David Henderson is an economist who appears in The Bob Zadek Show in two capacities: as the author of a study cited by another guest, and as an interview guest himself. In the 2019 episode he is introduced as Professor Emeritus at the Naval Postgraduate School and a research fellow with the Hoover Institution, with writings focused mainly on public policy; he is also described as the editor of the Concise Encyclopedia of Economics and as a blogger at EconLog David Henderson on Trumponomics, Deficits, and Immigration (2019).
The Gulf oil study
In a 2014 episode on Iraq, Ivan Eland cited a study by Henderson, whom he described as an economist under Ronald Reagan as president. According to Eland, the study showed that even if Saddam Hussein had taken over Saudi Arabia, Kuwait, and the United Arab Emirates — which Eland said there was really no threat of — US GDP would be cut by less than half of a percent, because Saddam would have to sell the oil, and wanted the revenues from it to pay for his Iran-Iraq war, which lasted eight years United Iraq Falls: Ivan Eland on Partitioning for Peace (2014). Eland used the study to argue that the original reason for the first war with Iraq was quite questionable, just as the second one was. The excerpt attributes the study and its finding to Eland’s account; Henderson himself does not appear as a speaker in that episode.
Trumponomics, the Laffer curve and the Fed
Henderson was the guest on a 2019 episode hosted by Charlie Deist, filling in for Bob Zadek, devoted to what the introduction called the economic policies of the Trump administration, the implications of tax cuts on federal revenue, and the nomination of Stephen Moore to the Federal Reserve David Henderson on Trumponomics, Deficits, and Immigration (2019). Deist framed the hour around the Laffer curve — the idea that lower taxes can produce more tax revenues — and the supply-side claim that tax cuts tend to pay for themselves, noting that Moore had co-authored Trumponomics with Arthur Laffer and that Moore had been nominated to the Federal Reserve Board after writing a Wall Street Journal op-ed calling the Fed and its recent interest-rate hikes a threat to growth. Deist raised the question whether it is the Fed’s job to promote growth under a particular president, or whether it should focus on price stability and a stable dollar, and said many people believed the nomination threatened the Fed’s independence.
Henderson’s own contributions in the surviving excerpts of that episode concern deficits, the debt, and taxation rather than the Moore nomination directly. Deist, in the segment on deficits, said the budget deficit grew under Reagan and reached a trillion dollars for the first time; Henderson corrected him — “No, no, no, no, no, it never hit a trillion under Reagan” — and Deist acknowledged he had been speaking of debt. Deist then said the national debt stood at 20 trillion and asked whether the deficit was above a trillion dollars; Henderson replied that he thought it was around 800 billion David Henderson on Trumponomics, Deficits, and Immigration (2019).
Deficits, the 17–18% constant, and the value-added tax
Asked what worried him about deficits, Henderson said that they are high and growing. He argued that the US government has kept revenues over roughly the last 65 and maybe 70 years at around 17 to 18% of GDP, which he called as close to a constant as you will find in macroeconomics, and that the odds of that going up much are very low. When revenues start hitting around 20%, he said, you get a tax cut — as with Reagan at the end of the Carter administration, and with Bush at the end of the Clinton administration David Henderson on Trumponomics, Deficits, and Immigration (2019).
The only way he thought that constant would be undercut would be a value-added tax. Henderson said he understands the economic arguments for a VAT, and that many economist friends say we should have one, but that they do not take account of how dramatically the politics would change: a VAT would breach the 17 to 18% figure and move the United States toward European levels of taxation. He cited Europe in the mid-1960s, when countries imposing a value-added tax as part of European Union agreements differed in their aims — some for revenue neutrality, some to reduce government revenues as a percentage of GDP, some to increase them. The ones that did it to increase revenues as a percent of GDP succeeded, he said; the ones who did it to hold revenues constant failed, and the one that did it to reduce revenues as a percent of GDP also failed. On a chart of government revenues as a percent of GDP, Western Europe was a little higher than the United States at the start and then diverged sharply after the mid-1960s. Henderson’s conclusion was that in a standard optimal analysis a VAT can be shown to be better, but that this holds constant the key thing that should not be held constant — revenue raised — and that is why he does not want a value-added tax.
Herb Stein and strategic default
In the same episode Henderson attributed to his old boss, Herb Stein — Ben Stein’s father, chairman of the Council of Economic Advisers under Nixon, for whom Henderson was a summer intern in the summer of 1973 — the remark that if something is unsustainable, then by definition at some point it has to stop David Henderson on Trumponomics, Deficits, and Immigration (2019). Deist had raised the idea of a strategic default by the United States, describing it as a bombshell, before turning to the deficit question; the surviving excerpt does not contain Henderson’s exposition of that argument.
Taxation as social engineering
A caller named John asked what best explains the persistent political ambition to increase taxes well into the realm of declining revenues. Henderson pointed to Emmanuel Saez, who teaches at Berkeley, and his co-author Gabriel Zucman, saying they argue explicitly that they do not want high marginal tax rates of 70–80% in order to raise revenue — they admit it might not, and perhaps even that it probably will not — but to go after an oligarchy and to bring down wealthy people so that they have less wealth and therefore less influence in the political system. Henderson said he was obviously not agreeing that this is a good idea, but that this is their argument David Henderson on Trumponomics, Deficits, and Immigration (2019).
The caller then distinguished sincere social justice warriors looking for revenues to solve problems from a category of social justice engineer designing things to defeat them. Henderson agreed with the distinction, saying some really do want the revenue and are very ignorant of the fact that people will do fewer of the activities being taxed if they are taxed higher, while others — economists like Saez and Zucman — are clear on that and want it.
Across episodes
Henderson appears in the excerpts in two episodes, but not in the same role: in the 2014 Iraq episode he is a cited author, and in the 2019 episode he is the interviewed guest. The excerpts show no development of a single question across the two appearances, and no position of Henderson’s is revisited between them.
What the sources do not cover
The excerpts do not give Henderson’s birth date or place, his educational history, or the date of the study Eland cites, and they do not reproduce his own account of strategic default. They also do not contain his assessment of Stephen Moore’s qualifications for the Federal Reserve, despite the episode’s framing of that question, nor any of his remarks on immigration or on Julian Simon, which the episode introduction lists among its topics. His exchange with the caller is preserved only in part, and the excerpt breaks off at several segment headings.
Episodes
1 appearance, 2019–2019.
- David Henderson on Trumponomics, Deficits, and Immigration (2019) — Economic policies and Federal Reserve nominations. Professor Emeritus Naval Postgraduate School