Politics & Policy

Where Are The Supply-Side Democrats?

Not so long ago, congressional liberals understood the power of marginal tax-rate cuts.

Extension of the 2003 tax cuts took a hit this week as Senate Republicans dropped the part of the bill that would resume the 15 percent rate on capital gains and dividends. While it’s possible the cuts will be added back in the House version, moderate Republicans in the House and Senate seem to be influencing the process in ways inimical to growth.

#ad#Despite clear evidence that the marginal rate cuts of the 1920s, ’60s, and ’80s (not to mention the 2003 tax cuts) led to higher revenues, Sen. George Voinovich (R., Ohio) recently said that “contrary to what some of my colleagues believe, tax cuts do not pay for themselves.” Stealing from the class-struggle line used so effectively by the Democrats, Rep. Mike Castle (R., Pa.) decried tax-cut extension for “reducing programs that could affect the poor and working poor.” The wobbly stance of certain Republicans is a far cry from the passion that former representative Jack Kemp brought to the debate (e.g., to House majority leader Jim Wright (D., Tex.), “Mr. Wright, I’m speaking to you!”) in the 1970s.

While Republican disagreement about taxes is surely disappointing, it’s not without precedent. In a January 1983 Washington Post article, columnist Mark Shields wrote of the desire of certain Democrats to discredit the Reagan economic program but for the more successful efforts of people within his own party. It was former Senate majority leader Bob Dole (R., Kan.) who helped pass what at the time was the “largest tax increase in history,” the Tax Equity and Fiscal Responsibility Act of 1982.

So, while it doesn’t help that not all Republicans are on board with tax-cut extensions, the ideological rigidity of today’s Democratic party is maybe more disturbing. House minority leader Nancy Pelosi (D., Calif.) said of the extensions, “They’ll take food out of the mouths of children in order to give tax cuts to wealthiest.” Pelosi’s reasoning contrasts impressively with that of former Sen. Lloyd Bentsen (D., Tex.), who in 1980 spoke of a past that “has been dominated by economists who focused almost exclusively on the demand side.” To achieve economic growth, Bentsen recommended “a comprehensive set of policies designed to enhance the productive side, the supply side of the economy.” Bentsen meant marginal rate cuts.

Talking about taxes in a November 3 speech, Sen. Hillary Clinton (D., N.Y.) took the Republican party to task for failing to “ask the wealthiest Americans to forgo a small portion of their tax cut” so that programs for “health care, education and environmental protection” could be saved. Forty years earlier another Arkansas representative, Democrat Wilbur Mills, supported the Kennedy tax bill based on his belief that it would “bring about an increase in the gross national product of approximately $50 billion in the next few years.” He added that if his predictions proved correct, contrary to Clinton’s present assertion that tax cuts lead to lower revenues, “these lower rates of taxation will bring in at least $12 billion in additional revenue.” That one-time Democratic congressman Phil Gramm crossed the aisle in 1981 is already well known.

While it’s impossible to know for certain, the Democratic party’s hardening anti-tax-cut stance might be harming the Bush economic plan in ways beyond a simple lack of votes. Does the party’s rigidity and lack of competing ideas for growth allow certain Republicans to be more flaccid in their views?

Returning to Lloyd Bentsen, back in 1980 he argued for marginal tax-rate cuts for their ability to improve “the productivity performance of the economy over the long term.” Republicans should intuitively take to Bentsen’s past reasoning, and at least a few Democrats should jump on board too.

And they say the Republicans are extremists?

John Tamny is a writer in Washington, D.C. He can be contacted at jtamny@yahoo.com.

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