The second coming of supply-side economics is more dangerous than the first.
The supply-side theory popularized by Ronald Reagan held that cutting taxes would lead to a great thrust of economic energy - and a rush of revenue into federal accounts that would replace the drain from the tax cuts themselves. It was, in the 1980s, called "voodoo economics" and a "Trojan horse." And that's just what some Republicans said.
By the 1990s other words would describe supply-side economics. Like fiscal failure.
No geyser of revenue rose up from the Reagan tax cuts. Federal revenues diminished in the aftermath of the 1981 tax cut, according to the White House Office of Management and Budget. Revenues as a percentage of the nation's gross domestic product declined from 19.6 percent when Reagan was inaugurated to 18.3 percent when he left Washington, even after a robust economic revival. They would drop further during the recession of the early 1990s.
Spending reductions never materialized. Not, anyway, until implementation of deficit-reduction packages - forged at enormous political cost by the first President George Bush and then President Bill Clinton.
Federal spending as a share of the economy was about the same when Reagan left the Oval Office as it was when he moved in. It did not begin a steady, downward path until 1992 - the year Bush was defeated for re-election, in part because a rift opened up in his party after he'd gone soft and raised taxes.
And what of Republican predictions that the Clinton tax hike included in the 1993 deficit-reduction package would bring on economic Armageddon? It would seem that the 21 million jobs added to payrolls during the Clinton era speak truth to slogan.
Nonetheless, we are mired now in another deficit inspired by the true supply-side believers, led by a most certain adherent, President George W. Bush. His deficit is about as large, as the share of the economy, as the budget gap was before his father became convinced of its danger.
But we are at no risk of losing the current president to the politics of doing the right thing.
He would like instead more tax cuts that go on forever and ever, an unstoppable force in the face of war and terror and any other historical inconvenience. This president cannot be persuaded to pragmatism.
And that is what makes his deficits more dangerous than Reagan's. We haven't the political leadership we had the first time around. There is a dire shortage of men and women who are willing to speak up.
Beginning immediately after the 1981 tax cut, Republican pragmatists within the Reagan White House and on Capitol Hill - people like Bob Dole and Howard Baker and Sen. Pete Domenici (R-N.M.), the budget committee chairman - insisted that some measure of discipline be restored. They won a series of incomplete victories.
Now, apostles of prudence are hooted down; their honor questioned. Just weeks ago, Sen. John McCain (R-Ariz.) was attacked by the speaker of the House for stating that sacrifice for the Iraq war is not widely shared, in part because Congress keeps passing tax cuts and spending money wildly instead of paying now for the military effort. Speaker J. Dennis Hastert (R-Ill.) suggested McCain - who nearly died of war wounds while imprisoned in Vietnam - doesn't understand the meaning of sacrifice.
Washington is mesmerized by this mentality. The idea is that deficits don't matter. And maybe they don't if it also does not matter that 10 cents of every tax dollar would, by the end of a second Bush term, be spent to just to pay interest. Maybe it does not matter that both liberal and conservative plans to revise Social Security - dependent, as they were, on the quaint old "lock box" of surplus money we used to have - cannot now be discussed. Maybe it doesn't matter that we can't pay what's necessary to secure against terror at home.
In the spirit of Reagan, we can always hope for the best. But this triumph of faith over fact did not work the first time. So why would it now?
Marie Cocco - Newsday
The supply-side theory popularized by Ronald Reagan held that cutting taxes would lead to a great thrust of economic energy - and a rush of revenue into federal accounts that would replace the drain from the tax cuts themselves. It was, in the 1980s, called "voodoo economics" and a "Trojan horse." And that's just what some Republicans said.
By the 1990s other words would describe supply-side economics. Like fiscal failure.
No geyser of revenue rose up from the Reagan tax cuts. Federal revenues diminished in the aftermath of the 1981 tax cut, according to the White House Office of Management and Budget. Revenues as a percentage of the nation's gross domestic product declined from 19.6 percent when Reagan was inaugurated to 18.3 percent when he left Washington, even after a robust economic revival. They would drop further during the recession of the early 1990s.
Spending reductions never materialized. Not, anyway, until implementation of deficit-reduction packages - forged at enormous political cost by the first President George Bush and then President Bill Clinton.
Federal spending as a share of the economy was about the same when Reagan left the Oval Office as it was when he moved in. It did not begin a steady, downward path until 1992 - the year Bush was defeated for re-election, in part because a rift opened up in his party after he'd gone soft and raised taxes.
And what of Republican predictions that the Clinton tax hike included in the 1993 deficit-reduction package would bring on economic Armageddon? It would seem that the 21 million jobs added to payrolls during the Clinton era speak truth to slogan.
Nonetheless, we are mired now in another deficit inspired by the true supply-side believers, led by a most certain adherent, President George W. Bush. His deficit is about as large, as the share of the economy, as the budget gap was before his father became convinced of its danger.
But we are at no risk of losing the current president to the politics of doing the right thing.
He would like instead more tax cuts that go on forever and ever, an unstoppable force in the face of war and terror and any other historical inconvenience. This president cannot be persuaded to pragmatism.
And that is what makes his deficits more dangerous than Reagan's. We haven't the political leadership we had the first time around. There is a dire shortage of men and women who are willing to speak up.
Beginning immediately after the 1981 tax cut, Republican pragmatists within the Reagan White House and on Capitol Hill - people like Bob Dole and Howard Baker and Sen. Pete Domenici (R-N.M.), the budget committee chairman - insisted that some measure of discipline be restored. They won a series of incomplete victories.
Now, apostles of prudence are hooted down; their honor questioned. Just weeks ago, Sen. John McCain (R-Ariz.) was attacked by the speaker of the House for stating that sacrifice for the Iraq war is not widely shared, in part because Congress keeps passing tax cuts and spending money wildly instead of paying now for the military effort. Speaker J. Dennis Hastert (R-Ill.) suggested McCain - who nearly died of war wounds while imprisoned in Vietnam - doesn't understand the meaning of sacrifice.
Washington is mesmerized by this mentality. The idea is that deficits don't matter. And maybe they don't if it also does not matter that 10 cents of every tax dollar would, by the end of a second Bush term, be spent to just to pay interest. Maybe it does not matter that both liberal and conservative plans to revise Social Security - dependent, as they were, on the quaint old "lock box" of surplus money we used to have - cannot now be discussed. Maybe it doesn't matter that we can't pay what's necessary to secure against terror at home.
In the spirit of Reagan, we can always hope for the best. But this triumph of faith over fact did not work the first time. So why would it now?
Marie Cocco - Newsday
