Supply me


Ezra's post is an example of exactly what's wrong with Jonathan Chait's article on supply-side economics. Chait, and others writing in this vein, refute the strongest claims of the supply-side movement: that tax cuts produce astonishing growth, or that cutting taxes can increase tax revenue. Then they imply that they have thereby refuted all the economic claims in favor of tax cuts, which they haven't, not even close. I haven't read the book, and the article may well have gotten muddy in the trimming. But from the article, it's not even clear that Chait is familiar with the moderate arguments about things like deadweight loss and fiscal stimulus that motivate many academics in favor of tax cuts. He certainly doesn't address, much less refute them. But nonetheless, a lot of people seem to have gotten the misimpression that there are no serious intellectual, economic arguments in favor of tax cuts. There are.

I agree that any Laffer-type arguments offered by the administration are wrong, and should not be taken seriously, and that Republicans should be pressure not to deploy them. But contra Ezra, it's not some sort of weird, uniquely awful Republican behaviour to sell your policies using dubious economic claims. I'll never forget being asked, in an interview with BET, how much Clinton's Urban Empowerment Zones contributed to economic growth in the 1990s. The correct answer--not in any measurable way--met with a great deal of skepticism, since the producer had seen Bill Himself making grandiose claims about the effects on growth and (slightly more plausibly) poverty. Politicians often assemble policies for a variety of reasons, and then sell them using the least plausible, but most appealing, rationale.

Any social worker, for example, will tell you that a core of their clients have no reasonable chance of getting off support. They have poor impulse control, drug habits, extraordinarily bad planning skills, and often, a rather lackadaisical attitude towards work. But almost no social worker ever says, "We need welfare benefits because these people are too screwed up to hold a job", because Americans do not care to give money to people whom they perceive as not trying. Whether this is appalling dishonesty, or merely putting your best foot forward, depends much on how you feel about the underlying program.

The actual rationale behind tax cuts was multiple. There was a fairness argument about how much of peoples' lives they should be compelled to spend laboring for the government; a fiscal stimulus argument about an economy sliding into (or just out of) recession; a deadweight loss argument; an efficiency argument about the structure of the tax code . . . these were serious beliefs, and they did, in fact, all get advanced during the policy debate. But liberal commentators have ignored all of these in favor of swiping down the few claims that are easy to refute.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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