Tweet
I could catch a lot of grief for this but….
There was very interesting article, by Kevin Williamson, in National Review a few weeks ago that is now available on-line. What is interesting about Williamson's article is that he one of the few people that I have read that attempts to make a valid argument against supply-side economics but not against tax cuts. You can read it for yourself but basically what his is saying is that: (1) Tax cuts won’t, in every case, pay for themselves; (2) if the tax cuts don’t and you don’t have corresponding spending cuts the result is larger deficits (makes sense); and (3) where the tax cuts do pay for themselves and there are no spending cuts – that additional revenue will be spent thereby growing government.
Williamson summarizes as follows:
To be fair: Although I have not thought about it in a while I was/am still partial to the “starve-the-beast theory” Williamson writes about – and I’m sure many of you are familiar with. But Williamson makes a solid argument which is causing me to question parts of my prior position.
Williamson’s recommendation:
Goodbye Supply Side
There was very interesting article, by Kevin Williamson, in National Review a few weeks ago that is now available on-line. What is interesting about Williamson's article is that he one of the few people that I have read that attempts to make a valid argument against supply-side economics but not against tax cuts. You can read it for yourself but basically what his is saying is that: (1) Tax cuts won’t, in every case, pay for themselves; (2) if the tax cuts don’t and you don’t have corresponding spending cuts the result is larger deficits (makes sense); and (3) where the tax cuts do pay for themselves and there are no spending cuts – that additional revenue will be spent thereby growing government.
Williamson summarizes as follows:
There are two schools of thought about the Reagan tax cuts. The conventional conservative view: They spurred investment, entrepreneurship, and real economic growth, helping to resuscitate the post-Carter economy, and, by doing so, they paid for themselves. The conventional liberal view: They were an ill-considered product of starve-the-beast ideology and produced crippling deficits, inaugurating a new era of fiscal irresponsibility only briefly transcended during the golden years of the Clinton presidency.
Here’s a different take: They never happened.
Properly understood, there were no Reagan tax cuts. In 1980 federal spending was $590 billion and in 1989 it was $1.14 trillion; you don’t get Reagan tax cuts without Tip O’Neill spending cuts. Looked at from the proper perspective, we haven’t really had any tax cuts to speak of — we’ve had tax deferrals. Reagan and his congressional allies had an excuse in the considerable person of Speaker O’Neill. But George W. Bush and the concurrent Republican majorities in both houses of Congress didn’t manage to cut spending, either. Part of that was circumstances — 9/11, Afghanistan, Iraq, the subprime meltdown — but part of it was the fact that a poorly applied supply-side analysis has infantilized Republicans when it comes to the budget. They love to cut taxes but cannot bring themselves to cut spending: It’s eat dessert first and leave the spinach on the table.
Here’s a different take: They never happened.
Properly understood, there were no Reagan tax cuts. In 1980 federal spending was $590 billion and in 1989 it was $1.14 trillion; you don’t get Reagan tax cuts without Tip O’Neill spending cuts. Looked at from the proper perspective, we haven’t really had any tax cuts to speak of — we’ve had tax deferrals. Reagan and his congressional allies had an excuse in the considerable person of Speaker O’Neill. But George W. Bush and the concurrent Republican majorities in both houses of Congress didn’t manage to cut spending, either. Part of that was circumstances — 9/11, Afghanistan, Iraq, the subprime meltdown — but part of it was the fact that a poorly applied supply-side analysis has infantilized Republicans when it comes to the budget. They love to cut taxes but cannot bring themselves to cut spending: It’s eat dessert first and leave the spinach on the table.
Williamson’s recommendation:
So, what should conservatives do? One, abjure magical thinking about tax cuts. Two, develop a rhetoric in which "spending" and "taxes" are synonyms, so a federal budget with $1 trillion in new spending means $1 trillion in new taxes — levies on Americans today or on our children tomorrow, with interest. Three, get a load of those tea-party yokels, with their funny hats and dysgraphic signage, and keep this in mind: They are opposed to the Democrats, but what they are really looking for is an alternative to the establishment Republicans, whom they distrust, with good reason, when it comes to the bottom-line question of balancing the budget and getting our fiscal affairs in good order. And then, finally, decide which angry mob you want to face: today’s voters or tomorrow’s bondholders.
Comment