NCPA - National Center for Policy Analysis

Neoconservatives and Supply-Side Tax Cuts

May 27, 2003

Neoconservatives aren't just for a strong defense and active foreign policy, says Bruce Bartlett. They have also championed supply-side economics.

Before the supply-side revolution, from the 1930s through the mid-1970s, conservative economics focused on balancing the federal budget and attacking trade unions. Conservatives consistently voted against tax cuts, for tax increases and for cuts in programs popular with the middle class like Social Security and Medicare.

  • Neoconservatives, by contrast, were sympathetic to unions because they represented working men, whom they viewed as fundamentally conservative on cultural issues and foreign policy -- later, such people came to be known as "Reagan Democrats."
  • Neoconservatives thought that attacking popular spending programs was both counterproductive and politically hopeless.
  • They concluded that it is the relative size of government as a share of the gross domestic product, not its absolute size, that is most important and that lower tax rates would spur economic growth.

If growth increased faster than spending, then spending's share of GDP would fall without the necessity of cutting spending directly. At the same time, they reasoned, budget deficits from lower taxes would mobilize movements advocating reduced spending.

In his 1995 book "Neo-conservatism: The Autobiography of an Idea," Irving Kristol, the father of neoconservatism, explained his contact with Jude Wanniski, a Wall Street Journal editorial writer who was intrigued by the tax cutting ideas of economists Arthur Laffer and Robert Mundell. And California's Proposition 13 in 1978 showed Kristol that tax cuts forced politicians to cut spending.

His writings convinced mainstream conservative economists like Herb Stein and Alan Greenspan to give supply-side economics a chance, and that made it possible for Reagan to run on a supply-side platform in 1980.

Starving the beast and increasing incentives for work, saving and investment are still good reasons to cut taxes today.

Source: Bruce Bartlett (NCPA senior fellow), "Taxing Credibility, Los Angles Times, May 25, 2003.

 

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