Memo To: SSU Students
From: Jude Wanniski
Re: An Early Account
I'd decided to devote this summer session of SSU to material from the archives that you might find illuminating. Today's offering is an article that appeared in the August 1981 issue of Esquire magazine. I'd forgotten all about it, but a fan saved a copy and faxed it to me yesterday. It isn't a perfect account of how the supply-side idea went from conception to real-world results, but it is very close. I wish I knew the author, but we have only initials, "C.W."
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First somebody thought of it. Then somebody told somebody else. Then somebody else sold it to the rest of us. Here's who.
Supply Side and How It Grew
Esquire magazine August 1981
Situated in the East Thirties, hardly the most fashionable quarter of Manhattan’s office district, the drab, dim, frugally appointed office looks like that of a languishing CPA firm with a shrinking client list. A sign over the light switch near the door pleads: DID YOU TURN THE COFFEE MACHINE OFF? Back in a tight cubicle defined by fogged glass panels, slumped behind an aging desk awash with books and papers, one comes upon a cherubic, complaisant man of thirty-five by the name of Leslie Lenkowsky.
Appearances to the contrary, Lenkkowsky is not looking for money. Lenkowsky gives out money. As the principal granting functionary for the $100 million Smith Richardson Foundation, Lenkowsky, more than anyone else, is supply side's money supply. Says Jude Wanniski, forty-five, an economic consultant and supply side's chief propagandist: “The Smith Richardson Foundation has been the source of financing in the supply-side revolution. It’s become the place to go if you have a project that needs money.”
Nobody knows that better than Wanniski. A seminal forty-thousand dollar grant from Smith Richardson in 1976 enabled him to write The Way the World Works, the first comprehensive distillation of supply-side thought. That book grew out of two articles Wanniski wrote for The Public Interest, the influential neoconservative journal whose fifty-thousand-dollar-or-so annual deficit Smith Richardson regularly underwrites.
Smith Richardson’s annual grant budget of about $3 million is modest compared with such better known foundations as Ford and Rockefeller. Yet by adroitly “targeting” (as he likes to say) its support for maximum impact, Lenkowsky has been responsible for many of the books, conferences, and organizations that have been so important in advancing supply side from fringe heresy to the theoretical foundation for our economic policy. “It doesn’t take a lot of money,” Lenkowsky says, “to make a difference.”
As grateful as they are to Lenkowsky and his practical and tactical support, however, supply siders tend to regard their domination of the economic mainstream as possessing the equivalent divine inevitability of the biblical begats.
IN THE BEGINNING, CIRCA 1971, THERE WAS ARTHUR B. LAFFER, NOW FORTY, THEN AN ECONOMIST TINKERING WITH OBSCURE MODELS AT THE OFFICE OF MANAGEMENT AND BUDGET. AIDED BY ECONOMIST ROBERT MUNDELL of Columbia University, Laffer devised the core idea of supply side – that a major cause of stagflation (concurrent inflation and stagnant growth) is the disincentive of high personal income-tax rates and that a sharp reduction in those rates would powerfully stimulate productive investment (the supply side of the economy) and spur economic growth. That was at sharp variance with the liberal Keynesian economic model, which had influenced U.S. policy since the Thirties and which saw demand stimulation by government spending as the engine of economic growth. First sketched in 1974 on a napkin in a Washington restaurant, the Laffer Curve, a dome-shaped diagram of the repressive effects of high taxes, emerged as supply side's most revered icon.
Over lunch in another Washington restaurant and in almost daily phone calls, thereafter, Laffer introduced his theory to Jude Wanniski. Soon Wanniski, who was hired as an editorial writer for The Wall Street Journal in 1972, became Laffer's chief apostle.
Wanniski knew little about economic theory. “I believe it because Art believes it,” he once said. “That's good enough for me.” But he knew what he liked. And he was blessed with a remarkable capacity for infectious zealotry. He soon effected several axial conversions of his own.
The first was Irving. Kristol, sixty-one, and the “Godfather’ of the burgeoning neoconservative movement. Through several articles on the subject, he won support for supply side among other highly placed neocons.
The second convert was Robert L. Bartley, forty-four, Wanniski's boss as editor of The Wall Street Journal editorial page. When Bartley took over the page in 1972, it was an undistinguished repository of traditional Old Right economics of the sort practiced by Alan Greenspan Milton Friedman. Wanniski introduced Bartley to Laffer and by late 1976, as Wanniski put it, "the whole editorial page of the Journal was on board." Acknowledged Bartley: “Jude had a tremendous influence over the tone and direction of the page." Because of its vast access to the business and political community, the Journal quickly became the single most influential supply-side forum.
The third Wanniski conversion was Jack Kemp, forty-six, an upwardly mobile upstate New York congressman in of an issue and as Bartley told Wanniski, “quite a piece of political horseflesh.” Following Kemp’s conversion in1976, the line of begats became complex and commingled, though service on the Journal's editorial page remained a common strain. A good example is Paul Craig Roberts, forty-two, a former Journal editorial writer and the Kemp aide who was the primary drafter of supply side's Kemp-Roth tax-cut proposals. Now as Assistant Treasury Secretary for economic policy, Robert is one of the administration's leading supply-side proponents.
The most important conversion, of course, was Ronald Reagan, who was introduced to the model in 1976 after his Jeffrey Bell read Wanniski's first Public Interest piece. “That was the break through article,” Bell said. He arranged for Laffer and other supply siders to meet with Reagan. Kemp, who had worked with Reagan in California, joined the effort. In 1978, Reagan endorsed Kemp-Roth. By 1979, said Wanniski, “he was pure supply side. He loved the stuff.”
During Reagan's 1980 Presidential campaign, the Old Right economists, especially Arthur Burns, George Shultz, and Alan Greenspan, pushed and shoved Laffer and Wanniski from the inner circle. The ouster was short-lived, for the supply siders had another convert with great upside potential: David A. Stockman, thirty-four, then a congressman from Michigan. Introduced to supply side by Kemp, Stockman was an early member of “the Cabal,” as Wanniski and Laffer called the group they formed in the mid-Seventies to plot a usurpation of the economic-policy apparatus. Stockman gained prominence last December with the impassioned and now-famous “Economic Dunkirk” memorandum to Reagan, which Stockman, along with Kemp and other supply siders, wrote and Wanniski fed to the press. Kemp persuaded Reagan to choose Stockman as budget director.
Stockman's incisive eloquence and data-base brain helped trim quickly become the administration's chief economic-policy maker. Though Kemp faded to convince Reagan to choose New York businessman Lewis Lehrman, forty-two, an ardent supply sider, as Treasury Secretary, he and Stockman did manage to install such supply siders as Paul Craig Roberts and Norman Ture in other key Treasury posts. As far as Washington is concerned, the supply siders are clearly in the ascendancy.
COMPARED TO JUDE WANNlSKI’S OTHER PIVOTAL CONVERTS, LESLIE LENKOWSKY IS NEARLY INVISIBLE. THAT REFLECTS HIS OWN TEMPERAMENT, MILD OF MANNER, SOFT OF SPEECH, HIS MIND UNBURDENED WITH THE IDEO-ologcial rigidities of most of his grantees. Lenkowsky is a born backstage operative. (His inconspicuous presence happens also to suit exactly the predilections of the trustees of, the Smith Richardson Foundation, who request that the grantees not acknowledge publicly the foundation’s role in their projects.) While the more visible supply siders have been developing the doctrine’s political clout, Lenkowsky has been central in developing its theoretical, empirical, and organizational infrastructure.
Lenkowsky’s conversion, like that of Stockman and many other once-liberal supply siders, was rooted in disillusion. During the late Sixties, Lenkowsky, a student at Franklin and Marshall College, a small liberal arts college in Lancaster, Pennsylvania, was a soldier in the revolution. He worked at the local poverty office, he tutored the disadvantaged, he tried to motivate the underachievers.
“But I began to wonder whether we really knew what we were doing,’ he says. A summer job with the Office of Economic Opportunity, which he once aspired to join after graduation, “confirmed my worst fears. It was like the war in Vietnam. They didn’t know what the hell they were up to.”
Looking for answers after graduation in 1968, Lenkowsky went to Harvard to study under another disillusioned liberal, Daniel Patrick Moynihan, now U.S. senator from New York. He began drifting inexorably toward the neocon nexus. He met Irving Kristol’s son. He met David Stockman, then the Moynihan family babysitter. When Moynihan left to join the Nixon Administration, Nathan Glazer, Moynihan’s longtime friend and coeditor of The Public Interest, became Lenkowsky’s thesis advisor.
In 1975, Glazer heard from Irving Kristol that Smith Richardson Foundation president that R. Randolph (“Randy”) Richardson was looking for staff. At Kristol’s recommendation, Richardson hired Lenkowsky. Randy, fifty-five, was the new head of a family dynasty that had build a tiny North Carolina pharmaceutical firm marketing Vicks VapoRub into a billion-dollar health- and personal-care corporation, once known as Richardson-Merrell and now as Richardson-Vicks. The foundation was created in 1935 by H. Smith Richardson, then the company’s chairman and Randy’s father. Under Smith, it pursued such routine philanthropy as aiding the Boy Scouts and historical restoration. Under Randy, who became president in 1973, it began to veer towards conservative causes.
When Lenkowsky, who had been trained as a social scientist, joined the foundation in 1976 as a director of research, he didn’t know much more about economics than Jude Wanniski. But at Harvard, in pondering the failures of liberal welfare policies, he, along with Moynihan, had become attracted to the notion of economic incentives. Lenkowsky likes to cite Winston Churchill’s definition of a proper welfare policy as both “a net below which none can fall” and a “ladder above which none can climb.” Liberals were good with the nets. But, says Lenkowsky, “we were not doing well by the ladders.” After Irving Kristol told Lenkowsky that Wanniski was “pregnant” with what later became The Way the World Works and sent him over for a talk, the broad implication of the supply side, not only for welfare but for the entire economy, says Lenkowsky, “just jumped out at me.”
Lenkowsky was soon among the faithful. He and Wanniski converted Randy Richardson. “People are divided up into weapons and ammunition,” Wanniski says. “Kemp is weapon, Wanniski is ammunition. Richardson is weapon, Lenkowsky is ammunition.”
LENKOWSKY HAS UNLEASHED A FUSILLADE. HE HAS MADE NUMEROUS GRANTS RELATED TO DEVELOPING SUPPLY-SIDE THEORY TO SUCH CONSERVATIVE ORGANIZATIONS AS THE AMERICAN ENTERPRISE INSTITUTE, THE HERI-tage foundation, the Hoover Institution, Martin Feldstein’s National Bureau of Economic Research, and Lewis Lehrman’s Lehrman Institute. He helped create and fund the International Center for Economic Policy Studies, a “supply-side think tank,” as he puts it. He recruited as program director writer George Gilder and assisted Gilder with his best selling Wealth and Poverty, a paean to the virtues of affluence, which David Stockman called “Promethean” and which Ronald Reagan has distributed to his friends.
Most recently, Smith Richardson has budgeted fifty thousand dollars for a supply-side workshop that Bruce Bartlett, author of Reaganomics: Supply Side in Action and deputy director of the Joint Economic Committee, is organizing for congressional staff members. The foundation is also considering grants to Martin Feldstein to teach a supply-side workshop at Harvard, and to James Ring Adams, who is pondering a leave from The Wall Street Journal editorial page to write a supply-side approach to municipal finance.
Lenkowsky’s influence extends far beyond financial largesse. “When I want advice on how to pull something off,” says George Gilder, “I just call Les. He has a terrific sense of tactics and strategy. He’s very shrewd about maneuvering through the Byzantine world of conservative money, through the neoconservatives, anticommunists, fanatical extremists, fundamentalists, and crazies like me. He’s on good terms with everybody,” Adds Lewis Lehrman, whose organization includes Irving Kristol and Robert Bartley as members: “Les is involved in so much of our institute I’m not sure what he’s in and what he’s out of.” Says Lenkowsky: “We’re open to all sorts of views. We have a lot of names on our Rolodex.”
Some strict-constructionist supply siders, indeed, worry that Lenkowsky is sometimes dangerously deviationist. While the purists insist that a big cut in the personal-income tax rate is the only true road to salvation, Lenkowsky sees supply side as encompassing a wide range of economic incentives.
Despite the ascendancy of supply siders of various persuasions in Washington these days, Lenkowsky knows that only a few skews in the political and economic flow could lead to a renascence of Old Right economics or even – terrible to contemplate – Old Left economics. It took the Depression to entrench Keynesianism. Unless God is indeed on the supply side, it will take a very large arsenal of weapons and ammunition, among other things, to entrench supply side. “There is,” he says, not without relish, “a hell of a long way to go.”
-- C. W.
Esquire, August 1981