Oklahoma Republican Sen. Tom Coburn will seek to offset federal aid to victims of a massive tornado that blasted through Oklahoma City suburbs on Monday with cuts elsewhere in the budget.> more ... (0 comments)
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.
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.
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!
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.
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