Politicians promoting the sham of supply-side economics are foolish, but their economic advisors should know better
Supply Side Bait and Switch
Ezra Klein
The American Prospect
"It is a far, far better thing," wrote John Kenneth Galbraith, "to have a firm anchor in nonsense than to put out on the troubled seas of thought." And the Republican primary, per usual, is firmly docked in the seas of supply-siderism. Rudy Giuliani, who's currently leading the polls, told Larry Kudlow, "I regard myself as a supply-sider for sure. I mean, watched Ronald Reagan do it and learned it, saw it work. Taxes get reduced, more revenue comes in." Mitt Romney offered an even pithier explanation of his supply-side philosophy: "If you lower taxes enough, you create more growth."
That "enough" is a particularly ingenious addition; if your economic policy based on massive cuts begins to tank the economy, it's just evidence that it wasn't tax-cutty enough. "Jeeves! The peasants are rioting! Slash the rates on capital gains!"
In his excellent new book The Big Con, Jonathan Chait methodically tracks the corrupt promises, failed predictions, and repeated shortcomings of the supply-side economics movement -- that dominant strain of conservative economic thought that sees tax rates as the near singular driver of economic performance, counsels that rates should always be lower than they are, and assures us that the economic growth sparked by such policies will mean the government gets more revenue even as it cuts taxes. Supply siders are a laughable bunch, repeatedly proven wrong by history -- most notably during the Clinton years, when a tax increase they said would "shrink the economy, put people out of work, and lower tax revenues" did quite the opposite on all counts -- and derided even by their putative allies. The conservative economist Greg Mankiw, formerly chair of the president's Council of Economic Advisors, put supply side theories in the "Cranks and Charlatans" chapter of his textbook.
Yet they retain the full fealty of every major candidate in the Republican primary. It's bizarre, but not inexplicable. In his book, Chait focuses on a small coterie of cranks like George Gilder and Jude Wanniski -- non-economists whose mastery of pure supply-side doctrine has made them useful to -- and thus influential within -- the Republican Party. But if you've never heard their names, you are forgiven (say five Hail Reagans and go about your day, my son). They may be the ideology's most devoted advocates, but they are not its most important enablers. That distinction goes to the economists whose indulgence and careerism sustains these crackpots.
(Continued here.)
Ezra Klein
The American Prospect
"It is a far, far better thing," wrote John Kenneth Galbraith, "to have a firm anchor in nonsense than to put out on the troubled seas of thought." And the Republican primary, per usual, is firmly docked in the seas of supply-siderism. Rudy Giuliani, who's currently leading the polls, told Larry Kudlow, "I regard myself as a supply-sider for sure. I mean, watched Ronald Reagan do it and learned it, saw it work. Taxes get reduced, more revenue comes in." Mitt Romney offered an even pithier explanation of his supply-side philosophy: "If you lower taxes enough, you create more growth."
That "enough" is a particularly ingenious addition; if your economic policy based on massive cuts begins to tank the economy, it's just evidence that it wasn't tax-cutty enough. "Jeeves! The peasants are rioting! Slash the rates on capital gains!"
In his excellent new book The Big Con, Jonathan Chait methodically tracks the corrupt promises, failed predictions, and repeated shortcomings of the supply-side economics movement -- that dominant strain of conservative economic thought that sees tax rates as the near singular driver of economic performance, counsels that rates should always be lower than they are, and assures us that the economic growth sparked by such policies will mean the government gets more revenue even as it cuts taxes. Supply siders are a laughable bunch, repeatedly proven wrong by history -- most notably during the Clinton years, when a tax increase they said would "shrink the economy, put people out of work, and lower tax revenues" did quite the opposite on all counts -- and derided even by their putative allies. The conservative economist Greg Mankiw, formerly chair of the president's Council of Economic Advisors, put supply side theories in the "Cranks and Charlatans" chapter of his textbook.
Yet they retain the full fealty of every major candidate in the Republican primary. It's bizarre, but not inexplicable. In his book, Chait focuses on a small coterie of cranks like George Gilder and Jude Wanniski -- non-economists whose mastery of pure supply-side doctrine has made them useful to -- and thus influential within -- the Republican Party. But if you've never heard their names, you are forgiven (say five Hail Reagans and go about your day, my son). They may be the ideology's most devoted advocates, but they are not its most important enablers. That distinction goes to the economists whose indulgence and careerism sustains these crackpots.
(Continued here.)
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