Saturday, April 09, 2005

supply-side slam

The concepts of conformity and labels have been of interest to me since I was a teenager. From a personal standpoint, I find it to be restrictive and requiring little imagination. That said, I’m always curious about anomalies. This is primarily because, by definition, they’re relatively scarce. It’s probably to do with the basic principle that a thing is more valuable when rare.

In another respect, an economy such as America’s, in which pop-cultural mass consumption abounds, producers likely prefer predictable trends. From a market perspective, I can see the benefits of promoting a Jones-following mentality. So, I entertain a bit of an internal conflict. Likewise, my political philosophy is bifurcated. Economically, I have a conservative bent; socially, I favor civil-liberty maximization. While I once considered joining the Libertarian Party, I've thought better of it, as they seem to be too hopelessly idealistic to have any substantive affect on the electorate.

I recently became aware of a new site that promotes a webzine entitled The New Libertarian, a monthly journal of "neolibertarian" commentary, policy and philosophy that attempts to lure libertarian-minded individuals away from the two major parties. For a while now, just such an idea has appealed me.
First, I should emphasize that, to my mind, Neolibertarianism is more about broadening libertarianism sufficiently to create a coalition (as opposed to the purity battles in most Libertarian circles) than it is about specific policy prescriptions. We differ on many things. –Jon Henke (The New Libertarian)
Sometimes though, when reaching out, core beliefs are compromised. Dale Franks, of QandO Blog, posted a critique of supply-side economics:
Even if we assume, charitably, that the last 5 years of Bush Administration GDP growth are as strong as Clinton era GDP growth, what does that tell us? In one case, that GDP growth followed a tax increase, and in the other case, similar GDP growth resulted from repealing that tax increase. It’s difficult to see how that becomes clear evidence of vindication for Supply-Side theory.
The “charitable” view of Frank’s post might be that he is courting disgruntled Democrats by down-playing supply-siders and implicitly endorsing Keynesian economics. I should say that I have no formal training in economics. However, common sense dictates that individuals create wealth and governments seize it. In the excerpt above, the two events that had the most profound effect on the economy in the last decade are conspicuous by their absence. Those being: the tech bubble burst and 9/11. Either of these individually would have crippled growth. The fact that they occurred in tandem is nothing short of disastrous.

Fortunately for us all, we’re not discussing the merits of a Gore or Kerry Administration’s economic policy. Instead, the likes of Paul Krugman and other Keynesian hacks decry Bush’s 2001 $1.6 trillion tax cuts. Now, I certainly take issue with current spending levels and would like to see an even deeper reduction in tax rates, but the irrefutable fact is that the unemployment rate is slightly below what it was at the beginning of the internet boom. To be sure, some will claim that lower wage jobs have replaced higher wage ones. The market will fluctuate and will only support that which is bearable at any given point. The goal is to increase the pie rather than merely redistributing the same pieces. It seems quite obvious to me that the profit motive, not government “compassion”, is what actually fuels the economic fire. Alas, as long as devotees of FDR and LBJ praise government spending, free-market types will have an up-hill battle.