Politics & Policy

Are We Conservatives a Bunch of Tax-Cut Nuts?

Just because Jonathan Chait says so, doesn't mean it's true.

The liberal writer Jonathan Chait now believes that advocates of tax cuts are not just wrong, but “insane.” His proof? Empirical research that he says has “decimated the conservative worldview.” (“Your silence is deafening, conservatives,” Los Angeles Times, June 11, 2006.)

The question at hand regards whether tax cuts prompt more government spending or less. Some conservatives have argued for tax cuts with the belief that the resulting loss of revenue — and hence increased deficits — would yield spending cuts. This is called the “starve the beast” school of tax cutting. But research from economist William Niskanen of the Cato Institute suggests that tax cuts prompt more spending, undercutting the starve-the-beasters.

 

For the sake of argument, let’s say that Niskanen’s analysis is correct. Chait says that, as a result, “the factual basis for [conservatives’] entire domestic strategy” has now been “exposed as a fraud.” As Chait sees it, since conservatives continue to insist on tax cuts, even though they lead to more government spending, conservatives must be “crazy.”

 

But there are several problems with Chait’s argument. For starters, by suggesting that “starve the beast” is the only conservative argument for tax cuts, it is willfully ignorant of political history.

 

Moral arguments about economic growth and undue burdens posed by excessive taxation animate conservative arguments in favor of tax cuts. The most articulate and successful advocates of tax cuts in the last thirty years — George Gilder, Jack Kemp, Ronald Reagan, Wall Street Journal editorial page editors, and Steve Forbes among them — all argued for cuts to prompt higher economic growth. These pro-growth tax-cutters believed that “taxes are an independent evil because they distort economic behavior,” as Harvard economist Jeffrey Miron recently explained it.

 

Indeed, Jack Kemp was mistrusted by many right-wingers for seeming to be soft on spending. Concern over spending has never been the primary tax-cut justification for growth-oriented tax-cut advocates; concern over the harmful effects of the taxes themselves was.

 

Either way, Chait knows these other arguments for tax cuts exist because, well, he has written about them. But why let one’s past writings get in the way of a rant? Chait has complained that conservatives have been silent about the devastation of their worldview; but since the research in question doesn’t speak to the worldview of pro-growth conservatives, why should it be surprising that many of them are silent when Chait sputters?

 

Now, it is true that many conservatives have argued, as a tactical matter, that it would be beneficial if cutting taxes yielded the cuts in spending that they also advocated. So let’s turn to the research itself: Does it stand up to scrutiny?

 

I don’t have a dog in the fight over the merits of Niskanen’s analysis. When I first wrote about it on NRO, I figured it was prudent to assume, for the sake of argument, that he was correct. I found it odd that liberals like Chait were so quick to embrace Niskanen, since Niskanen argues persuasively that Americans get more government than they want, an implication that’s obviously uncomfortable to liberals like Chait.

 

Chait still can’t seem to grasp this simple point. But since Chait has used the Niskanen research to smear as nutty all advocates of tax cuts and limited government, I’ll point out a number of sane reasons to suggest that Niskanen’s research may mark the beginning of a debate, rather than the end.

 

Chait claims that he found only two responses to Niskanen’s research — one by me and another by the editors of National Review. This says a lot about his thoroughness. He overlooked a response from Richard Rahn in the Washington Times, in which Rahn pointed out that “Mr. Niskanen’s mistake was to only look at the situation for a very few years in the U.S., rather than over a long time, and to fail to look at what has happened in the rest of the world.”

 

Chait also ignored the fact that University of Oregon economist Mark Thoma and other writers and bloggers such as Jon Henke pointed out several possible problems with the Niskanen paper.

 

What’s more, the Niskanen research also apparently conflicts with research from economist Henning Bohn. The existence of Bohn’s research prompted Harvard University’s Greg Mankiw to argue recently that “Until someone sorts out these apparently conflicting results, it is premature for anyone (like Chait) to conclude that Niskanen has the last, or even the most persuasive, word on the topic.” Even economist Brad DeLong — whose tirades about conservatives are even more cartoonish than Chait’s — says Niskanen’s findings are statistically insignificant.

 

Perhaps this, and not mental illness, is the explanation for why conservatives have been too silent for Chait’s taste regarding Niskanen’s claims.

 

Chait cherry-picks the Niskanen research and ignores other research. Why? Let’s assume that it is because he is a liberal, and thus wants a more progressive tax code and increased government spending on the causes he favors. Fine enough. But while Chait is entitled to his opinions, he is not entitled to his own facts.

 

It is evident that the jury is still out on Niskanen’s research. It is also evident that there are lots of arguments for tax cuts that aren’t predicated on the starve-the-beast theory. Since Chait has written about them, he knows they exist. Ignoring the existence of something you’ve already acknowledged? Now that’s downright crazy.

 

– Nick Schulz is editor of TCSDaily.com.

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