Bob Dole, Supply-Sider Jude Wanniski September 16, 1996

Memo To: R. W. Apple Jr., The New York Times
From: Jude Wanniski
Re: Your September 8th story on "15% tax solution"

Dole has actually committed himself to a "root and branch" reform of the tax system. In his acceptance speech, he got his most enthusiastic applause when he made this commitment ~ as did Kemp in his acceptance speech. The problem, which your piece makes clear, is that Dole has so far emphasized the 15% plan, which is small change at high expense in terms of static scoring. The 15% plan was not an idea recommended by Steve Forbes or Kemp, both of whom recommended a rollback of the C90 and '93 tax increases. It was chosen on the grounds that the distribution effects could be more easily defended as "fair." Put aside were the arguments that it would be very expensive if it had to be matched by spending cuts over six years. My criticism in a Times op-ed occurred before Kemp was selected and it became clear Dole was committing to a "root and branch" reform — which meant the 15% cut was a temporary fix of the existing system, not the central proposal.

On the campaign trail, the shift of emphasis began last week, but it was hardly noticed in the news about Iraq. I did a piece last week, which I send along, which discusses the problems of transforming a campaign that had been designed without Kemp to one that integrates his ideas and team. If you recall, Dole & Newt had endorsed the findings of the Kemp tax commission, and at the press conference helped Jack dump the federal tax codes into a garbage pail. The commission did not recommend a flat tax, but a simpler, fairer, flatter system that would be written from scratch.

Dole never departed from this idea. It was Steve Forbes who decided to run on the pure Armey flat tax, with no mortgage interest or charitable deductions. Dole's criticisms of the Forbes1 flat tax were well in bounds. There is nothing in supply-side economic theory that requires a flat tax. Kemp only got into the Forbes1 race when Dole's agents in New York (really D'Amato's) were misrepresenting Steve's proposals. The governor of New Hampshire had also used numbers he knew were wrong in ads that demolished Forbes in that primary.

Dole is actually not a late convert to supply-side. After the Bush defeat in C92, Dole was public in saying he had experienced the Reagan years and the Bush years, and the Reagan years were better. In the two years I advised him, 1993-94, he was as supply-side as anyone in Congress. In the summer of '94, when Tim Russert asked him what would be the first thing he would do as President, he said he would cut the capital gains tax. I decided to break with Dole in early March 1995, when his rhetoric began switching to conform to the budget-balancing mania underpinning the Contract With America. It was at that point that I urged Forbes to enter the race, or we would have no one carrying the growth banner.

I've known Dole for 27 years, on good terms from '69 to late '80. He was among those who doubted the wisdom of the Reagan tax cuts and helped delay them for three years. He did so because of the influence of people like Greenspan, George Shultz, Pete Domenici and the conservative bankers, who persuaded him as the new Senate Finance Chairman that it was imperative that the Reagan tax cuts be deferred. He was an observer more than an instigator. The strength of the economic expansion that began when Volcker stopped fighting it with monetary deflation, in the summer of C82, made Dole more of a believer. Our contacts became warmer by late '85, when he urged the Reagan White House to appoint Wayne Angell to the Fed. I called him to congratulate him on the move, as Angell was clearly a supply-sider and a gold advocate. Angell and I became close friends, traveling together to Moscow and Beijing, and the link enabled Dole and Kemp to communicate at long distance. Angell and I both knew that Dole and Kemp did not dislike each other and that Dole was not a supply-side enemy. The press corps over the years has written so much nonsense on all this that it is impossible to unwind all the mythology. Dole intervened with the Bush White House in 1990 on Angell's behalf, trying to talk Sununu into getting a capgains tax cut into the Deal of the Century that Dick Darman had engineered. I had asked Wayne to do this with Dole on behalf of Newt, who was opposing the Bush White House at the time.

In early '93, Angell persuaded me and Dole to arrange an informal advisory relationship, which we cemented with a brunch at the Four Seasons. I told Dole that I did not believe Jack would run in '96 and that I would commit myself to him as long as he found my counsel rewarding. I told him Jack's confidence in himself had been shattered in the bad defeat he suffered in C88 and the debts he had piled up. In the following two years, I wrote hundreds of memos to Dole and helped prepare him for many tv appearances. I guaranteed him that I would not cut loose from him if Jack decided to run. This was one of the reasons Jack finally decided not to run, I think, because he knew I was not going to leave Dole after having worked so closely with him for two years.

In fact, I only broke my relationship with Dole after Jack announced he would not run. When Dole shifted gears to put budget balancing and cultural conservatism ahead of the growth issues, in order to counter Phil Gramm, I became afraid that we would play out the year with our growth ideas dead. That is not now the case.

I'm writing this to you because I have great respect for your journalistic honesty and insights, and want you to get a more accurate picture of what is going on. Your reports are taken as gospel by so many important journalists, print and electronic, that even small errors on your part become quickly magnified into major baloney and permanent caricature. I've been proselytizing supply-side economics for almost 25 years, and the number of journalists who have seriously tried to learn what it is all about have been fewer than a dozen. They all know what it is from reading about it in the papers.

What unfolds between now and November 5 should be less of a surprise to you because of this memo. Other reporters will have to cover up their mistakes by saying Dole is doing this, that and the other thing out of desperation. The Dole/Kemp campaign will be much bolder, bigger and brighter than is now apparent. From my standpoint, it should win if it is properly executed, because we know how to grow the economy rapidly without inflation, and the Clinton team admits it does not.