Megan McArdle Goes After the Free Lunch Supply-side Moonbats

While I realize that this review of John Chait’s take down Crakcpot Economics will drive those of on the left crazy, I really like this:

Chait tars all tax-cutters with the ideas of the looniest supply siders. One can believe that tax cuts, by reducing deadweight loss and/or providing fiscal stimulus, will be good for the economy, without necessarily believing that the economy will be crippled by a 5% rate increase. His primary exhibits for the nefarious influence of supply-side policy are: Larry Lindsay, Dick Cheney, Jack Kemp, Jude Wanniski, and George Gilder. Cheney I give you, but Larry Lindsay was drummed out of the administration in disgrace (for unrelated reasons) even before Bush’s major tax cut, and Chait somehow neglects to mention the more conventional economists who have occupied the job since. Jack Kemp hasn’t had access to serious power since I was snoring my way through Algebra I, and what power he did have was over HUD. Moreover, though I agree that Jude Wanniski and George Gilder are barking moonbats, they have, to put it kindly, limited influence on today’s Republican party; which is hardly surprising given that Wanniski was kicked out of the party in disgrace before he died in 2005, and George Gilder has turned his attentions to that hugely influention Republican mouthpiece, the Gilder Technology report. This motley collection of names is hardly proof that the Supply Siders Have Taken Over the Building.

Sweet! But wait a second – George Bush once dubbed Lawrence Lindsey the smartest economist he ever met (what an insult to Glenn Hubbard and Greg Mankiw). I could go on but Matthew Yglesias has done the hard work for me. So let me just focus on this:

And, of course, in addition to this insignificant crew of presidents and congressional leaders, there’s people like Rudy Guiliani and John McCain As Greg Mankiw put it “fealty to the most extreme supply-side views is de rigeur in some segments of the Republican party.”

While it is true that Greg Mankiw has called out Guiliani and McCain on their free lunch BS, Mitt Romney is spreading the same BS. Didn’t Greg say he was one of Romney’s economic advisors?

Update: In his discussion, Mark Thoma points to another version of an oft heard silly claim:

Even Democrats can’t reasonably deny we’ve experienced sustained economic growth following the Bush tax cuts. Instead, they’ve resurrected the canard they used to discredit the phenomenal growth of the supply-side Reagan years … Contrary to liberal propaganda, the Reagan tax cuts led to dramatic increases in federal revenues even after adjusting for inflation. Increases in the deficit were due to the spending side, some of the blame for which admittedly should be shared by Republicans.

Is David Limbaugh really this stupid or does he just assume his readers won’t fact check his mendacity. Yes, we have had an anemic recovery from the 2001 recession but the average annual growth rate since George Bush has taken office has been only 2.4 percent. The average annual growth rate from 1980 to 1992 was only 3 percent – as compared to growth rates near 3.5 percent for the 1950’s, 1960, 1970’s, and the Clinton years.

But at least David knows how to adjust for inflation – unlike that WSJ op-ed piece by Art Laffer and Jack Kemp just before the 2000 election. As Laffer and Kemp advocated free lunch supply-sider George W. Bush should get our vote, they flat out lied to us by a host of confusions – including the nominal v. real canard – as they tried to claim the 1981 tax cut doubled revenues. But let’s take a closer look at Federal revenues in 1992 versus 1980 (two periods at similar points in the business cycle) by separating payroll taxes from current receipts (the latter being income and profit taxes). Payroll taxes were $162.6 billion in 1980 and were $441.8 billion in 1992. This 172% nominal increase represented a 70% real increase and the price-level rose by about 60% over the 12-year period. Current receipts rose from $335.9 billion in 1980 to $660.4 billion in 1992 or by about 86% in nominal terms. But in real terms, we are talking about an increase of only 16% over a 12-year period. Considering the fact that the US population rose by 13% over this same period – real per capita Federal current receipts grew by less than 3% over a 12-year period. Not exactly a dramatic increase after all – is it?

Incidentally, none of this reality should be new to anyone. Either David Limbaugh is an incredibly clueless person or he is a very dishonest person. But hey – the GOP label should be Moonbats R Us!