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Taxing Credibility

Supply-side economics would give Bush's cuts the underlying logic they lack

May 25, 2003|Bruce Bartlett | Bruce Bartlett is a senior fellow at the National Center for Policy Analysis. He helped draft the Kemp-Roth tax bill upon which Ronald Reagan's 1981 tax cut was based.

WASHINGTON — Although Congress has now agreed to a scaled-back version of President Bush's tax plan, the president has clearly had a more difficult time selling a tax cut this year than he did two years ago. Disappearance of the surplus made his job more difficult, certainly. But on the other hand, the economy is in much worse shape, which normally makes Congress highly receptive to anything labeled a "stimulus" program.

Perhaps one reason for the president's problem, one that could dog his efforts to get through the additional cuts he still hopes for, is that his tax program lacks an underlying philosophy. Cutting taxes for the sake of cutting taxes may be enough justification for conservative Republicans, but not for others. They need persuading not only that tax cuts are preferable to deficit reduction but also that each particular tax cut is one we need now.

The White House itself seems uncertain about why it is doing what it is doing. On some days, the plan to eliminate taxes on dividends was sold as a step toward fundamental tax reform and a cure for corporate governance problems. On others, it was promoted as Keynesian pump-priming.

When people are not sure what the administration really believes, its enemies may be able to convince people that political expediency is the driving thrust. Such a perception can be deadly on election day. By contrast, voters are inclined to give the benefit of the doubt to those, like President Reagan, who appear guided by core beliefs -- even if those beliefs aren't shared by the majority.

Look at Bush's generally high marks on foreign policy. In that area, he has deeply held beliefs that fit into a coherent worldview. This worldview -- known as neoconservatism -- has many articulate supporters who have honed their arguments in academic and popular journals for decades. For this reason, even those who disagree with Bush's foreign policy tend to respect his convictions.

Neoconservatives also have a coherent view of economic policy, called supply-side economics. It underlay Reagan's economic policies and would fit with Bush's as well. By bringing supply-side economics back into the foreground, the president could present a more coherent economic policy and better arguments for selling it.

Historically, conservative economics focused on two things: balancing the federal budget and attacking trade unions. From the 1930s through the mid-1970s, these were the twin pillars of conservative economic thought, at least insofar as they manifested themselves in congressional debate. Generally speaking, conservatives thought that unions and deficits were the root of all evil. If we could just get them under control, everything would be OK.

Neoconservatives saw things differently. They were sympathetic to unions because they represented the working man, whom they viewed as fundamentally conservative on cultural issues and foreign policy. Later, such people came to be known as "Reagan Democrats." It is worth remembering that union leaders like George Meany and Lane Kirkland were stalwart anti-communists, and that New Left groups like Students for a Democratic Society reserved their deepest scorn for "hard hat" construction workers and others associated with President Nixon's "silent majority" of conservative voters.

Neoconservatives also differed fundamentally with traditional conservatives on the deficit and how best to regulate the size of government. Old-style conservatives thought that controlling the deficit was crucial to a sound fiscal policy. Consequently, they consistently voted against tax cuts and for tax increases. They expended enormous energy in fruitless efforts to cut Social Security, Medicare and other programs highly popular with the middle class.

Neoconservatives thought that attacking massively popular spending programs was both counterproductive and politically hopeless. Congress would never vote to cut such programs directly, and would not even restrain their growth unless under enormous political pressure.

And so, they approached things differently. First, they concluded that it is the relative size of government, not its absolute size, that is most important. In other words, government spending as a share of the gross domestic product was what mattered. For neocons, increasing the GDP is as important as lowering spending. Earlier conservatives had concentrated almost exclusively on controlling spending, assuming that increasing GDP was beyond government's grasp.

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