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“What Have You Done For Me Lately?” The Welfare State, Tax Politics, and the Search for a New Majority, 1968–1980

  • Molly C. Michelmore (a1)
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1. “Game Satirizing Life on Welfare Draws Criticism But Sells Well,” New York Times, 30 November 1980, 60. Portions of this article are adapted from my book, Tax and Spend: The Welfare State, Tax Politics, and the Limits of American Liberalism (Philadelphia, 2012). This project would not have been possible without the support of people too numerous to name, but I would like specially to thank Matt Lassiter, Brian Balogh, Sid Milkis, Julian Zelizer, Gina Morantz-Sanchez, and Maris Vinovskis, as well as the editors at University of Pennsylvania Press, the anonymous reviewers at the Journal of Policy History, and my colleagues at Washington and Lee University.

2. Hammerhead Enterprises, Public Assistance: Why Work for a Living When You Can Play This Great Welfare Game, 1980, author’s personal collection.

3. Nicholas Lemann, “Cheat Thrills and ‘Public Assistance,’” Washington Post,11 November 1980, B3.

4. M. Stanton Evans, “Can Reagan and Wallace Get Together?” Conservative Digest, November 1975, 29.

5. U.S. Court of Appeals, 2nd Ct., Hammerhead Enterprises, Inc. v. Brezenoff, 28 April 1983, 6 available online at http://openjurist.org/707/f2d/33. The rules clearly disadvantaged players on the Working Person’s Rut, who might be asked to pay out money for gas, for property taxes (ten times a roll of the dice), for school tax ($50), for a new tire ($50 towing charge), for rent (also ten times the dice), or for a monthly parking fee ($30). In the game, workers’ children faced violence at the hands of “ethnic gangs” and the threat of being “bussed back to inner-city schools”; their relatives risked being killed by a “rehabilitated’ murderer,” or “raped by a paroled rapist”; their daughter’s “ethnic boyfriend” might cost them $150 in hospital bills; government “overregulation” or affirmative-action programs for “ethnic immigrants” and “‘disadvantaged,’ minority, homosexual, Buddhist female[s]” might put them out of a job.

6. Lemann, “Cheat Thrills and ‘Public Assistance,’” B3.

7. The racial and gender politics in Public Assistance were hard to miss. Many of the chance situations—“pitch pennies all day,” “Lincoln needs a new paint job,” “Finance company repossesses your Cadillac,” not to mention repeated references to illegitimacy—drew on common racial stereotypes about African Americans. Not surprisingly, the NAACP urged members to boycott stores that sold the game. NOW condemned the game for “perpetuat[ing] myths and totally misrepresent[ing] the role of women on welfare.” Chief of the New York City’s Human Resources Agency Stanley Brezenoff attacked the game as an “ugly and damaging slam at . . . society’s poorest citizens” that did a “grave injustice to taxpayers and welfare clients alike.” Carter administration Health and Human Services secretary Patricia Harris criticized its racism and sexism and dismissed it as a “vicious brand of stereotyping.” Hammerhead Enterprises, Inc. v. Brezenoff, 9 n. 2.

8. “Game Satirizing Life on Welfare Draws Criticism But Sells Well.”

9. For an analysis on the changing meaning of “welfare” and its political implications, see Katz, Michael B. and Thomas, Lorrin, “The Invention of ‘Welfare’ in America,” Journal of Policy History 10, no. 4 (1998): 399418, at 401.

10. “Interview with Governor Reagan: Welfare America’s No. 1 Problem,” U.S. News and World Report, 1 March 1971, 39.

11. For a study of the importance of tax policy to the Democratic and Republican platforms after 1968, see Hansen, Susan B., The Politics of Taxation: Revenue Without Representation (New York, 1983), 8697and table 3.2.

12. Evans, “Can Reagan and Wallace Get Together?” 29.

13. Richard Viguerie, “Let’s Get Union Members to Support Conservatives,” Conservative Digest, August 1977, 57.

14. For more on liberals’ reconciliation with modern capitalism and their abandonment of structural reform, see Brinkley, Alan, The End of Reform: New Deal Liberalism in Recession and War (New York, 1995).

15. Franklin Roosevelt, “Annual Message to Congress,” 4 January 1935, in Wooley, John T. and Peters, Gerhard, eds., The American Presidency Project (Santa Barbara, 1999–), 14890; President William J. Clinton, “Address Before a Joint Session of Congress on the State of the Union,” 23 January 1996, in Wooley and Peters, The American Presidency Project, 53091; Clinton, “Address Accepting the Democratic Nomination at the Democratic National Convention in New York,” 16 July 1992, Wooley and Peters, The American Presidency Project,25958.

16. Despite unprecedented demand put on federal coffers by the explosion of New Deal spending programs, and contrary to his own fiscally conservative inclinations, Roosevelt resisted any attempt to enlarge the federal income tax system, relying instead on revenues generated by regressive, but largely hidden, consumption and “sin” taxes. It was not until 1942 that Roosevelt endorsed base-broadening reform to raise “taxes to beat the Axis.” For more on Depression-era tax policy, see Leff, Mark J., The Limits of Symbolic Reform: The New Deal and Taxation, 1933–1939 (Cambridge, 1984). For a brief history of World War II tax policy, see Brownlee, W. Eliot, Federal Taxation in America: A Short History (Cambridge, 2004), 8590.

17. For more on the Revenue Act of 1964—which cut individual and corporate income taxes across the board—see Collins, Robert, More: The Politics of Growth in Postwar America (New York, 2000), 59.

18. The term “gateless poverty” is taken from President Johnson’s commencement address to the graduates of historically black Howard University in Washington, D.C. In the speech, the president pledged a new direction for civil rights legislation, one that reached beyond formal equality to provide “equality as a fact and equality as a result.” “Commencement Address at Howard University: ‘To Fulfill These Rights,’” 4 June 1965, in Woolley and Peters, The American Presidency Project,27201.

19. Radio scripts, “To be Delivered by Realtor” and “To be Delivered by Mortgagee,” Records of the Federal Housing Administration (RG 31), Program Correspondence of the Assistant Commissioner, box 9, quoted in Freund, David M. P., Colored Property: State Policy and White Racial Politics in Suburban America (Chicago, 2007), 199.

20. Arthur Altmeyer, “The Need for Social Security,” quoted in Campbell, Andrea and Morgan, Kimberly, “Financing the Welfare State: Elite Politics and the Decline of the Social Insurance Model in America,” Studies in American Political Development 19, no. 2 (Fall 2005): 197; Ellen Woodward, “America’s Further Needs in Social Security: Address to the National Conference on Family Relations,” Cleveland, 22 May 1943, in National Archives and Records Administration II, College Park, Md. (hereafter NARA II), HEW, Family Security Agency, Office of Information Reference Files, 1939–46, box 26, File: SSB Addresses.

21. David Lawrence, “What Is Right in the Left?” U.S. News and World Report, 20 January 1950, 35. For a history of the rocky relationship between business interests and the liberal state, see Phillips-Fein, Kim, Invisible Hands: The Businessmen’s Crusade Against the New Deal (New York, 2009).

22. For more on Detroit’s “welfare king,” see Rufus Jarman, “Detroit Cracks Down on Relief Chiselers,” Saturday Evening Post,10 December 1949, 122.

23. Commission on Governmental Efficiency and Economy, The Department of Welfare: City of Baltimore (Baltimore, 1947); Jarman, “Detroit Cracks Down on Relief Chiselers,” 122.

24. Rep. Wilbur Mills, U.S. House, Congressional Record, 81st Cong., 1st sess., 5 October 1949, quoted in Zelizer, , Taxing America: Wilbur D. Mills, Congress, and the State, 1945–1975 (New York, 1998), 75.

25. Lyndon B. Johnson, OEO Public Affairs, Memorandum to all OEO Staff Members, “Remarks of the President at the Swearing-in Ceremony of Hon. Sargent Shriver as Director, Office of Economic Opportunity, East Room of the White House,” 16 October 1964, Lyndon B. Johnson Library (hereafter LBJL), White House Central Files (hereafter WHCF) Administrative History, OEO, box 2, File: “Vol. II—Documentary Supplement, chap. 1 (2 of 2).

26. Johnson, quoted in Bertram Harding, A Narrative History of the War on Poverty, ii, LBJL, WHCF, Administrative History, OEO, box 1 (Crisis of 1967), File: Vol. 1, Part 2, Narrative History.

27. By the end of the 1950s, the unmarried mothers and nonwhite families were disproportionately represented on the welfare rolls. For a history of how race and gender have both shaped and been shaped by welfare policies, see Gwendolyn Mink, The Wages of Motherhood: Inequality in the Welfare State (Ithaca, 1995). See also Solinger, Rickie, Wake Up Little Susie: Single Pregnancy and Race Before Roe v. Wade (New York, 1992), and Solinger, , Beggars and Choosers: How the Politics of Choice Shapes Adoption, Abortion, and Welfare in the United States (New York, 2001).

28. Friedman, Murray, Overcoming Middle-Class Rage (New York, 1971), 13; George Wiley, untitled speech dated 5 March (1973), George A. Wiley Papers, box 10, Folder 3, Wisconsin State Historical Society, Madison, quoted in Isaac Martin, “The Origins of Populist Neoliberalism, Or How the Tax Revolt Turned Right,” paper prepared for the Annual Meetings of the Social Science History Association, Portland, Oregon, 3–5 November 2005.

29. June Alexander to Rep. Martha Griffiths (D-Mich.), 20 June 1968, Martha Griffiths Papers, Bentley Historical Library, University of Michigan, Ann Arbor, box 28.

30. For an analysis of how the U.S. government has provided “hidden” assistance to the middle class, see Howard, Christopher, The Welfare State Nobody Knows: Debunking Myths About U.S. Social Policy (Princeton, 2007). On the political consequences of this “hidden welfare state,” see Suzanne Mettler, “The Transformed Welfare State and the Redistribution of Political Voice,” in Pierson, Paul and Skocpol, Theda, ed., The Transformation of American Politics: Activist Government and the Rise of Conservatism (Princeton, 2007): 191222. See also Steinmo, Sven, Taxation and Democracy: Swedish, British, and American Approaches to Financing the Modern State (New Haven, 1994).

31. St. Louis Tax Reform Group, Press Release, 15 February 1973, in Wisconsin Historical Society (hereafter WHS), MEJ, box 18F: 8TJP BKGR, St. Louis Tax Reform Group and Missouri Tax Reform Group (2).

32. ANTE UP, Taxaction2, 6 (June 1975); 2, 8 (August 1975); in WHS, MEJ, box 18, File 1: TJP, BKGR, State Organizations–Calif. Americans Nonpartisan for Tax Equity.

33. Martin, Isaac, The Permanent Tax Revolt: How the Property Tax Transformed American Politics (Stanford, 2008), 54.

34. Congress had directed the Treasury Department to undertake this audit as part of the Revenue and Expenditure Control Act of 1968.

35. House Ways and Means Committee, Tax Reform, 1969, Part 1: Hearings, 91st Cong., 1st sess., 4 September 1968 (Washington, D.C., 1969), 4; Witte, John, The Politics and Development of the Federal Income Tax (Madison, 1985), 166; “House Committee Begins Major Tax Reform Proposals,” Congressional Quarterly,28 February 1969, 312; see also U.S. Congress, Joint Committee on Internal Revenue Taxation, Summary of HR 13270, Tax Reform Act of 1969 as Reported by the Committee on Finance, 91st Cong., 1st sess., 18 November 1969 (Washington, D.C.).

36. In 1967 and 1968, President Lyndon Johnson pushed—at first reluctantly and then insistently—for a 10 percent income tax surcharge to cool down an economy overheated by spending for the Vietnam War, domestic spending, and a massive, across-the-board tax cut passed in 1964. In return for the surcharge, which was included in the Revenue and Expenditure Control Act of 1968, Congress, led by Ways and Means Chairman Wilbur D. Mills (D-Ark.), demanded $6 billion of reductions in domestic spending. Eileen Shanahan, “Taxes: Why Reforms, at Last, May Be in Reach,” New York Times, 27 July 1960, E2; “House Committee Begins Major Tax Reform Proposals.” For an analysis of the bill, see Robert M. Collins, “The Economic Crisis of 1968 and the Waning of the ‘American Century,’” American Historical Review101, no. 2 (April 1996): 396–422.

37. Anthony Lewis, “When Tax Justice Is Not Seen to Be Done,” New York Times, 3 August 1969, E11.

38. Eileen Shanahan, “Full Nixon Tax Reform Bill Seems Unlikely in ‘69,” New York Times, 20 March 1969, 23. For more on the “tax community” and its efforts to reform the Internal Revenue Code, see Zelizer, Taxing America.

39. “Tax-Relief Bill with Some Reform Provisions Reported,” Congressional Quarterly, 7 November 1969, 2186.

40. John W. Finney, “Economy 1: A Lot of Politics in That Tax Bill,” New York Times, 14 December 1969, E1. The phrase “unpoor, unyoung and unblack” comes from Ben Wattenberg and Richard Scammon’s The Real Majority (1970). Arguing that the average American voter was a “forty-seven year old wife of a machinist living in suburban Dayton,” Scammon and Wattenberg attempted to lay out a strategy for victory.” See Scammon and Wattenberg, The Real Majority(New York, 1970), chaps. 4 and 5.

41. Senate Committee on Finance, Tax Reform Act of 1969: Hearings, 91st Cong., 1st sess., 4, 5 September 1969 (Washington, D.C., 1969), 10, 513.

42. David Kennedy, Robert P. Mayo, and Paul McCracken, Memorandum to RMN, 19 December 1969, Nixon Presidential Materials Project (hereafter NPMP), WHCF, Subject Files, FI, box 58, File: EX FI 11, Taxation, 5 of (?). Jonathan Rose to Peter Flanigan, “Possible Veto of Tax Bill,” 19 December 1969, NPMP, WHCF, Subject Files, FI, box 58, File: EX FI 11 Taxation 5 of (?).

43. Andrew H. Malcolm, “Shift of Tax Burden Sought,” New York Times, 11 January 1971, 67.

44. For an analysis of the Silent Majority as an amalgam of radical insurgency and conservative backlash, see Cowie, Jefferson, Stayin’ Alive: The 1970s and the Last Days of the Working Class (New York, 2010), and Cowie, , “‘Vigorously Left, Right and Center’: The Crosscurrents of Working-Class America in the 1970s,” in America in the Seventies, ed. Bailey, Beth and Farber, David (Lawrence, Kans., 2004), 8082; and Michael Harrington, “Two Cheers for Socialism,” Harpers, October 1976, 78.

45. Robert Bartell, acting president, National Tax Action, quoted in “Measures to Finance Schools Are Being Defeated Across U.S.,” New York Times, 24 May 1970, 80.

46. Martin, Permanent Tax Revolt, 55.

47. “Phone Tax Protest Planned,” New York Times, 13 April 1970, 70.

48. Martin, Permanent Tax Revolt, 56.

49. Quoted in “Economic Issues: Views of Top Democratic Rivals,” Congressional Quarterly, 10 June 1972, 1332. For the evolution of McGovern’s economic policy, see Weil, Gordon, The Long Shot: George McGovern Runs for President (New York, 1973); White, Theodore, The Making of the President, 1972 (New York, 1973). McGovern proposed to redress the imbalance in the federal income tax system by raising the minimum tax, increasing corporate tax rates, and reforming existing estate and gift tax laws. In his “National Fair Share Program,” centrist senator Ed Muskie (D-Me.) promised to eliminate $14 billion in unfair loopholes. After he had declared his candidacy for the presidential nomination, the conservative Mills introduced legislation in the Ways and Means Committee that promised to “repeal virtually all tax preferences over the period 1974–1976.” See also “Democratic National Convention, Majority Report of the Platform Committee, Congressional Quarterly, 1 July 1972, 1728–29.

50. Majority Report of the Platform Committee, 1728–30.

51. Economic Affairs Committee, Democratic Policy Council, 1972, “Issues and Alternatives in Economic Policy,” NPMP, WHCF, SMOF, Herbert Stein, box 49, File: Memoranda.

52. Jerry Berman, Memorandum to CHNBP (Committee on Human Needs and Budget Priorities) Steering Committee, “Counter or Alternative Budget,” draft, 14 February 1973, WHS, GWP, box 4, File: CHNBP.

53. Paul Clancy, “Ex-Senator Stumps for Tax Reform,” Charlotte Observer, 15 February 1973, WHS, MEJ, box 17, File 4: Background, National Organizations, Tax Action, Harris.

54. Carl P. Leubsdorf, “Harris Launching ‘Tax Justice Campaign,” Montgomery Journal, 12 February 1973, WHS, MEJ, box 17, File 4: Background, National Organizations, Tax Action, Harris. Although the NPA boasted an impressive roster of national support, including distinguished economists, labor leaders, and civil rights veterans, the group depended on grassroots activists to organize and mobilize taxpayers. Local organizations, rather than the national office, staged and coordinated Tax Action Day events. In Arkansas, members organized a “tour of five corporate ‘tax avoiders’ for a busload of average taxpayers and reporters,” making stops at the local offices of the Georgia-Pacific Railroad and Alcoa. In San Francisco, local groups delivered a “blown-up check for $24 million” representing a “welfare payment from average taxpayers” to the city’s Alcoa building. Atlanta’s Tax Action Coalition organized 250 people in front of the Georgia Power Company to present the utility with a “Tax Avoider” award. In Milwaukee, some five hundred people, many carrying signs protesting the unfairness of the present tax system, marched into the rotunda of the City Hall to attend a rally sponsored by a local Taxes and Taxpayers (TNT) group. Advisory Board, Tax Action Campaign, WHS, MEJ, box 17, File 4: Background, National Organizations, Tax Action, Harris; Tax Action Campaign, “Tax Action Day—April 16, 1973,” Summary of Activities, in WHS, MEJ, box 17, File 4: National Organizations, Tax Action, Fred Harris.

55. National Tax Action, “Karen Miller is Fed Up,” Advertisement, New York Times, 14 April 1973, Section 4, p. 18, Column 1–7.

56. Wiley, “The Need for a Taxpayers’ Uprising,” Speech to National Council of the Church of Christ Conference on Taxes and Redistribution of Wealth, 5 March 1973, in WHS, MEJ, MS 766, box 11, File: Tax Reform Conference.

57. Movement for Economic Justice, News Release, “Former Welfare Head to Organize Taxpayers,” 5 March 1973, in WHS, MEJ, box 22, File: Tax Justice Project, Mailings, Flyers, Newsletters.

58. At the national level, the movement for welfare rights petered out after 1972 and the NWRO officially closed its doors in 1975. Welfare activism continued at the local level, as small groups of welfare recipients came together to challenge state and local welfare laws and regulations. See Orleck, Anelisse, Storming Caesar’s Palace: How Black Mothers Fought Their Own War on Poverty (Boston, 2005); Nasstrom, Kathryn L., Everybody’s Grandmother and Nobody’s Fool: Frances Freeborn Pauley and the Struggle for Social Justice (Ithaca, 2000); Kornbluh, Felicia, The Battle for Welfare Rights: Politics and Poverty in Modern America (Philadelphia, 2007).

59. Movement for Economic Justice, Flier, About the Movement for Economic Justice, WHS, MEJ, MS 766, box 11, File: Tax Reform Conference; Movement for Economic Justice, letter, 6 February 1973, in WHS, MEJ, box 22.

60. Wiley, “Need for a Taxpayer’s Uprising”; Discussion Draft on Organization, 29 August 1974, WHS, MEJ, File 4: TJP BKGR—State Organizations, California Tax Reform Association.

61. Community Tax Aid for the Tax Justice Project and the Movement for Economic Justice, Tax Clinic Handbook: A Guide for Volunteers, 1973, WHS, MEJ, box 22, File 15: Tax Clinics, Tax Clinic Handbook.

62. Movement for Economic Justice, letter, 6 February 1973.

63. Barry [No Last Name] to Tom and Ralph [Nader], memorandum, “Organizing in Ways and Means Districts,” 5 May 1973, WHS, MEJ, box 17, File 6: TJP, BKGR—Tax Reform and Research Group (Nader).

64. Movement for Economic Justice, Flier, Welfare for Wall Street, in Tax Organizing Kit Prepared by the MEJ for Unions, WHS, MEJ, box 16, File 21: NCTJ, TJA, Unions.

65. Movement for Economic Justice, flier, The Political Pickpockets, in Tax Organizing Kit.

66. Movement for Economic Justice, Flier, America—Why Business Loves to Leave It, in Tax Organizing Kit. A sample TJP form letter urged legislators to endorse “tax reform which would take away unfair tax credits, subsidies, depletion allowances and other tax loopholes from the large corporations,” while “lowering taxes for middle and lower income families” in order to “put more money in the hands of the people and help our economy.” See Tax Justice Project, flier, How to Write Your Congressman, in Tax Organizing Kit.

67. Tax Justice Project, flier, Tax Reform—Crucial in the Fight Against Recession and Inflation, in Tax Organizing Kit.

68. National Committee for Tax Justice, draft, “Dear Colleague Letter,” 18 November 1975, WHS, MEJ, box 16, File 20: NCTJ TJA Mailings.

69. According to the Joint Committee on Taxation, by 1978 the average worker “lost” about 5.8 percent of her earnings to the Social Security tax; thirty years earlier, this figure had been only 1 percent. Study cited in “Mauled by Federal Programs, Steps Urged to Ease Middle-Class Tax Burdens,” Congressional Quarterly, 8 April 1978, 828–33.

70. In the lowest income brackets, Social Security taxes increased by 13.8 percent and combined personal income taxes increased by 31 percent; in the middle brackets, Social Security taxes rose by 21.6 percent, thanks to artificially inflated incomes and legislation raising the amount of earnings subject to the Social Security tax, while personal income taxes rose 26.5 percent. Inflation-driven wage increases often pushed taxpayers into higher tax brackets—a phenomenon known as bracket creep. Because brackets were smallest in the lower- and middle-income ranges, and larger toward the top, bracket creep largely affected lower- and middle-income taxpayers. See Joint Economic Committee (JEC), Subcommittee on Consumer Economics, Staff Study: “Inflation and the Consumer in 1975,” 10 February 1974, 1–5, in WHS, MEJ, box 16, File 18: NCTJ-TJA-Congress and Alan Murray, “Income Tax Progression and Inflation,” 26th National Conference of the Tax Foundation, December 1974, cited in JEC Staff Study, 25.

71. Brown, Michael K., “The Segmented Welfare State: Distributive Conflict and Retrenchment in the United States, 1968–1984,” in Remaking the Welfare State: Retrenchment and Social Policy in America and Europe, ed. Brown, Michael K. (Philadelphia, 1988), 198.

72. The national media description of the middle and working classes shifted in the mid-1970s. Where the late 1960s and early 1970s had seen a proliferation of almost hysterical warnings about the potentially violent frustration and anger of the Silent Majority, by 1974 these narratives had been supplanted by stories about a broad middle class squeezed by high taxes and a rising cost of living. For examples, see “Squeeze on America’s Middle Class: A Special Report,” U.S. News and World Report, 14 October 1974, 42; “Middle Class Squeeze,” Business Week, 10 March 1975, 54.

73. See, for example, Jackson, Kenneth, Crabgrass Frontier: The Suburbanization of the United States (New York, 1985); Self, Robert O., American Babylon: Race and the Struggle for Postwar Oakland (Princeton, 2003), Katznelson, Ira, When Affirmative Action Was White: An Untold History of Racial Inequality in Twentieth-Century America (New York, 2005); Howard, Christopher, The Welfare State Nobody Knows: Debunking Myths About U.S. Social Policy (Princeton, 2007); Hacker, Jacob, The Divided Welfare State: The Battle Over Public and Private Social Benefits in the United States (Cambridge, 2004); and Klein, Jennifer, For All These Rights: Business, Labor, and the Shaping of America’s Public-Private Welfare State (Princeton, 2003).

74. Russell Barta, “Are the Rules Changing?” America, 20 October 1971, 345, quoted in Chappell, Marissa, The War on Welfare: Family, Poverty, and Politics in Modern America (Philadelphia, 2010), 114; By 1960, Americans with incomes above the median claimed a slim majority (51 percent) of direct government transfer payments from the federal government. Middle-class taxpayers profited particularly from veterans and farm payments, but even those programs that most benefited the poor provided some aid to the middle- and upper-income brackets. For more, see Brown, Michael K., Race, Money, and the American Welfare State (Ithaca, 1999), tables 8a and b, 178.

75. For more on the political consequences of the G.I. Bill, see Mettler, Suzanne, “Bringing the State Back in to Civic Engagement: Policy Feedback Effects of the GI Bill for World War II Veterans,” American Political Science Review 96, no. 2 (June 2002): 351–65. See also Mettler, “20,000 Leagues Under the State,” Washington Monthly, July–August 2011, available online at http://www.washingtonmonthly.com/magazine/julyaugust_2011/features/20000_leagues_under_the_state030498.php.

76. In 1972, Democratic liberals seized on a study of tax spending done by Joseph Pechman and Benjamin Okner, two Brookings Institution economists, to make the case for tax reform. The report found more than $77 billion in revenue lost to various provisions in the Internal Revenue Code. Many of these “loopholes” benefited corporations and the wealthy, but Silent Majority taxpayers also received a significant percentage of this tax spending. According to Pechman and Okner, 43 percent of the $77 billion figure accrued to those with incomes between $10,000 and $24,000. See Joseph Pechman and Benjamin Okner, Individual Income Tax Erosion by Income Class, in Joint Economic Committee, Economics of Federal Subsidy Programs: Part 1, General Study Papers, 92nd Cong., 2nd sess., 8 May 1972, 1340 (Washington, D.C.: U.S. GPO, 1972). See also Howard, Christopher, “The Hidden Side of the American Welfare State,” Political Science Quarterly 108, no. 3 (1993): 403–36.

77. Even the Great Society, the focus of much of the white working and middle-class’s anger, provided significant benefits to nonpoor citizens. For more, see Jackson, Thomas F., “The State, the Movement, and the Urban Poor: The War on Poverty and Political Mobilization in the 1960s,” in The Underclass Debate: Views from History, ed. Michael B. Katz (Princeton, 1993): 403– 40.

78. Ben Wattenberg, Memorandum to Douglas Cater, “Talking Points for Monday Speech to AFL-CIO Policy Committee,” 4 February 1967, LBJL, Welfare (EX WE 9), box 28, File: WE 9, January–8 February 1967.

79. John D. Ehrlichman (hereafter JDE) Notes, 14 October 1972, NPMP, White House Special Files (hereafter WHSF), Staff Member Office Files (hereafter SMOF), JDE, box 6, File: #12.

80. Patrick Buchanan, Memorandum to the President, 3 April 1972, NPMP, WHSF, SMOF, PB, box 2, File: April 1972. For a history of Nixon’s economic policy choices, see Matusow, Allen J., Nixon’s Economy: Booms, Busts, Dollars, and Votes (Lawrence, Kans., 1998).

81. Ed Harper to JDE, Confidential Memorandum re Taxes and Analysis of Poll Data, 23 November 1971, NPMP, WHCF, SMOF, Herbert Stein, box 49, File: Memoranda.

82. Buchanan and Kenneth Khachigian, “Assault Strategy,” 8 June 1972, NPMP, WHSF, SMOF, Patrick Buchanan, box 2, File: June 1972.

83. Louis Harris, “President Trailing on Issue of Taxes,” Chicago Tribune, 9 October 1972, in WHS, MEJ, box 17, File 4: BKG, National Organizations, Tax Action, Harris.

84. U.S. House Committee on Ways and Means, Message from the President on Tax Reform, 91st Cong., 1st sess., 21 April 1969 (Washington, D.C., 1969), 4.

85. The VAT then under consideration by the administration would provide an income tax credit for taxpayers earning up to $8,000 a year or a refund to about 25 million taxpayers in order to make it roughly proportional. It would net about $5.1 billion for each percentage point of tax—meaning that a 5 percent VAT would net about $25.5 billion. The proposal specified certain reforms to the existing tax structure, reducing the net gain from the new tax to about $9 billion for new expenditures. The proposed reforms included $5 billion in revenue sharing, $4 billion for depreciation reform, a $3 billion proposal for tax credits to defray tuition costs, about $500 million for child-care allowances, and $3.5 billion for the integration of personal and corporate taxes. Memorandum for the President, 3 December 1970, Information, Value Added Tax, NPMP, WHCF, Subject Files, FI, box 58, File: EX FI 1, Taxation, October–December 1970.

86. Department of Health, Education and Welfare, Office of the Assistant Secretary for Planning and Evaluation, “Selected Characteristics of Families Eligible for the Family Assistance Plan, 1971 Projections,” 2 February 1970, National Archives and Records Administration, Washington, D.C. (hereafter NARA), RG 46, SFC, Bill Files, HR 16311, box 69A, File: Administration Material.

87. Welfare reform divided Nixon’s advisers. Throughout the spring and early summer of 1969, two groups—an anti-FAP contingent led by presidential economic adviser Arthur Burns and a pro-FAP faction led by labor secretary George Shultz, HEW secretary Finch, and urban affairs counselor Daniel Patrick Moynihan—made their case to the president. The terms of this debate had little to do with the economic implications of the proposal. Rather, both the Burns group—which included commerce secretary Maurice Stans and Vice President Spiro Agnew—and the Shultz-Finch-Moynihan group focused on the proposal’s implications for the president’s support among white working- and middle-class voters. See, for example, Arthur Burns, Memorandum for the President, “A Plan for Welfare Reform,” 14 July 1969, NPMP, WHSF, JDE, SSF, box 38, File: Welfare Book; Maurice Stans, Memorandum for the President, 7 May 1969, NPMP, WHSF, JDE, box 40, File: Welfare Book, Reaction; Burns, Memorandum to the President, “A Review of the ‘Revolt of the White Lower Middle Class’ by Pete Hamill,” 16 May 1969, NPMP, WHSF, Staff Member Office Files (hereafter SMOF), JDE, SSF, box 39, File: Attitudes Toward Welfare; Spiro Agnew, Memorandum to the President: FSS, 4 August 1969, NPMP, WHSF, JDE, SSF, box 38, Welfare Book, 2 of 2.

88. “Effects of the ‘70 Vote,” U.S. News and World Report, 16 November 1970, 22.

89. JDE Notes, 2 April 1971, NPMP, WHSF, SMOF, JDE, box 5, File 2.

90. Quoted in Chappell, The War on Welfare,105.

91. For more, see Chappell, The War on Welfare, chap. 2. The FAP had the unexpected benefit of dividing the president’s liberal opponents. Some saw the FAP as a good, if inadequate, opening wedge in the struggle to guarantee at least a minimum level of economic security to all Americans. Acknowledging the real deficiencies in the FAP, groups like the National Association of Social Workers, the American Public Welfare Association, the League of Cities, Common Cause, the American Jewish Committee, and the League of Women voters, as well as the AFL-CIO, nevertheless rallied behind it and lobbied for amendments to raise benefit levels and soften its most punitive features. Such compromises seemed impossible and even immoral for other members of the liberal antipoverty coalition. Welfare rights groups, in particular, saw the FAP as a significant threat to the rights and well-being of their membership. Speaking on behalf of current AFDC recipients, the vast majority of whom would receive lower benefits as a result of the FAP, the National Welfare Rights Organization (NWRO) denounced the proposal as a form of “slave labor” and launched a campaign to “Zap the FAP.” The organization’s strident tone and “militant posture” alienated many liberal organizations otherwise sympathetic to the NWRO’s goals and membership. For an analysis of the FAP, Nixon’s success in dividing his liberal opposition, and his attempts to use federal policy to undermine and defund liberal political networks, see Schulman, Bruce, The Seventies: The Great Shift in American Culture, Society, and Politics (New York, 2001), chap. 1.

92. Moynihan, Daniel P., Politics of a Guaranteed Income: The Nixon Administration and the Family Assistance Plan (New York, 1973), 278.

93. For example, the American Conservative Union produced a pamphlet geared specifically to working-class voters, The Family Assistance Plan: A Guaranteed Annual Income—What It Means to YOU as a Taxpayer, quoted in Chappell, The War on Welfare,99.

94. John Huntsman to JDE, Memorandum, “Re: HR 1,” 30 October 1971, NPMP, WHSF, SMOF, JDE, Alphabetical Subject Files, box 18, File: Scrapbook 1 of 1.

95. John Connally, Memorandum to the Honorable John D. Ehrlichman, Re: Tax Reform Issue, 12 May 1972, NPMP, WHCF, Subject Files, FI, box 60, File: EX VI, 11, Taxation, March–May 1972.

96. Letter to Rep. Griffiths, 2 November 1969, Martha Griffiths Papers, box 21.

97. Letter from F. J. Halik of Detroit to Sen. Philip Hart (D-Mich.), 2 November 1969, Martha Griffiths Papers, box 37, File: Inflation.

98. Louis Harris, “President Trailing on Issue of Taxes,” Chicago Tribune, 2 October 1972, in WHS, MEJ, box 17, File 4: BKG National Organizations: Tax Action, Harris.

99. Herb Stein to President Nixon, “Re: The Economy at Early June,” 8 June 1972, NPMP, WHCF, SMOF, Herbert Stein, box 45, File: Memoranda for the President, 2 of 4.

100. Patrick Buchanan to Julie Eisenhower, 17 July 1972, NPMP, WHSF, SMOF, PB, box 2, File: July 1972.

101. Telephone conversation between Ehrlichman and George Shultz relating to conversation between Shultz and George Meany, NPMP, WHSF, SMOF, JDE, box 28, File: August 1972. Meany’s refusal to offer his endorsement to McGovern reflected and exacerbated the class fissures in the Democratic Party. Having lost the battle to get hawkish senator Henry “Scoop” Jackson (D-Wash.) or even moderate Edmund Muskie (D-Me.) to head the Democratic ticket, and outraged by the diminution of organized labor power to influence the party’s nomination process, Meany complained volubly that the party had abandoned economic liberalism for social liberalism. “The presidential campaign,” he asserted a week before the election, “has confirmed and strengthened my deep conviction that the best interests of the working people of the Democratic Party and of the United States call for the repudiation of George McGovern.” Meany, “Statement,” 25 October 1972, NPMP, WHSF, SMOF, PB, box 2, File: October 1972.

102. Jude Wanniski, “Should a GOP Scrooge Shoot St. Nick? The Two Santa Claus Theory,” National Observer, 6 March 1976.

103. Wanniski was single-minded on the question of taxes. As he explained in a 1980 New York Times op-ed, tax progressivity was the “central problem” facing American society. Not only had the federal income tax drained the economy of its vitality, but it had led directly to such problems as “crime, poverty, pornography, divorce, suicide, mental illness, alcoholism, abortion and child- and wife abuse.” The progressive income tax could also be blamed for “gambling . . . graft . . . political corruption” and the nation’s “crippled” weakness vis-à-vis the Soviet Union. Jude Wanniski, “The No. 1 Problem,” New York Times,27 February 1980, A27.

104. As Princeton economist and liberal Keynesian Paul Krugman pointed out in 1995, “Not only is there no major department that is supply-side in orientation, there is no economist whom one might-call a supply-sider in any major [economics] department.” Krugman, Paul, Peddling Prosperity (New York, 1995), 85, quoted in Chait, Jonathan, The Big Con: The True Story of How Washington Got Hoodwinked and Hijacked by Crackpot Economics (Boston, 2007), 21.

105. In a revealing 1981 interview with journalist William Greider, Reagan’s budget director, David Stockman, admitted that supply-side economics was simply a more politically palatable name for the more familiar “trickle-down theory.” According to Stockman, across-the-board supply-side tax cuts were nothing more than a “Trojan horse to bring down the top rate.” President Reagan, angered by the interview, later took Stockman “to the woodshed.” William Greider, “The Education of David Stockman,” Atlantic Monthly, December 1981, available at http://www.theatlantic.com/magazine/archive/1981/12/the-education-of-david-stockman/5760/.

106. For more on the conservative counter-establishment, see O’Connor, Alice, “Financing the Counterrevolution,” in Rightward Bound: Making America Conservative in the 1970s, ed. Schulman, Bruce and Zelizer, Julian (Cambridge, Mass., 2008); Steven Teles, Conservative Mobilization Against Entrenched Liberalism,” in Pierson and Skocpol, 160–88.

107. Kristol, Irving, Neoconservatism: The Autobiography of an Idea (New York, 1995), 35, quoted in Chait, The Big Con,16.

108. Robert Bartley, introduction to The Way the World Works, 3rd ed., ed. Jude Wanniski (Morristown, N.J., 1989), x–xii, quoted in Chait, The Big Con, 23. For a contemporary analysis of the origins of supply-side economics, see John Brooks, “Annals of Finance: The Supply Side,” New Yorker,18 April 1982.

109. Hansen, 86–97, table 3-2. The GOP’s embrace of tax cut politics has also improved its overall reputation on economic matters. As Mark Smith has argued, contrary to most conventional wisdom, it is the Republican Party, not the Democratic Party, that has benefited politically when the electorate is focused on economic issues. Since 1972—the same year Nixon embraced the politics of tax cuts—the GOP has been seen as the “party of prosperity” by the majority of voters, despite the poor performance of the US economy in times of Republican rule. According to Smith, by adhering to a “limited set of principles”—namely, that tax cuts are good for both the individual and the economy at large—the GOP has secured for itself a “reputational edge” on economic questions. See Smith, Mark, “Economic Insecurity, Party Reputations and the Republican Ascendance,” in Pierson and Skocpol, The Transformation of American Politics, 143, 146–50.

110. For an analysis of the importance of political trust to American politics, see Heatherington, Marc J., Why Trust Matters: Declining Political Trust and the Demise of American Liberalism (Princeton, 2005).

111. On the political consequences of inflation, see Samuelson, Robert, The Great Inflation and Its Aftermath: The Past and Future of American Affluence (New York, 2008), 2223; and Caplovitz, David, “Making Ends Meet: How Families Cope with Inflation and Recession,” Annals of the American Academy of Political and Social Science 456 (July 1981).

112. The political viability of supply-side theory got an early test run in 1978, when the GOP proposed to cut the tax rate on capital gains. Sponsored by GOP Representative William Steiger of Wisconsin, the proposal to reduce taxes on capital gains attracted bipartisan support and had apparently unstoppable momentum on Capitol Hill. Liberal efforts to sink the proposal by pointing to its “grossly inequitable” consequences failed. “The Year in Review: Foreign Policy, Economics, Defense, Top 1978 Key Votes,” Congressional Quarterly, 25 November 1978, 3335.

113. For a good history of Proposition 13, see Martin, The Permanent Tax Revolt or Citrin, Jack and Sears, David O., Tax Revolt: Something for Nothing in California (Cambridge, Mass., 1982).

114. Citrin, Jack, “Do People Want Something for Nothing? Public Opinion on Taxes and Spending,” National Tax Journal: Proceedings of a Conference on Tax and Expenditure Limitations 32, no. 2 (June 1979): 127, 117. See also Ladd, Everett Carl Jr. et al. ., “The Polls: Taxing and Spending,” Public Opinion Quarterly 43, no. 1 (Spring 1979), and Advisory Commission on Intergovernmental Relations, 1980: Changing Public Attitudes on Governments and Taxes, a Commission Survey (Washington, D.C., 1980).

115. Cited in Ladd et al., “The Polls,” 130.

116. “‘Welfare Queen’ Becomes an Issue in Reagan Campaign,” New York Times, 15 January 1976. The woman in question, Linda Taylor, was ultimately found guilty of welfare fraud and perjury. But the Circuit Court determined only that she had used two aliases to collect twenty-three public assistance checks worth $8,000. See “Chicago Relief ‘Queen’ Guilty,” New York Times,19 March 1977.

117. Quoted in Sally Quinn, “Proposition Man: Howard Jarvis, the Tax Fighter, Is Riding High on Number 13,” Washington Post, 29 June 1978, B1.

118. Oakland, William, “Proposition 13: Genesis and Consequences,” National Tax Journal 32, no. 2 (June 1979), Supplement: Proceedings of a Conference on Tax and Expenditure Limitations: 387.

119. Anderson, Martin, “The Objectives of the Reagan Administration’s Social Welfare Policy,” in The Social Contract Revisited: Aims and Outcomes of President Reagan’s Social Welfare Policy, ed. Bawden, D. Lee (Washington, D.C., 1984), 113.

120. John Palmer and Isabel Sawhill, “Overview,” in The Reagan Record: An Assessment of America’s Changing Domestic Priorities, An Urban Institute Study (Cambridge, Mass., 1984), 3. Sawhill and Palmer concluded that despite its antistate rhetoric, and its public commitment to curtail federal spending, the Reagan administration did little “to reduce the rapidly rising expenditures for Social Security, Medicare, government employee pensions, and other predominantly middle-class programs that had been the “chief source of growth in the federal budget since the 1950s.”

121. Adam Clymer, “Public Prefers a Balanced Budget to Large Cuts in Taxes, Poll Shows,” New York Times,3 February 1981, A1, B9.

122. Bob Carleson, Memorandum for Ed Gray, 19 March 1981, Ronald Reagan Presidential Library, Martin Anderson Files, CFOA: 88-91, box 4, File: “Welfare, 2 of 3.”

123. For a history of the battle over the 1986 reform bill, see Birnbaum, Jeffrey, Showdown at Gucci Gulch: Lawmakers, Lobbyists, and the Unlikely Triumph of Tax Reform (New York, 1987).

124. For a short history of this process, see Chait, Jonathan, “The Triumph of Taxpophobia,” Democracy Journal (Spring 2011): 3238.

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Journal of Policy History
  • ISSN: 0898-0306
  • EISSN: 1528-4190
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