I was a teenage supply-sider

Few know this about me now, but during my intellectually formative high-school years, my passion was economics. And not just plain economics, but specifically the supply-side theories of folks like Art Laffer, George Gilder, Jude Wanniski, and Larry Kudlow that formed the intellectual foundation for the Reagan and Bush 43 tax cuts. For my young and romantic mind, supply-side economics was sexy, sweeping, and (I still believe) fairly commonsensical.

I mention this because Jonathan Chait of The New Republic has a colorful survey of the movement's history in the latest New Republic. It's a shrill hit-piece, but it was still fun to read, given that I actually lived firsthand through some of the intellectual history he's narrating.

The piece itself is unimpressive. Its thesis is that this cabal of "economic crackpots" has hijacked the conservative movement--and American politics in general. If I had a nickel for every time I've heard that someone's hijacked the conservative movement (it typically alternates between the neocons and the religious right, though)... I'd have quite a few nickels.

Chait also--while acknowledging that there's a grain of truth to it--wrongly minimizes the applicability of supply-side logic. The plain fact is that taxes affect economic behavior in all sorts of ways, and in that vein, Wanniski's The Way the World Works is a lot more nuanced than he gives it credit for in fleshing those out.

That said, he has some good points when he talks about the, umm... excesses in enthusiasm of the supply side crowd. I was there--and had them myself. In fact, as someone who subscribed to--and loved--The American Spectator when George Gilder ran the show, I can add a few more datapoints of my own.

Like Larry Kudlow's 2001 prediction that the Dow would hit 35,000 by the end of the decade.

Then--to show that the supply-side cabal hasn't completely taken over the conservative movement--there was the scoffing (pre 9/11) editorial about how Bill Kristol and the "national greatness" crowd at The Weekly Standard "would love another war."

Of course, once 9/11 hit, most of the supply-side crowd (with the exception of the oddball Wanniski) was pretty hawkish. Supply-side economics was never just about marginal tax rates, but about the societal and personal virtues cultivated by entrepreneurship and freedom. That a repudiation of all those things would appear in the form of Islamic fundamentalism, then, offered no ideological difficulty. And for folks like Kudlow and especially Michael Novak (both devout Catholics), free market entrepreneurship, done well, can even take on a great religious dignity. (John Paul II, too, has said as much.)

The lesson here for all those (mostly liberal) pundits predicting a crack-up of the conservative coalition, or its hijacking by one faction or another, is that on a fundamental level (and speaking very generally), conservative ideas on social, economic, and foreign policy actually fit together quite well.

Even on matters of war, however, supply-siders' particular and exaggerated ideological optimism was evident. Kudlow (whom I have enormous respect for, by the way) predicted that the Dow would jump 1,000 points the day Baghdad fell. Needless to say, that didn't quite happen.

Chait's other quasi-legitimate point is about deficits. Supply-siders have always been fairly dismissive of big budget deficits, at least on the federal level. The reasoning goes that 1) they won't be as big as predicted anyway, because tax-cut spurred economic growth will bring in more revenue, and 2) even when they're there, their negative effect on the economy isn't that big. This is essentially because tax-cut produced economic growth eats up the inflation deficits are supposed to produce.

This, say supply-siders, is why the huge deficits of the Reagan years were accompanied by an economic boom and low inflation (yes, yes, Volcker helped too)--and why the low deficits of the Carter years coincided with serious stagflation.

One of my favorite Reagan quotes, along these lines, is "I don't worry about the deficit; it's big enough to take care of itself." There's wisdom here. But going forward 20 years, you get Cheney's gloss on the principle: "Reagan proved that deficits don't matter." And that's a problem, at the very least on a moral level. Because when you have a government that automatically assumes it can spend more money than it takes in... well, you pretty much get Bush's domestic spending.

And that's all I have to say about that. Anyone looking for a more reasonable take on the virtues and follies of supply-siderism should check out Bruce Bartlett, one of the original crew, on why the entire term has overgrown its usefulness.