In "The Seven Fat Years," Robert Bartley, the legendary former editor of The Wall Street Journal, wrote: "On March 26, 1976 Herb Stein coined a label, the 'supply-side fiscalists,' telling a conference at the Homestead Resort in Virginia that it consisted of 'maybe two' economists. Alan Reynolds passed this along to Jude (Wanniski), who promptly appropriated the label, though dropping 'fiscalists' as awkward and misleading." The label was new, but the basic concepts had been explained in Wanniski's Journal article of Dec. 11, 1974, "It's Time to Cut Taxes."
In 1977, Bruce Bartlett went to work for Jack Kemp, the congressional quarterback for what eventually became President Reagan's first round of tax rate reductions.
In a recent New York Times article, Bruce wrote: "I think it is long past time that the phrase (supply-side economics) be put to rest. ... It has become a frequently misleading and meaningless buzzword that gets in the way of good economic policy. Today, supply-side economics has become associated with an obsession for cutting taxes under any and all circumstances. No longer do its advocates in Congress and elsewhere confine themselves to cutting marginal tax rates -- the tax on each additional dollar earned -- as the original supply-siders did. Rather, they support even the most gimmicky, economically dubious tax cuts with the same intensity. ... Today, it is common to hear tax cutters claim, implausibly, that all tax cuts raise revenue."
Labels aside, those remarks are nothing new. In a July 2004 column, Bartlett correctly remarked that, "The vast bulk of tax cuts since 2001, in revenue terms, have gone for tax rebates, kiddy credits and other measures having no impact on marginal incentives."
Of course such "gimmicky tax cuts" lose tax revenue. But Wall Street Journal columnist Robert Frank, writing on economist Greg Mankiw's blog, recently imagined he had witnessed "the supply-sider Bruce Bartlett now conceding that tax cuts for top earners don't boost total tax revenues." Bartlett conceded no such thing. Revenues have risen impressively since the 2003 reduction of tax rates, and nearly all of the gains are from top earners, including profits, capital gains and dividends.
In 2004, Bartlett wrote that "with federal revenues at just 15.8 percent of gross domestic product (GDP) -- well below their historical level of 18 percent -- I don't think our economy is overtaxed." The Congressional Budget Office now estimates federal revenues of 18.6 percent of GDP this year and 19 percent next year.
Phrases intended to describe complex ideas in a word or two, such as Keynesian or monetarist, invariably become misused or hijacked after three decades. But such semantic abuses can't be halted by Bartlett's white flag. Like it or not, the phrase "supply-side economics" will doubtless continue to be used and abused.
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