On October 18, 2004, Jack Kemp wrote an editorial posted online titled "Deficit declines $100 billion". The editorial begins:
The media and all too many political elites, it seems, never learn. For at least 20 of the past 25 years, there has been constant hand-wringing over the federal budget deficit. Well, they're at it again. Headlines around the world last week decried the $413 billion fiscal 2004 deficit as a historic record. The International Monetary Fund, once again interfering in U.S. economic policy, has called on the United States to raise taxes. All of this is exacerbated by political demagoguery of the Kerry campaign saying taxes only need to be raised on the top 2 percent of income earners.
Kemp goes on for two more paragraphs on why the deficit is not a problem. He then continues:
It's not surprising that the budget deficit hit an all-time high in 2004 when it is measured in dollars unadjusted for inflation and unrelated to the size of the economy. The economy, measured in those same dollars, also hit an all-time high of $11.7 trillion last month. When the federal budget deficit is measured properly as a share of the economy - 3.5 percent - at this stage of the business cycle it is absolutely nothing to worry about.
The deficit as a percentage of GDP is meaningless. Each January, the prior year's deficit becomes a piece of historical trivia. What lives on is the debt that was created by that deficit. We and our children will have to pay interest on that debt forever (unless we pay it back). Hence, we should be concentrating on the debt as a percentage of GDP, not the deficit. You can see all of the figures for the debt since 1940 at this link. As you can see, the debt did reach about 122% of GDP in 1946, at the end of WW2. We got it down to 33% of GDP in 1981 but have since run it back up to 65% of GDP. It is currently projected to skyrocket in the next few decades as the Boomers retire.
In any case, Kemp goes on for two more paragraphs on why tax cuts are the proper way to deal with deficits. He then continues:
We heard the same talk of "deficits as far as the eye can see" after President Reagan signed his 25-percent, across-the-board tax-rate reductions into law in 1981. Yet for all of the hysteria, the deficit as a percentage of GDP, which was 2.6 percent during Reagan's first year in office, was 2.8 percent of GDP when he left office in 1988.
The deficit was 2.6% of GDP in 1981 and 2.8% of GDP in 1989. What Kemp fails to mention, however, is that it was 4% of GDP or more from 1982 through 1986, reaching a peak of 6% of GDP in 1983. You can see these figures in the table at this link. In any case, Kemp continues:
The press also often neglects to report that deficits spiked at 4.7 percent of GDP in 1995 due to sluggish growth following the Clinton tax hikes. The economy didn't begin its revival until the Republicans seized control of Congress in 1994, forcing a reluctant president to reduce the capital gains tax rate, create Roth IRAs and get spending growth under control. Then the private economy was free to grow faster than the government and budget deficits were transformed into surpluses.
The press likely neglects to report this because it simply isn't true! As can be seen from the prior link, deficits spiked at 4.7% of GDP in 1992. Clinton wasn't inaugurated until January of 1993. Deficits began to decline immediately after that. Also, as can be seen in the graph and table at this link, the economy started its revival in 1992, peaking at an annualized growth rate of 5.49% in the fourth quarter of 1993, long before the Republicans seized control of Congress in January of 1995.
I assume that Kemp is not purposely lying, that he is simply very sloppy with his facts. If informed of this, will we reconsider his conclusions? No, judging from other supply-siders I've run across, I suspect that he will simply select another collection of "facts" and come to the very same conclusions.