Jack Kemp argued that growth could win the war on poverty

Picture a quarterback in the old American Football League, a man who has been knocked flat by linemen twice his size for a decade, wandering through a boarded-up block in Buffalo years later and asking the obvious question: why does nobody here own anything? That is, more or less, the career of Jack Kemp. He went from the huddle to the House, from the House to the cabinet, and from the cabinet to the national ticket, and at every stop he asked Republicans the same uncomfortable question. If our ideas about lower taxes, property and enterprise are so good, why do we only offer them to people who already have money?

Most politicians never ask that. Kemp asked it so often that some in his own party found him exhausting. I think he deserves a better hearing than he got, and I think the question is still the right one. This is the story of what he proposed, what Washington did with it, and what it is fair to say worked.

From the Bills to Congress

Kemp was born in Los Angeles in 1935 and played professional football, most famously as quarterback for the Buffalo Bills. He led the team to American Football League championships in 1964 and 1965, and he was named the league's most valuable player in 1965. He was also a leader among the players, serving as president of the AFL Players Association, which gave him a first-hand education in how groups of working people bargain and organize.

In 1970 he ran for Congress in the Buffalo area and won. He served in the House from 1971 to 1989, eighteen years, which is long enough to learn that ideas in Washington win slowly and lose quickly. He was a Republican in a state where Republicans were not always dominant, and in a district where a lot of voters worked in plants and mills. That mattered to his politics. He talked about growth to people who made things for a living.

The argument for growth

Kemp's central idea was straightforward and it is worth stating plainly, because it gets caricatured. The caricature says supply-side economics means "tax cuts for the rich pay for themselves." Kemp did not say that, and the serious versions of the theory do not say that. The idea was narrower.

One, people respond to incentives at the margin. If the government takes 70 cents of the next dollar you earn, you will work less, invest less or hide more of it than if it takes 30.

Two, the top marginal rate in the early 1970s was 70 percent on the highest incomes. Rates that high change behavior.

Three, therefore lowering rates across the board would encourage more work and investment and would grow the economy, even if it did not recover all the revenue.

Four, the point is growth, not a refund for the wealthy. A bigger economy is the only anti-poverty program that does not need an appropriation.

Here is the arithmetic of the incentive, with a hypothetical. Suppose a self-employed contractor is offered a weekend job that pays an extra $1,000. At a 70 percent marginal rate she keeps $1,000 times 0.30, which is $300. At 50 percent she keeps $1,000 times 0.50, which is $500. At 28 percent she keeps $1,000 times 0.72, which is $720. Same job, same sore back, and the reward for saying yes has more than doubled between the first case and the last. Multiply that decision by millions of workers and owners and you have the theory in one paragraph. Whether the effect is large or small is an empirical question, and economists argue about it, but nobody serious thinks the reward is irrelevant.

Fair enough, say the critics. Here is the strongest version of their reply: tax cuts as such do not raise as much revenue as they cost, and the 1980s deficits proved it. That criticism is serious. Supply-side tax cuts did not pay for themselves in full, and Kemp's allies who said or implied that they would were overselling. What is also true, and the critics skip it, is that the debate was never only about revenue. The pro-growth case was about the rate structure and the incentives it created, and that is why rate reform in the 1980s won votes from both parties. The details of the idea are laid out in The Laffer curve explained, and the claim it never actually made, and a related profile, Jack Kemp, the quarterback who sold the party on growth, covers the economic side of his story.

Kemp-Roth and the 1981 law

In the late 1970s Kemp and Senator William Roth of Delaware, a Republican, put their names on a bill to cut individual income tax rates across the board by roughly a third over several years. It was known, naturally, as Kemp-Roth. It was a radical proposal when it began. Most of the Republican establishment of the day preferred to balance the budget first and cut taxes later.

Ronald Reagan adopted the idea as a centerpiece of his 1980 campaign, and when he took office the result was the Economic Recovery Tax Act of 1981. The law cut individual rates by 25 percent over three years: 5 percent in the first, then 10 percent and 10 percent in the following two. Check the arithmetic: 5 plus 10 plus 10 is 25, which is the headline number, and the phase-in meant families felt only the first slice in 1981. The top rate fell from 70 percent to 50 percent. And the law introduced indexing of tax brackets to inflation, beginning in 1985, so that a raise that only matched rising prices did not push a family into a higher bracket. That last feature, which got less attention, may be the most durable thing in the law. reagan's 1981 tax cut and the quiet end of bracket creep explains how bracket creep worked and why indexing ended it.

Kemp did not stop there. He was also a champion of rate reform, which in 1986 produced the Tax Reform Act that cut the top rate to 28 percent and closed loopholes in exchange. His fingerprints were on the philosophy: lower rates, wider base. For the rest of the story, see the 1986 tax reform that lowered rates by closing loopholes.

Enterprise zones: growth for places the party had given up on

Here is where Kemp really stood apart. In 1980 he introduced, with Democratic congressman Robert Garcia of the South Bronx, a bill to create what he called enterprise zones. The idea was to take neighborhoods with chronic unemployment and abandoned property and, within them, cut taxes, ease regulations and let small business owners and workers keep more of what they earned.

I want you to notice who his partner was: a Democrat from one of the poorest districts in the country. This was a Republican who thought that tax cuts and deregulation were not just for suburban shopkeepers and who was willing to put them to the test in the places where government programs had been tried the longest and had failed the most.

What happened to the idea? Congress did not pass his version in the form he wanted. States adopted their own enterprise zones, and the federal government later created Empowerment Zones (in 1993, under Bill Clinton) and Renewal Communities (in 2000). Evaluating them is hard. Studies of the state programs have come out with mixed results, and anybody who tells you that enterprise zones lifted whole neighborhoods out of poverty is overselling. Anybody who says they accomplished nothing is also overstating. The fair verdict is that the idea was sound in its direction, because lower costs for hiring and building in a poor area make sense, but that small tax incentives alone cannot overcome a place with crime, bad schools and no capital. Kemp understood that. He said repeatedly that the solution was a package: taxes, property, schools and safety together.

One natural place to see this is the link with the cost of land and buildings. If you cannot get permission to build, tax relief does nothing. zoning may be the biggest price control you never got to vote on describes how local rules can strangle the very construction a zone is supposed to encourage.

The objection from the right

Kemp took fire from two directions, and the one from his own side deserves a fair hearing. Deficit hawks in the party, including some who served alongside him, argued that tax cuts without matching spending cuts left the country with bigger deficits and that Kemp was too relaxed about it. They were not wrong that the deficits of the 1980s were large and that spending did not fall to match. Kemp's answer was that a growing economy, not a shrinking budget, was the way out, and that Republicans who wanted spending cuts had to win those votes in Congress rather than blame tax relief for their absence. You may think he was right, or you may think the hawks had the better of it. Either way, the argument is a healthy one, and it is why Why Spending Restraint Keeps Losing in Washington, Whoever Is in Charge is worth reading beside this post.

HUD and tenant ownership

In 1989 President George H. W. Bush named Kemp Secretary of Housing and Urban Development, a department that conservatives had often wanted to abolish. Kemp took the job and tried to change what it did. He served until January 1993.

The signature program was tenant ownership: letting residents of public housing manage their buildings and eventually buy their units. He called the effort HOPE, short for Home Ownership for People Everywhere. His belief was that the wall between renting and owning was a wall between dependence and wealth. A family that owns its home has an asset to pass on. A family that rents public housing can lose its place the moment its income rises.

Two things need to be said honestly. First, the program was small. Congress funded it modestly, and only a limited number of public-housing residents ever had the chance to buy. Second, Kemp was working inside a bureaucracy that did not share his view, and he had to cope with the usual management troubles that any large agency produces. The record on HUD in that period is mixed, and an honest reader should check the reports from the department's inspector general and the Government Accountability Office rather than my summary.

Yet I will defend the principle. The idea that residents of public housing should have a route to ownership is fully consistent with conservative philosophy. It treats the poor as capable adults. It refuses to assume that poor families cannot handle the responsibilities that the rest of us take for granted. If you want a related story, Edward Brooke of Massachusetts took a different route to helping public-housing tenants; see Edward Brooke won Massachusetts as a Republican and changed public housing.

1996: the ticket

In August 1996 Bob Dole chose Kemp as his running mate. The Dole-Kemp ticket ran on an across-the-board income tax cut of 15 percent, along with other economic proposals, and Kemp was famous for his optimism and his good humor. He debated Vice President Al Gore in October. The Clinton-Gore ticket won, and Kemp's national political career ended with it. He died in May 2009.

The loss does not erase the argument. Dole's own career gets its own treatment in Bob Dole came home wounded from Italy and became a master of the Senate, and it is worth reading both stories side by side. Dole was the master of process who knew where every vote was. Kemp was the evangelist who believed that if you told the story of growth well enough, the votes would follow. A party needs both, and the 1996 ticket put them in the same car.

What Kemp teaches Republicans

Let me give a few lessons in the form of verdicts.

Verdict one: a party that only talks about growth to people who already have jobs is leaving votes and ideas on the table. Kemp insisted that low taxes, property ownership and enterprise were for everyone.

Verdict two: be honest about trade-offs. The supply-side case is strongest when it is stated modestly. Cutting rates raises growth, but it does not eliminate the cost of government, and a party that pretends it does will lose the argument on the first bad budget year.

Verdict three: the poor are not a problem to be managed. They are a talent to be freed. This is the point where Kemp is closest to the best of the Republican tradition, which began with Lincoln's insistence on free labor and the dignity of work.

Verdict four: try the idea, measure it and report. Enterprise zones deserve a rigorous modern test, with careful evaluation, rather than either blanket praise or blanket dismissal.

There is a skeptic's question worth answering. Why should a conservative worry about inner-city policy at all when the party's base is elsewhere? Because the principles do not stop at a ZIP code. If you believe that work, ownership and enterprise are the foundations of a free society, you cannot exempt a neighborhood from them. And if you do exempt it, don't be shocked when it votes for someone who promises something different.

The bottom line

• Kemp's core idea was that lower rates and wider ownership help people at every income level; judge it by his proposals, not by the caricature.
• Be honest about the limits. Supply-side tax cuts did not fully pay for themselves, and enterprise zones produced mixed results.
• Homeownership is a conservative goal, and tenant ownership of public housing deserves a serious modern trial.
• Ask your local officials how zoning and permits affect the cost of building where you live; tax relief means little if no one is allowed to build.
• Read the actual text of the 1981 and 1986 tax laws on Congress.gov, and decide for yourself what worked.