| By now there have been hundreds of articles explaining
why Bob Dole's economic plan, which relies on the magic of supply-side
tax cuts, won't work. And there have been hundreds more explaining why
Dole, whose contempt for people who believe in that kind of magic is a
matter of public record, nonetheless chose to accept their program--and
chose one of the most prominent believers as his running mate. I have nothing
to add to all of that. But it seems to me that the success of the tax cutters
in taking over yet another presidential campaign requires a deeper explanation.
Why does supply-side economics have such durability? |
| It should go without saying that the supply-side idea--which
is that tax cuts have such a positive effect on the economy that one need
not worry about paying for them with spending cuts--does not persist because
of any actual evidence in its favor. If you want, any nonpartisan economist
can explain to you at length what really happened during the Reagan years,
and why you can't seriously claim his record as an advertisement for supply-side
policies. But surely it is enough to look at the extraordinary recent record
of the supply-siders as economic forecasters. In 1993, after the Clinton
administration had pushed through an increase in taxes on upper-income
families, the very same people who have persuaded Dole to run on a tax-cut
platform were very sure about what would happen. Newt Gingrich confidently
predicted a severe recession. Articles in Forbes magazine urged
readers to get out of the stock market to avoid the inevitable crash. The
Wall
Street Journal editorial page had no doubts that the tax
increase would sharply increase the deficit instead of reducing it. Well
here we are, three years later: The economy has created 10 million new
jobs, the market is up by 1500 points, and the deficit has been cut in
half. I'm not saying that Clinton's policies led to that result--they account
for only part of the good news about the deficit, and hardly any of the
rest. But the point is that the supply-siders were absolutely sure that
his policies would produce disaster--and indeed, if their doctrine had
any truth to it, they would have. |
| Nor, I would argue, do supply-side views spread because
they are good politics. True, Ronald Reagan won on a supply-side platform--but
one suspects he would have won on almost any platform, and that the taunts
of "voodoo economics" actually cost him some votes. Today, the supply-side
label is a clear liability. Even promoters of the concept shy away from
the label. In 1994, Republican leaders like Gingrich and Dick Armey chose
to conceal the extent of their tax-cutting fervor from the voters, who
they judged would not trust an economic program based on supply-side assumptions.
And the word is that even Republican focus groups--the same groups that
were used to craft the Contract With America--have reacted scornfully
to the idea of an election-year tax-cut promise. This is partly, of course,
because they doubt it will really happen. But it is also because they doubt
it would have the promised beneficial effect. |
| So why does the supply-side idea keep on resurfacing?
Probably because of two key attributes that it shares with certain other
doctrines, like belief in the gold standard: It appeals to the prejudices
of extremely rich men, and it offers self-esteem to the intellectually
insecure. |
| The support of rich men is not a small matter. Despite
its centrality to political debate, economic research is a very low-budget
affair. The entire annual economics budget at the National Science foundation
is less than $20 million. What this means is that even a handful of wealthy
cranks can support an impressive-looking array of think tanks, research
institutes, foundations, and so on devoted to promoting an economic doctrine
they like. (The role of a few key funders, like the Coors and Olin Foundations,
in building an intellectual facade for late 20th-century conservatism is
a story that somebody needs to write.) The economists these institutions
can attract are not exactly the best and the brightest. Supply-side troubadour
Jude Wanniski has lately been reduced to employing followers of Lyndon
LaRouche. But who needs brilliant, or even competent, researchers when
you already know all the answers? |
| The appeal to the intellectually insecure is also more
important than it might seem. Because economics touches so much of life,
everyone wants to have an opinion. Yet the kind of economics covered in
the textbooks is a technical subject that many people find hard to follow.
How reassuring, then, to be told that it is all irrelevant--that all you
really need to know are a few simple ideas! Quite a few supply-siders have
created for themselves a wonderful alternative intellectual history in
which John Maynard Keynes was a fraud, Paul Samuelson and even Milton Friedman
are fools, and the true line of deep economic thought runs from Adam Smith
through obscure turn-of-the-century Austrians straight to them. |
| And so it doesn't really matter whether supply-side economics
makes any sense, or even whether it goes down to a crushing electoral defeat.
The supply-siders will always have a safe haven in the world of Free Enterprise
Institutes and Centers for the Study of Capitalism, outlets for their views
in the pages of Forbes and the Wall Street Journal,
and new recruits who never tire of saying the same things again and again.
When I was younger I thought that ridicule could eventually bring the whole
farce to an end, but now I know better. Presumably the pundits are right,
and Dole's desperate ploy will fail. But while that will be the end of
him, the supply-siders will be back. |
| Biologist Richard Dawkins has argued famously that ideas
spread from mind to mind much as viruses spread from host to host. It's
an exhilaratingly cynical view, because it suggests that to succeed, an
idea need not be true or even useful, as long as it has what it takes to
propagate itself. (A religious faith that disposes its believers to become
martyrs may be quite false, and lethal to its adherents, yet persist if
each martyr inspires others.) Supply-side economics, then, is like one
of those African viruses that, however often it may be eradicated from
the settled areas, is always out there in the bush, waiting for new victims.
I had expected Bob Dole, with his worldliness and sharp wit, to have stronger
immunity than most. But weakness in the polls made him vulnerable, and
he will never recover. |