gene Tunny 22:56
Yeah. And I think one point, the important point about the Clinton administration, and to its credit, it did work with the Congress to, to rein in the budget. And I think you ran some budget surpluses in the late 90s. Yeah, yeah. So that was that was to its credit. Okay. One of the things I found interesting and I want to ask you about this specifically for among those that are the charges against Reaganism, you’re talking about a war against expertise and government now, is this just about supply side economics? Or is it more general? Because I mean, to me, I mean, looking at the like that Reagan had a very impressive cabinet lineup. And then you had people like James Baker, George Shultz, Weinberger, it seemed to be a fairly strong cabinet of people with expertise. So what’s your critique? There, please, Edwin, what is that war against expertise and government that you see
Ed Oswald 23:58
here? So let me just maybe give you a little bit of a a backdrop. I think one thing we tried to make it clear in the book is certainly that the character of Reagan and Trump, I think, is quite different. And we try to make this frankly, in chapter one, we try to make that distinction that you know, Reagan, you know, had Reagan was a moral person. You know, Reagan had shame. Reagan had true, you know, legit government bonafide, he was a two term governor of California. So he come he came to the table, both as a man and with experience very different than what Donald Trump came with. So we’re not saying the character of Trump and Reagan is similar. We in fact, say it’s this song. But the one to your point. You know, one of the things that I think start is down the road would have, perhaps dismissing expertise was very famously in his inauguration speech and the January 2019 81. Reagan said at the present time, government is not the solution to our problem. government is the problem that’s been somewhat mythologized by the GOP over the year in terms of shorthand that government is the problem. Yeah, I think I think implicit is that is contempt frankly, contempt for government contempt for bureaucrats. You see aspects of that really bubbling up in the GOP in terms of global warming. You know, in terms of respect to science, and the poor until the house scientists become politicised over the last few decades. And I really think in many ways, some of that seed corn was was laid down by Ronald Reagan in terms of, you know, disrespect for government and in frankly, the proper role of government. Although, again, I agree with your point that certainly, you know, Reagan’s cabinet was filled with adults was filled with many competent people. But still the broadcast far and wide was government is the problem. Yeah,
Gene Tunny 26:23
yeah. I mean, I learned I didn’t know that there was that qualification, or how he began that famous statement. So I learned something from that as well. And yeah, it makes more sense. And it sounds more, it sounds more sensible. And it sounds more like something you would say at that inauguration without being where you’re not familiar. It was an otherwise it’s a very ideological statement, a very broad brush statement. But with that qualification, it does make more sense. So I think it was good for me to to learn that. So I really appreciate that. That was a good part of the book. Okay. Yeah. Right. Oh, so I guess what I want to ask now it is, I mean, what’s the link with with Trump? I mean, where are how many years? Is it? 35 or 36 years since Reagan was in the White House? I mean, how is this? How is this relevant to? I mean, I guess we’re talking about the the tax cuts and the belief in their, their ability to pay for themselves. Okay, that’s an argument you can make. But what about Trump? Is Trump at any one in in any way influenced by the Reagan legacy? Or is he a he’s a man with his own views? I mean, he’s a, he’s his own force of the universe, really, rather than inspired by Reagan. I mean, how do you see the connection between Trump and Reagan?
Ed Oswald 27:47
Yeah. So, you know, as we, as we wrote the book, and certainly part of the book was written when during the Trump presidency, although it’s a book primarily on Reagan, we couldn’t help but not see the connection somewhat between, you know, Reagan and Trump and let me give you kind of desensitise. You know, for So for starters, you know, Reagan really was the first, you know, Magog president, if you will, if you recall, Reagan’s slogan back in 1980. Was let’s make America great again. Trump shorthand did that by one word, make America great again. So they both really ran on the same slogan just in terms of commonality. And what if you will, what Trump took from Reagan, to I think, gene that the DNA of the campaigns were quite similar. There was contempt for government, I think, contempt for expertise, both pro tax cut, both somewhat based in nationalism. And I think also, more importantly, both based on some aspects of nostalgia, hence, America Great Again, you know, they were both democrats are certainly portions of their lives. You know, Reagan was, ironically, a new dealer, until the 60s and Reagan and Trump was a Democrat. For a large portion of their lives. They didn’t have his life. They were both divorced. Neither one was really a student of government. Neither one was deep and expertise. No one really took on a political career, took on politics as a political career. And I think they’re also, frankly, both you know, mythmakers, and I think they both played a long, perhaps a weakness in the American psyche to believe mediated mythology, as opposed to one meeting reality. You know, Reagan was the Marlboro Man, the man on the books, Reagan was you know, Morning in America, Trump was the man with the Midas touch the entrepreneur, the character you see from, from the apprentice. So they both played upon those myths, which was a strong suit for for both of them in terms of dealing with the media.
Gene Tunny 30:18
Yeah, gotcha. Okay. And I mean, what are your thoughts on what? What we could see in terms of economic policy? If there is a another Trump administration? I mean, I, I mean, being in Australia, it’s hard for me to make an assessment of, of what’s going on, sometimes I hear, I’ll look at, it’s easily going to be Trump, it’s going to be a Wipeout. And then other times I hear I’ll hang on not so don’t be so sure about that. There’s a way for, for, for Biden to hang on. So I’ve got a really got no idea who’s going to win the election. I mean, my suspicion is it will be Trump and that, therefore we should start thinking about what, whether there’ll be economic policy changes. Do you have any thoughts on that? Edwin? What’s the Do you have any? Can you look into the crystal ball for us, please? Yeah,
Ed Oswald 31:10
so it’s certainly going to be a tight race. I would say just on the political front, you know, you know, Donald Trump now is in the middle of a criminal trial in New York City, taking him off the campaign trail, and perhaps people are taking a second look at some of the facts and circumstances there. But I would say, Jane, in terms of, you know, economic policy tax policy, if Trump is reelected, you know, an important element of that is whether the House and Senate also turned Republican. That’s an important fact there. If Trump is reelected, and they and the GOP wins the House and Senate, then I think you’ll see, you know, more tax cuts, at least one thing to highlight is many aspects of Trump’s 2017 Tax Act, expire at the end of 2025. So you’ll do so I think you’ll see a lot of energy, about renewing those tax cuts, and perhaps even further tax cuts above and beyond what Trump did in 2017. You know, if Trump is reelected, but doesn’t take the House and Senate, well, then you’re probably looking for some type of compromise, you know, along perhaps party or various lines there. It’ll be much more difficult, I think, for Trump to press on in a significant way and material way in terms of tax cuts, if he doesn’t have both underlying houses as well.
Gene Tunny 32:55
Yeah, yeah. I mean, given the state of the, the budget of it, it’d be good, be courageous to try and get additional tax cuts. I mean, whether, you know, you might you know, for some of us who are more on the, you know, classical classically liberal side of things, we might say, well, it’s, you know, it’d be good to have a smaller government and have, you know, tax cuts. But yeah, if you don’t cut spending, then that’s problematic. And it’s adding to the, the data. And you’ve already got a problem there. And I think one of the one of the important messages of your book, which I liked is that you’ve got to have, you’ve got to have this respect for the numbers. And to some extent, some of these policies that have been advanced, they seem to not have a, you know, the advocates may not understand the actual arithmetic. So I think that’s a, that’s a fair point. And it is such a change. And I might sort of start to wrap up, but you quote JFK, JFK to Yale University’s Class of 1962. And I mean, this just highlights the change that we’ve had that, like, JFK said that the differences today are usually a matter of degree what is at stake today is not some grand warfare of rival ideologies, which will sweep the country with passion. But the practical management of a modern economy, the unravelling of America’s post war governing consensus began with the election of Ronald Wilson Reagan. Okay. So very, very strong charge there. Before we wrap up, Edwin, anything else? Before we should conclude anything else you’d like to add?
Ed Oswald 34:31
Well, just maybe just reflect upon that passage you quoted is? You know, I liked that passage. Well, one, you know, I quote, JFK, as you know, a number of times in the book, just in terms of, although, you know, a Democratic president, I think he was very eloquent and staining the states and the times of his presidency. A and going really back perhaps to where we started that, you know, in terms of tax policy, historically, at least up to 1980, you did not have really a dramatic difference in tax rates between the GOP and the Democratic Party. As we started earlier, you had tax rates, the wealthy really did pay their fair share, regardless of who is elect building, because, you know, deficits mattered, the Balanced Budget Narrative, paying our bills matters. And all that really did change in 1981. Were really there was a revisiting of what JFK said about managing managing a modern economy. And looking at things really with very different prism in stark contrast, in terms of governing philosophy. Hence, here we are 40 years later, still in the middle of that, in many ways, still dealing with, you know, Reagan’s tax policies. In the wake of the deficit here.
Gene Tunny 36:13
Rock Gotcha. Okay. Yep. I mean, it’s a, it’s a well argued book. And there’s a lot of really interesting stories in there a lot of things I learned. So I’ll definitely recommend it. I’ll put a link in the show notes, I suppose, where, and I might have to come back to this in a future episode, what I’d like to explore, and it’s to what extent I mean, can we just say it’s, is it because of the tax rates? Or is it also because of, you know, there was the China shock that David Autor talks about, there’s the, you know, the NAFTA, and those, you know, both of those developments, they had implications for the middle America, so to speak, a lot of towns in, in the Midwest and in, in rural America were were badly affected by by those shocks. And you’ve also got the skill biassed technological change. We’ve got the internet and all of that, which is led to increased inequality. So that’s one thing I’d like to explore a bit more I know, it’s, you would have had the, you know, your your book had a slightly different focus. But as an economist, I’d probably want to explore the the empirics around that. What are the relative contributions a bit more? I don’t know if you’ve had any, before we wrap up any reflections on that? Or any if you’ve done any investigations yourself on that, Edwin?
Ed Oswald 37:34
Well, I would just say, you know, those are all those are all fair points. And I And you’re right, my my book as a kind of singularity of focus, which is really, you know, more on tax policy, and tax cuts. But I would say that what really influenced me was there was been a London School of Economics study that came out in 2020. You know, a 50 year of study, you know, based on cutting tax cuts for the wealthy looking at, you know, 18 OECD countries. Which really, you know, did, I think, empirically link, the notion of, you know, tax cuts for the wealthy lead to a largest share of the national income going to the wealthy. And I would say that, despite the events, you say, some of which we could control and some of the some of it, we can, it’s just the, you know, the macro economic situation. You know, Congress in the executive branch can control tax policy and tax rates and something within our control. And I think if we want to deal with the growing deficit with the growing income divide and wealth divide, at least tax policy is something within our control. It’s something to be more considered, if you will. Very
Gene Tunny 39:01
good. Okay. Edwin hospital. Thanks so much for your time. I really enjoyed reading your book and well done on the book. Yes, I’ll definitely recommend that and put a link in the show notes. very much enjoyed the conversation. Look forward to speaking sometime in the future.
Ed Oswald 39:19
Here was my pleasure. Thank you very much for having me on.
Gene Tunny 39:23
rato, thanks for listening to this episode of economics explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via contact at economics explore.com Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting outlets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.
40:10
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Credits
Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business, www.adepteconomics.com.au. Full transcripts are available a few days after the episode is first published at www.economicsexplored.com. Economics Explored is available via Apple Podcasts, Google Podcast, and other podcasting platforms.
