Conservative economic historian Bruce Bartlett has just released a new book entitled The New American Economy: The Failure of Reaganomics and a New Way Forward. Here’s a short blurb from Amazon on the thesis of the book:

As a domestic policy advisor to Ronald Reagan, Bruce Bartlett was one of the originators of Reaganomics, the supply-side economic theory that conservatives have clung to for decades. In The New American Economy, Bartlett goes back to the economic roots that made Impostor a bestseller and abandons the conservative dogma in favor of a policy strongly based on what’s worked in the past. Marshalling compelling history and economics, he explains how economic theories that may be perfectly valid at one moment in time under one set of circumstances tend to lose validity over time because they are misapplied under different circumstances. Bartlett makes a compelling, historically-based case for large tax increases, once anathema to him and his economic allies. In The New American Economy, Bartlett seeks to clarify a compelling and way forward for the American economy.
It may surprise you to learn that I was contacted recently by a publicist for Mr. Bartlett’s book about doing a Q&A interview with him to explore the themes he sets out in the book. I should be receiving a copy soon and will let everyone know when the Q&A is scheduled to go down.

In the meanwhile, please check out a new blog post that Bartlett just wrote that contains a lot of excellent context on what drove him to write the book. Here’s just a taste:

I continue to believe that what the supply-siders did was good for the economy, good for the country and good for the advancement of economic science. The best economists in the country were pretty clueless about our economic problems during the Carter years. It was widely asserted that the money supply had no meaningful effect on inflation, that marginal tax rates had no incentive effects, and that it would take decades or another Great Depression to break the back of inflation…

During the George W. Bush years, however, I think SSE became distorted into something that is, frankly, nuts–the ideas that there is no economic problem that cannot be cured with more and bigger tax cuts, that all tax cuts are equally beneficial, and that all tax cuts raise revenue.

These incorrect ideas led to the enactment of many tax cuts that had no meaningful effect on economic performance. Many were just give-aways to favored Republican constituencies, little different, substantively, from government spending. What, after all, is the difference between a direct spending program and a refundable tax credit? Nothing, really, except that Republicans oppose the first because it represents Big Government while they support the latter because it is a “tax cut.”

I think these sorts of semantic differences cloud economic decisionmaking rather than contributing to it. As a consequence, we now have a tax code riddled with tax credits and other tax schemes of dubious merit, expiring provisions that never expire, and an income tax that fully exempts almost on half of tax filers from paying even a penny to support the general operations of the federal government.

The supply-siders are to a large extent responsible for this mess, myself included. We opened Pandora’s Box when we got the Republican Party to abandon the balanced budget as its signature economic policy and adopt tax cuts as its raison d’être. In particular, the idea that tax cuts will “starve the beast” and automatically shrink the size of government is extremely pernicious.

Read the whole thing. h/t Sully

If I understand him correctly, Bartlett is making two very sound and interconnected points, i.e., (a) marginal tax rates used to be very high and by dropping them we jumpstarted the American economy, and (b) just because we cut taxes when marginal rates were ridiculously high, this doesn’t justify the ongoing Republican obsession with tax cuts always being the panacea to solve all our ills.

In essence, he’s saying that just because something worked once, we’d be stupid to simply assume that it will always work when used again and again.

Good stuff! I can’t wait to read the book!

Keep your eyes peeled for our upcoming Bartlett Q&A!

Update: The coda to Bartlett’s post is also particularly poignant:

Many of my friends believe I have abandoned supply side economics and become a Keynesian. (Among conservatives there are few insults more damning than to be labeled a “Keynesian.”) But as I try to explain in my book, my views haven’t changed at all; it’s circumstances that have changed. I believe that my friends are still stuck in the 1970s when tax rates were considerably higher and excessive demand (i.e., inflation) was our biggest economic problem. Today, tax rates are much lower and a lack of demand (i.e., deflation) is the central problem. I really don’t understand why conservatives insist on a one-size-fits-all economic policy consisting of more and bigger tax cuts no matter what the economic circumstances are; it’s simply become dogma totally disconnected from reality.

Nor do I understand the conservative antipathy for Keynes, who was in fact deeply conservative. He developed his theories primarily for the purpose of saving capitalism from some form of socialism. Same goes for Franklin D. Roosevelt, whose biggest economic mistake, I believe, was not that he ran big budget deficits, as all conservatives believe, but that he didn’t run deficits nearly large enough until the war forced his hand. (I discuss these points in columns here and here.)

People can judge for themselves if I prove my case. But whether they agree or disagree, I think they will learn something useful from reading my book. I learned a lot from writing it.

  1. schu says:

    Is he going to be another Greenspan, and in twenty years after another economic disaster go opps, guess that module did not work.

    • Metavirus says:

      as i understand it, his thesis was that reaganomics was the right solution at the time (i.e., when top marginal tax rates were 70%+). his view now is that the economic circumstances have changed and tax rates are actually quite low at the moment -- thus, the mantra of "tax cuts, tax cuts, tax cuts" is wrong-headed.

  2. Anonymous says:

    "…and an income tax that fully exempts almost on half of tax filers from paying even a penny to support the general operations of the federal government."

    I interpret this as a clear reference to the lowest marginal rate population, not those on the higher end. This reference clearly suggests it is time for those on the lower end of the income spectrum to start to bear their fair share of the country's operational requirements. When 50% of the population pays 98% of the income tax, there is clearly something amiss. The pandering for votes via tax manipulation is what this author is decrying.

    • schu says:

      Ok, if you earn 300 a week, pay 100 for child care, 80 for taxes, and 100 for health care, you can splurge the rest for food, a place to live, and transportation. And you are making a little over 7 an hour. Yep, you are going to carry a hole lot of the tax burden.

      • Metavirus says:

        It's a common rightwing demonization tactic. when faced with populist anger about slow wage growth, robber barons, and a skyrocketing cost of living — People in power direct the anger of the ignorant rubes to immigrants, inner-city blacks (aka "crime"), and those parasitic pathetic poor people who buy cell phones and sponge off the gubmit, all while paying NO TAXES! (which, by the way, that last part is COMPLETE BULLSHIT) Yes, many of those cited don't pay income taxes, but they pay payroll taxes, property taxes, sales taxes, social security taxes, unemployment insurance, etc. In fact, the working poor actually pay a much larger percentage of their income to taxes than rich people do!

  3. JAGUAR6CY says:

    Interesting way to sell books. Unfortunately the US now has the second highest corporaTe tax rate in the industrialized world. Even Russia's is lower. That is the major cause of business, industry and JOBS moving overseas. That part isn't mentioned here at all. Interesting way to sell books.

    • schu says:

      Please, the major reason that our jobs are moved over seas is pure greed! They want the 50 cent to one dollar labor and unrestricted environmental regulations to build product to sell back here.

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