Should we be surprised by the Republicans' insistence on cutting taxes as a way out of this recession? Hardly. If they were a repertory company, their production would be called A Tax Cut for All Seasons.
Problem is, Republican tax-ax economics is, in the words of author Jonathan Chait, "The Big Con." In fact, that is the title of Chait's book, published in 2007. (Full title: The Big Con: The True Story of How Washington Got Hoodwinked and Hijacked by Crackpot Economics.)
Chait, who describes himself as "quite moderate," nevertheless offers this pointed critique of Republican economics: "American politics has been hijacked by a tiny coterie of right-wing economic extremists, some of them ideological zealots, others merely greedy, a few of them possibly insane." He says that ideas once considered laughable are now accepted as economic gospel by Republicans; and warns that while pundits have repeatedly written off the right wing, it has come back stronger every time.
There's more beneath the bottom line...
To get to today's Republican dogmatism, you have to go back to the 1970s (bell bottoms and love beads optional) when Arthur Laffer, an economic consultant; Jude Wanniski, an editorial page writer at the Wall Street Journal; and Dick Cheney, President Ford's chief of staff (yes, him again) got together to discuss what we now call "supply-side economics." (A bit of trivia from Chait: Herb Stein, the chief economist during the Ford administrations, coined the phrase as a term of derision.)
Laffer and Wanniski have had enormous influence in GOP circles, even though Chait considers both men candidates for a rubber room. Laffer left the Office of Management and Budget in disgrace after his simplistic nostrum was--pun intended--laughably wrong in forecasting Gross National Product in 1971. But Laffer knew how to pitch a simple idea to politicians: he drew a parabola-shaped curve on a cocktail napkin for Cheney to illustrate his contention that if taxes fell, revenue would actually increase. That was the famous Laffer Curve.
Laffer was a model of propriety compared to Wanniski. His book, How the World Works, is considered holy writ by supply-siders--even though, Chait says, he knew nothing about economics five years before he turned author. It shows. In his book, Wanniski blamed Hitler's invasion of Poland on high tax rates, which distorted the German economy to the point that the country needed to acquire more territory. Later, Wanniski defended Louis Farrakhan and Saddam Hussein, and hired several Lyndon LaRouche followers at his consulting firm. This was too much even for Republicans, who made him a pariah–but nevertheless clung to his economic ideology.
By now, you've probably surmised that supply-side economic theory would face a rough ride in academia. You're right. This work was never peer-reviewed--odd, considering that university economics departments are themselves conservative. Instead of academic journals, supply-siders published their work in the right-wing media.
So how on Earth did such an off-brand theory become a cornerstone of economic policy under the Republicans? Chait offers four reasons: (1) the stagflation of the 1970s shook public officials' faith in Keynesian economics; (2) the theory allowed Republican candidates to offer a painless economic plan to voters; (3) for obvious reasons, wealthy people love tax cuts; and (4) Americans are so economically illiterate that they can't distinguish sound economic theories from the work of snake-oil peddlers--which is how Greg Mankiew characterized supply-siders.
Timing is everything, too. One important early convert to supply-side economics was Jack Kemp who, in turn, converted Ronald Reagan. And since the GOP has turned into a cult of Ronald Reagan, supply-side economics have become part of the party's Apostles' Creed. The last Republican president to raise taxes was the first George Bush, and the right wing never forgave him for having done so.
What Chait finds truly scary is that Republicans, in true cult-like fashion, embraced supply-side economics even more firmly after it was discredited. They've also played fast and loose with logic. Republicans credited the Reagan tax cuts for the recovery of the 1980s, even though Chait argues it was due more to the operation of the business cycle--something supply-siders don't believe in. Republicans predicted economic doom after Congress passed the Clinton tax increase; then, when the economy boomed, they credited Reagan; and when the economy slumped in 2000, they blamed Clinton. And when you bring up the fact that deficits ballooned under George W. Bush, they change the subject.
Chait sums it up this way: "The supply-siders do not qualify their predictions because they are monocausalists. Whatever else may come along to buffet the economy–the popping of the tech bubble, the Enron scandal, the war on terror and the war in Iraq–tax cuts ought to overcome it."
The Big Con was published before the current implosion began in earnest, but at this point you can probably figure out the right wingers' reasoning. They'll tell you that really big crises call for really big tax cuts.