"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.
Take Mankiw. He is now one of Mitt Romney's main economic advisors. He also knows, without a shadow of a doubt, that it is lunacy to say, "if you lower taxes enough, you create more growth." Yet his employer will say just that -- politics being politics, you know --and Mankiw will stand quietly behind, signaling rationality even as Romney further cements the legitimacy of fatuous, free-lunch economics in the minds of the Republican base. It is a role only Mankiw or another accredited expert could play. It allows Republicans like Romney to pander furiously to the conservative movement while still retaining credibility in elite circles.
Lending expert cover to supply siders would be more understandable were Republicans rhetorically irresponsible but fiscally responsible. That, of course, is not the case. When Mankiw chaired the CEA, taxes were chopped yet again, a move many thought insane given the deficits and spending priorities in 2003. "I had assumed," wrote the economist Brad DeLong, "that Greg Mankiw as chair of the Council of Economic Advisers in 2003-2005 was playing the 'inside game,'" arguing for sane policies and spending restraint even as he supported their ceaseless tax-cutting publicly. But Mankiw didn't demand such fiscal restraint as the price for his support. Rather, he asserted its preexistence. "[A]t some point," he warned, "continued deficits [will] matter and could impede growth. This is why, as the president has said, spending restraint is so vital." But such spending restraint wasn't in the offing. Mankiw's credibility ended up supporting pure supply side policies, not the more nuanced combination of tax cuts and spending restraints he advocated.
The problem goes beyond politicians. Economists give cover to the most sacred temple of the supply-side priesthood every time they publish on the Wall Street Journal's editorial page. Few dispute the page's nuttiness. Even the center-right economics commentator Justin Fox admitted, "When writing about tax policy in particular, the Journal editorialists seem entirely unaware of most economic theory and empirical evidence on the issue." But the page survives because the crazed editorials -- like this one, from August 24, arguing that "The supply-side revenue effects on the rich are remarkable," (Which is true: When you give the rich more money, they must pay somewhat more in taxes, which is exactly what's happened. But it's a foolish way to run an economy) -- mingle with op-ed from the finest economists and financial observers in the world. Insofar as that means good columns are carried, it's a boon. Insofar as the exposure enhances the reputations of good economists, it's a boon to them personally. But insofar as their presence creates an aura of legitimacy around an institution most will admit zealously upholds a bankrupt and harmful policy agenda, it harms the rest of us.
Matt Yglesias recently copped to some "disquiet with the sort of economist-bashing" one often hears among the progressive left. "The ideas the Bush administration, the Wall Street Journal, and all the rest are working with are marginal, crackpot notions that are being mainstreamed through relentless message discipline," he wrote. "There isn't some army of orthodox neoclassical economists out there who think that returning to Clinton-era levels of taxation would wreck the economy, that retirement security can best be provided to all by expanding tax breaks for rich people, that health care can best be improved by expanding tax breaks for rich people, that sound education policy requires expended tax breaks for rich people etc."
What frustrates myself and many others is that Yglesias is right: Economists don't believe in the conservative laundry list he lays out. But whether because of political naiveté or careerism or simple inattention, many consistently lend their credibility to institutions and politicians that do uphold such views. It's really only aggressive censure from within the field of economics that could convince the press to begin treating bad, discredited ideas as bad, discredited ideas. These noxious proposals do not come from within the economics profession, but they cleverly misrepresent cautious, hedged statements from experts to create the illusion that they are within the mainstream of economic thought. It's time they no longer possessed that freedom. The day Rudy Giuliani is left with no one but George Gilder as his economic advisor is the day he lifts anchor, and sets sail for more respectable economic waters.
