Taking the Supply Side

Why is Kevin D. Williamson caving in to parochial calculations by accountant economists of the revenue effects of tax cuts (“Goodbye Supply-Side,” May 3)? Has he no idea of the vast body of data from around the globe showing that low-tax countries increase their government spending three times faster than high-tax countries, because the low-tax countries grow their economies some six times as fast? Does he have any idea of how silly it is to connect higher tax rates with increased revenues at all? Tax rates are prices. A huge body of economic and management literature shows that low prices, in general, yield more revenue and larger market share (global tax share) over time than high prices do.

Spending, on the other hand, is a political matter reflecting the increasing sway of special interests in our affairs as a result of campaign-finance laws that restrict individual contributions to a few thousand dollars but allow millions in outlays from PACs. Archer Daniels Midland can buy an ethanol mandate wholesale, but world-class chemist Art Robinson in Oregon has to raise money to oppose them in Congress two thousand bucks at a time.

The key to rectifying the pension crisis is a major increase in the retirement age. The problem is exacerbated by the scandalous and illegal self-dealings between politicians and public-sector unions extorting unsustainable benefits in exchange for their political support. Focus on that, rather than on grand plans for a deal with the Democrats that exchanges hypothetical spending cuts for real tax hikes that doom the U.S. to Eurosclerosis and disarmament.

National Review should be more skeptical toward leftist economists playing to the mainstream political galleries.

George Gilder Via e-mail

Kevin D. Williamson Replies: Mr. Gilder writes in the great American tradition of optimism: He is confident that naïve supply-siders, having had more than 40 years to pull a sound fiscal policy out of the magic hat, will get it right this time. Mr. Gilder is a man with many brilliant and original insights, none of which changes the fact that $1 = $1, and that the income side of the national ledger eventually has to match the expense side. There are 130 trillion pieces of evidence weighing heavily against Mr. Gilder’s analysis, which I enumerate in part on page 28.

Mr. Gilder asks why I am “caving in to parochial calculations by accountant economists,” and that’s a fair question. The answer is that the accountants have a much better record for getting the numbers right than do those who have adopted Mr. Gilder’s dessert-first philosophy about taxing and spending. Mr. Gilder is in the predictions business, but who would have predicted that a decade of Republican leadership in Congress, coupled with a Republican near-lock on the White House, interrupted only by the fiscally moderate Bill Clinton, would have left the nation with the cumbrous public debt under which it now labors? The politics of taxing and spending simply have not played out as advertised. Conservatives have a duty to deal with reality and to abjure magical thinking. Supply-side mysticism gave an entire generation of Republican politicians an excuse for avoiding the hard work of cutting spending and balancing the books. Scarcity stinks, it’s tough being a grown-up, but that’s life.