Two plus two is five, isn't they?? Part I
- From: "Joe S." <anon@xxxxxxxx>
- Date: Fri, 26 May 2006 22:59:54 -0400
Bankrupted by voodoo economics
While Republicans tax-cut and spend, research shows increases lead to
reduced government.
By Jonathan Chait
The Los Angeles Times
May 14, 2006
IF YOU remember the 2000 election, you probably remember George Bush's
warning about why we needed to cut taxes: If we did not return the surplus
to the taxpayers, Washington would spend it. Well, we all know what happened
next. Bush returned the surplus to taxpayers - and Washington spent the
money, anyway.
Conservatives have a number of analogies to explain why tax cuts will lead
to spending restraint: Cut your child's allowance. Starve the beast. But the
analogies are all wrong. The child has a credit card. The beast has a
private meat locker. Washington can spend whatever it wants, regardless of
how much it taxes.
The right has been congenitally unable or unwilling to grasp this lesson.
Last week, though, there was a faint glimmer of recognition. William
Niskanen, chairman of the fervently anti-government CATO Institute, did a
calculation showing that, since 1981, every $1 in tax cuts tends to produce
15 cents of extra spending. Likewise, every $1 of tax hikes tends to reduce
spending by 15 cents. The notion that tax cuts cause spending to dry up, or
that tax hikes encourage more spending, is not just wrong, it's completely
backward.
Now, Niskanen is not the first policy wonk to discover this correlation.
Four years ago, Richard Kogan of the liberal Center on Budget and Policy
Priorities discovered the same thing. I wrote about it in the New Republic -
and nobody paid any attention.
But Niskanen's finding is getting some attention. Moderate libertarian
Jonathan Rauch wrote about it in The Atlantic, and a Washington Post
columnist picked it up from there.
Demolished Underpinning
You'd think conservatives would pay some attention to a study that
empirically demolishes one of the central underpinnings of their domestic
policy. Indeed, my fellow columnist, Jonah Goldberg, wrote on National
Review's blog last Monday that "conservatives are going to have to respond
to Jonathan Rauch's argument in the new Atlantic."
Of course, no response ensued. Indeed, the next day, National Review was on
its merry way, editorializing for more tax cuts, as if Niskanen's study
didn't exist.
The curious thing is why conservatives persist in supporting a strategy that
is demonstrably counterproductive to their stated goal of shrinking
government. The answer can be found in the same entry by Goldberg. He
proceeded to write: "There are others better qualified to deal with the
economic issues. But if tax increases can be demonstrated to shrink
government in some significant way, I'm certainly open to them."
Indeed, there is plentiful evidence that tax hikes can slow spending. There
is a sizable chunk of the Democratic Party that is willing to inflict pain
on their constituents in the form of spending cuts as long as the rich bear
some of the burden in the form of higher taxes. In 1982, 1983, 1990 and
1993, Democrats in large numbers voted for budgets that ratcheted back
spending and raised taxes.
In 1995, many Democrats offered to cut spending and balance the budget. But
Newt Gingrich and the Republicans quashed that move by insisting on huge tax
cuts, too.
Weakened Fiscal Restraint
The insistence on tax cuts tends to weaken fiscal restraint all around.
Having tended to the rich with tax cuts, Bush had to buy off enough voters
with spending hikes to win reelection.
Most conservatives are like Goldberg - they want to shrink spending. But
most conservatives, also like Goldberg, tend to think that "others are
better qualified" to make those decisions. Conservative opinion outlets tend
to subcontract out their economic thinking to a handful of polemicists, and
virtually all of them are committed advocates of supply-side economics.
They're theologically committed to tax cuts and don't really care about
spending cuts. They studiously ignore any evidence that weakens their case -
which is to say, most of the evidence.
So, basically, you have a handful of supply-siders leading the rest of the
conservatives around by the nose. The conservatives could cut a deal with
the Democrats to tighten spending and taxes, but the anti-tax nuts are the
ones who set policy for the movement.
It's funny. Almost all the conservatives, including Goldberg, are furious at
Bush for raising spending. But it hasn't occurred to them to question the
dogma of the voodoo economists who led them into this mess in the first
place.
Jonathan Chait is a senior editor at The New Republic, where he has worked
since 1995. He has written for The New York Times, Washington Post, Wall
Street Journal, Slate, Time, American Prospect and other publications
Copyright 2006 Los Angeles Times
http://www.latimes.com/news/opinion/la-oe-chait14may14,0,1529178.story?track=tothtml
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