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Eight Starving the Public Sector: The Economic Recovery Tax Act of 1981

1. Steven R. Weisman, "Reaganomics and the President's Men," New York Times Magazine, October 24, 1982, pp. 26-29, 82-85, 89-92, 109. [BACK]

2. Howell Raines, "Reagan Orders Staff to Repudiate Report of Compromise on Tax Cut," New York Times, April 14, 1981, pp. A1, D13. [BACK]

3. For detailed tables, see National Journal, July 25, 1981, p. 1349, and August 8, 1981, p. 1410. [BACK]

4. Inflation was also driving poor people into brackets where they would be taxed when they had not been taxed before. [BACK]

5. Robert W. Merry, "Rostenkowski and the Tax Bill," Wall Street Journal, March 97, 1981, p. 26. [BACK]

6. Ibid. [BACK]

7. Robert W. Merry and Burt Schorr, "Pension Pains: Congress, Reagan See Need to Cut Benefits Paid by Social Security," Wall Street Journal, May 10, 1981, pp. 1, 12. [BACK]

8. Peter Goldman, "The Reagan Steamroller," Newsweek, May 18, 1981, pp. 38-40. [BACK]

9. Robert W. Merry, "Mr. Chairman: Senator Robert Dole Plays Major Role in Future of Reagan Tax Bill," Wall Street Journal, July 14, 1981, pp. 1, 15. [BACK]

10. Barrett, Gambling with History, pp. 166-67; Stockman, Triumph of Politics, pp. 238-40; and Walter Isaacson, "A Less Than Perfect' 10-10-10,"' Time, June 1, 1981, p. 16, 21. [BACK]

11. "The Best-Laid Plans ...: Negotiations toward a bipartisan tax cut go astray," Time, June 8, 1981, p. 19. [BACK]

12. Ibid. [BACK]

13. Martin Schram, "Leading the Democrats: Rostenkowski Plays 'Palm' to O'Neill's 'Oak,'" Washington Post, June 8, 1981, pp. A1, A2. [BACK]

14. On Rostenkowski, see ibid.; "The Sultan of Swap," Time, June 1, 1981, p. 21. [BACK]

15. Peter Goldman, "Tax Cuts: Reagan, Digs In," Newsweek, June 15, 1981, pp. 26-27. [BACK]

16. Ibid. [BACK]

17. Richard E. Cohen, "A Reagan Victory on His Tax Package Could Be a Costly One Politically," National Journal, June 13, 1981, pp. 1058-62. [BACK]

18. Art Pine and Lou Cannon, "Reagan, Democrats Unable to Agree on Terms for Tax Cut," June 2, 1981, pp. A1, A3; Art Pine and Lee Lescaze, "Democrats Ease Stand On Tax Cut," June 3, 1981, pp. A1, A4; and Art Pine, "Reagan Rejects Plan By Hill Democrats for 15% Tax Cut," June 4, 1981, pp. A1, A4; all in Washington Post. [BACK]

19. Stockman, Triumph of Politics, p. 249. [BACK]

20. Ibid., p. 247. [BACK]

21. A tax credit allows the payer to deduct from taxes, not from income, some portion of the cost of an investment. A 10 percent credit on a million dollar item is worth $100,000. At a tax rate of 40 percent, a 10 percent deduction would be worth 40 percent of that, or $40,000. The combination of tax credits up front with 10-5-3 depreciation is what gave the Reagan plan its negative rates. [BACK]

22. Caroline Atkinson, "Argument for Tax Cut to Aid Business Weakened by New Statistics," Washington Post, February 5, 1981, p. A2. [BACK]

23. Ibid; Robert R. Samuelson, "Business Tax Cuts—Needed Stimulant or Poorly Conceived Boondoggle?" National Journal, April 4, 1981, pp. 556-61. For the pro-10-5-3, see various Martin Feldstein Wall Street Journal articles, including July 15, 1981. Details in CQA 1981, p. 96. [BACK]

24. See Lee Lescaze and Art Pine, "President Challenges Democrats," June 5, 1981, pp. A1, A7; John Berry, "Business Tax Break Cut 33% In Revised Depreciation Plan," June 5, 1981, pp. C8, C9; and Art Pine, "Tax Relief Restoration Is Proposed," June 9, 1981, pp. D6, D8; all in Washington Post. [BACK]

25. Cohen, "A Reagan Victory on his Tax Package Could Be a Costly One Politically." [BACK]

26. Steven R. Weisman, "Reaganomics and the President's Men," New York Times Magazine, October 24, 1982, pp. 26-29, 82—85, 89—92, 109; Barrett, Gambling with History, pp. 164-65. [BACK]

27. Barrett, Gambling with History, pp. 171-72. Also see Greider, Education of David Stockman. [BACK]

28. Art Pine, "'Bidding War' Is Seen During Markup of Bills," Washington Post, June 6, 1981, pp. A1, A4. [BACK]

29. Stockman describes both Baker and Regan as deferring to the president's preferences on the tax bill, and our interviews confirm that judgment. See Triumph of Politics, pp. 245-46. [BACK]

30. Peter Goldman, "Tax Cuts: Reagan Digs In," Newsweek, June 15, 1981, pp. 26-27; John Berry, "Revised Proposal Offers Lower Federal Deficits," Washington Post, June 6, 1981, pp. A1, A4; Pine, "'Bidding War' Is Seen During Markup of Bills"; Lou Cannon, "White House Expects Long Tax Cut Battle, Readies the 'Hard Sell,'" Washington Post, June 7, 1981, p. A5; Peter Behr, "Compromising on Taxes," Washington Post, June 8, 1981, pp. A1, A2; Pine, "Tax Relief Restoration Is Proposed"; Art Pine, "Some Hill Democrats Switch on Tax Relief," Washington Post, June 10, 1981, p. A3; Art Pine, "Reagan's Tax Plan Gets a Mixed Reception," Washington Post, June 11, 1981, p. A6; and Claudia Wallis, "The Marine Has Landed: As the tax-cut battle heats up, Donald Regan warms to his task," Time, June 22, 1981, p. 13. [BACK]

31. Martin Schram, "Leading the Democrats: Rostenkowski Plays 'Palm' to O'Neill's 'Oak,'" Washington Post, June 8, 1981, pp. A1, A2. [BACK]

32. Art Pine, "In Tax Debate, the Democrats Are Where the GOP Used to Be," Washington Post, June 12, 1981, p. A3. [BACK]

33. Michael Kinsley, "Compromising Positions," New Republic, June 2O, l981, pp. 9-10. [BACK]

34. Caroline Atkinson and John Berry, "Senate Panel Backs Reagan Tax Plan," Washington Post, June 19, 1981, pp. A1, A5. [BACK]

35. The details were fuzzy because the committee was in the early stages of designing a proposal, not in formal markup. Reports were slightly contradictory, e.g., over the timing of various proposals. See CQA 1981, pp. 9899; John W. Berry, "Basic Shift on Business Taxes Gains," Washington Post, June 18, 1981, pp. A1, A5; "Rival business tax cuts would cost the same," National Journal, June 27, 1981, pp. 1174-75. [BACK]

36. Atkinson and Berry, "Senate Panel Backs Reagan Tax Plan." [BACK]

37. See ibid.; and John Berry, "Tax-Cut Debate No Longer Over 'Whether' But 'How,'" Washington Post, June 21, 1981, p. GI. [BACK]

38. Peter Behr, "Reagan's Advisers 'Puzzled' by High Rates' Persistence," Washington Post, July 15, 1981, p. E1. [BACK]

39. CQA 1981, p. 101. [BACK]

40. See, for example, the Congressional Record for June 23, 1981, pp. S13249-64, in which the Democrats made a record of their support on the floor. [BACK]

41. Stockman, Triumph of Politics, p. 253. See also CQA 1981, pp. 97-98; Robert J. Samuelson, "Death and Taxes—An Instructive Tale About How Congress Makes Tax Policy," National Journal, July 4, 1981, pp. 1192-96. [BACK]

42. Congressional Record 1980, p. S17138, and comments of Mr. Armstrong, June 26, 1980, p. S17161, pp. S17164-66. [BACK]

43. Ibid., pp. S17164—65. [BACK]

44. Stockman, Triumph of Politics, p. 254. [BACK]

45. Congressional Record, July 16, 1981, p. S1612. [BACK]

46. See Tables V-1 and V-3 in "General Explanation of the Economic Recovery Tax Act of 1981," Staff of the United States Congress Joint Committee on Taxation, Committee Print (Washington, D.C.: U.S. Government Printing Office, 1981). Indexing was not as important as the estimates suggested, for inflation turned out to be lower than anyone had anticipated. [BACK]

47. Walter Isaacson, "Big Battles on Two Fronts," Time, June 29, 1981, p. 21. [BACK]

48. Caroline Atkinson, "Dole Hopes to Pass Tax Bill in 2 Weeks, Beating the House," Washington Post,. July 3, 1981, p. A7; Caroline Atkinson and Lou Cannon, "White House Quickly Squelches GOP Talk of Tax Compromise," Washington Post, July 10, 1981, pp. A1, A7. [BACK]

49. CQA 1981, pp. 98-99. [BACK]

50. Peter Behr, "Limited Straddle Curbs Voted," Washington Post, July 11, 1981, p. D7; Thomas Edsall, "Reagan Goes To the Hill On Tax Bill," Washington Post, July 25, 1981, pp. A1, A10. [BACK]

51. See Robert Prinsky, "Industry Pushes to Persuade Congress To Accept Its Tax-Straddle Proposals," Wall Street Journal, July 31, 1981, p. 32, for the industry's side. [BACK]

52. Margot Hornblower, "A Boll Weevil," Washington Post, July 27, 1981, p. A5. [BACK]

53. Sources for numbers here, which are, as usual, a bit fuzzy, include Samuelson, "Death and Taxes—An Instructive Tale About How Congress Makes Tax Policy"; "Congress Decorates the Christmas Tree a Little Early," National Journal, July 4, 1981, p. 1194; CQA 1981, pp. 98, 100-2; Robert W. Merry, "Congress Clears Reagan's Tax-Cut Plan, Rejecting Traditional Economic Policies," Wall Street Journal, July 30, 1981, pp. 3, 12, 14, 16; Thomas B. Edsall, "Republicans Control Tax Legislation," Washington Post, July 26, 1981, p. A10; Thomas B. Edsall and Caroline Atkinson, "Ways and Means Democrats Bend a Bit on Tax Trims," Washington Post, July 22, 1981, p. A2; and Edsall, "Reagan Goes To the Hill On Tax Bill." [BACK]

54. Who's to say what a windfall profit is? Presumably, if prices and profits plummeted, no one would suggest a subsidy to make up the difference. [BACK]

55. Thomas B. Edsall and Edward Walsh, "Senate Bargaining on Tax Cut Bill Chokes Oil Bonanza, Ends Filibuster," Washington Post, July 23, 1981, p. A4; Thomas B. Edsall, "Oil Is the Issue Snagging House and Senate Tax Bills," Washington Post, July 21, 1981, p. A6; Edsall and Atkinson, "Ways and Means Democrats Bend a Bit on Tax Trims"; CQA 1981, pp. 101-2. [BACK]

56. Thomas B. Edsall and Lou Cannon, "Reagan Opens Tax Bill in Bid for House Votes," Washington Post, July 24, 1981, pp. A1, A2. [BACK]

57. Stockman, Triumph of Politics, p. 257. [BACK]

58. Edsall, "Reagan Goes To the Hill On Tax Bill." [BACK]

59. Ibid. [BACK]

60. CQA 1981, pp. 102-3. [BACK]

61. Edsall, "Reagan Goes To the Hill On Tax Bill." [BACK]

62. Ibid. [BACK]

63. "Christmastime on Capitol Hill," Time, July 27, 1981, p. 25. [BACK]

64. Stockman, Triumph of Politics, p. 262. [BACK]

65. Ibid., pp. 262-63. Barrett, Gambling with History, pp. 164-65, tells the same story but dates it to June 4, which seems less likely. [BACK]

66. "Cutting Loose on Taxes," Editorial, Washington Post, July 22, 1981, p. A20. [BACK]

67. Thomas B. Edsall, "Rostenkowski Aside, House Likes Indexing," Washington Post, July 18, 1981, p. A2. [BACK]

68. "A Wealth of Tax Objections," Time, July 20, 1981, p. 23. [BACK]

69. Thomas B. Edsall, "Panel Democrats Targeting Tax Cuts at Income Below $50,000," Washington Post, July 14, 1981, p. A4. [BACK]

70. Peter Goldman, "Hanging Tough on Taxes," Newsweek, July 27, 1981, pp. 22-23. [BACK]

71. David Broder, "The Gypsy Moths," Washington Post, July 27, 1981, pp. A1, A4. [BACK]

72. David Broder, "Reagan Backs Off Televised Speech on Social Security," Washington Post, July 26, 1981, pp. A1, A5. [BACK]

73. George H. Gallup, The Gallup Poll: Public Opinion 1981 (Wilmington, Dela.: Scholarly Resources Inc., 1982), pp. 118-19; Survey #173-G. [BACK]

74. John F. Stacks, "It's Rightward On," Time, June 1, 1981, pp. 12-13. [BACK]

75. Gallup Poll, 1981, No. 191, p. 18. [BACK]

76. Broder, "Reagan Backs Off Televised Speech on Social Security." [BACK]

77. Barrett, Gambling with History, p. 169. [BACK]

78. Lou Cannon and Thomas B. Edsall, "Reagan Makes Appeal To Voters for Tax Bill," Washington Post, July 28, 1981, pp. A1, A6; Barrett, Gambling with History, pp. 169-70. [BACK]

79. Dennis Farney, "Reagan's Mastery of Economic Policies In Congress May Sag on Social Issues," Wall Street Journal, July 30, 1981, p. 14. [BACK]

80. CQA 1981, p. 103. [BACK]

81. Lou Cannon and Kathy Sawyer, "President's Speech Has Hill Switch boards Ablaze," Washington Post, July 29, 1981, pp. A1, A2. [BACK]

82. Ellie McGrath, "Tracking the Great Persuader," Time, August 10, 1981, p. 14. [BACK]

83. Barrett, Gambling with History, p. 170. [BACK]

84. McGrath, "Tracking the Great Persuader"; Cannon and Sawyer, "President's Speech Has Hill Switchboards Ablaze." [BACK]

85. Ward Sinclair and Richard L. Lyons, "Tactics That Won," Washington Post, July 30,1981, pp. A1, A8; Thomas B. Edsall, "Reagan Triumphant on Tax Cut Bill," Washington Post, July 30, 1981, pp. A1, A9. [BACK]

86. McGrath, "Tracking the Great Persuader"; Stockman, Triumph of Politics, p. 266. [BACK]

87. Stockman, Triumph of Politics, pp. 264-65. [BACK]

88. Robert W. Merry, "Congress Clears Reagan's Tax Cut Plan, Rejecting Traditional Economic Policies," Wall Street Journal, July 30, 1981, p. 3. [BACK]

89. Ibid. [BACK]

90. "Seizing the Helm," National Journal, August 8, 1981, p. 1404. [BACK]

91. See Ward Sinclair and Richard L. Lyons, "Tactics That Won," Washington Post, July 30, 1981, pp. A1, A8. [BACK]

92. Gallup Poll, 1981, No. 191, p. 20. [BACK]

93. Walter Isaacson, "Yeas 238—Nays 195," Time, August 10, 1981, p. 12. [BACK]

94. Sinclair and Lyons, "Tactics That Won"; and Edsall, "Reagan Triumphant on Tax-Cut Bill." [BACK]

95. Broder, "The Gypsy Moths." [BACK]

96. Greider, Education of David Stockman, pp. 59-60 [BACK]

97. Ibid. [BACK]

98. See "A White House Report," Program for Economic Recovery (Washington, D.C.: U.S. Government Printing Office, February 18, 1981), p. 16; and Joint Committee on Taxation, General Explanation of the Economic Recovery Tax Act Of 1981 (Washington, D.C.: U.S. Government Printing Office, 1981), Tables V-1, V-3. [BACK]

99. Isaacson, "Yeas 238—Nays 195." [BACK]


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