Friday, April 02, 2010

"Supply-side" economics was a colossal failure, wasn't it? (Econoclasts, Part I)

#2 in an ongoing series on Econoclasts: The Rebels Who Sparked the Supply-Side Revolution and Restored American Prosperity. First post in the series: Econoclasts: The Rebels Who Sparked the Supply-Side Revolution, Intro.

The headline for this post says it all, I think. I mean, isn't it pretty well acknowledged? So-called "supply-side" economics along with its twin, "trickle-down" economics, was an abject failure. Wasn't it? It's worthy of derision. Isn't it? Just listen to the experts. Here from Econoclasts: The Rebels Who Sparked the Supply-Side Revolution and Restored American Prosperity, p. 21:

PAUL KRUGMAN: "Biologist Richard Dawkins has argued famously that ideas spread from mind to mind much as viruses spread from host to host. . . . Supply-side economics, then, is like one of those African viruses that, however often it a be eradicated from the settled areas, is always out there in the bush, waiting for new victims."

JONATHAN CHAIT, of the New Republic: "The [Wall Street] Journal is perhaps most famous for helping to transform supply-side economics from a crank doctrine ridiculed by mainstream economists and rejected by Washington policymakers into a crank doctrine ridiculed by mainstream economists yet embraced by Washington policymakers."

MICHAEL KINSLEY, of Slate: "The classic Republican phony theory is, of course, supply-side economics . . . , based more on theory than evidence."

DAILY KOS: "The Greatest Lie ever told the last thirty some odd years is the theory of supply-side economics."
Or how about these from various blogs also quoted by Domitrovic (loc. cit.):

"Supply-side economics has become the triumph of faith over evidence."

"When you think Supply-Side Economists you need to think Mob Lawyers and not honest participants in an economic debate."

"Long-term fiscal responsibility does not reduce long-term growth even if the Laugher [sic] Curve nitwits . . . keep saying it does."

"Isn't Prescott an actual supply-side economist? This is like being in Intelligent Design biologist. It can't be ignorance; it's got to be dishonesty."
Or these quoted by Larry Schweikart in his 48 Liberal Lies about American History:
Few doubted . . . that the supply-side formula intensified an ominous fiscal crisis. . . . The national debt grew from $907 billion in 1980 to over $2 trillion in 1986. . . .” --John Mack Faragher, et al., Out of Many

[The Reagan tax cuts resulted in] slashing rates for the rich. Cutting the government's total income by 747 Ilion dollars over five years, [the tax cuts] meant less money for federalprograms. . . . --David Goldfield, et al., The American Journey
Then, to affix the very last nail in the coffin, let's quote Pearson Prentice Hall’s 2007 text book The United States since 1945: Historical Interpretations edited by Doug Rossinow and Rebecca Lowen, as it is quoted by Domitrovic:
Although historians' evaluations of Reagan . . . have softened over time, . . . their views of Reaganomics have remained almost uniformly unfavorable. . . . Where disagreements have emerged, they have been modest, ranging from how great a drag on the economy the Reagan deficits and accumulating debt were, to how much Reagan's tax cuts contributed to the growth in inequality. . . . Few of the countless fond recollections of Reagan's presidency after his death in 2004 even mentioned the supply-side economics with which Reagan was so closely associated, so overwhelming is the evidence for this doctrine's failure to achieve the goals its advocates proclaimed.
Considering how universally reviled this "voodoo economics" is, why would I waste my time reading about it?

Perhaps you don't know me yet. I like to attempt to listen to "both sides" of every story, and I thought I ought to try to listen to and understand the story of the supply-siders. After all, for good or ill, their ideas have had some effect on the American economy over the last 25 years. I thought I should get some perspective on the subject. Moreover, frankly, honestly, until I read Domitrovic’s book, I didn't even know what "supply-side" stood for. So how could I possibly form a reasonable opinion on the subject?

As I said in my introductory post on Domitrovic's book, Domitrovic’s lecture I listened to at least inspired me to think that the man might have something interesting to say.

And Domitrovic's summary response to the almost universal derision directed at supply-side economics?
Academic historians harbor a mistaken assumption that they have actually performed scholarship on supply-side economics. . . . We should not be misled, . . . [f]or historians, as historians, have said approximately nothing about the history of supply-side economics.

I sat dumfounded for a few moments after reading that sentence! "Historians have said approximately nothing about the history of supply-side economics"?!? How could he make such a statement? I should have kept reading.
History distinguishes itself from the other disciplines by its special method, pioneered by Herodotus: it reads the sources that are contemporaneous and pertinent to the event in question. There are primary sources, those left by witnesses to testify to the event in question; secondary sources, or "secondary literature," works of historical narrative and analysis that historians compose on the basis of primary sources; and tertiary sources, summaries of the secondary literature. It is debatable whether there is even one single work of secondary literature in academic history concerning supply-side economics. There does not appear to be one scholarly book or article, in the discipline of history, on the topic of supply-side economics that has called on and analyzed the relevant complement of primary sources. Not one. . . .

The very existence of all the tertiary literature on the subject of supply-side economics does not accord with the usual practice of the discipline of history. According to the usual practice, historians first endeavor to command the source base as they struggle To compose works of secondary literature. Once a significant complement of secondary literature is produced, tertiary literature arises to synthesize it.

In the case of supply-side economics, there is tertiary literature in the absence of secondary literature. This means that there are historians who speak and write, at times volubly, about supply-side economics despite the nonexistence of scholarship founded on primary sources.

What, then, is the basis of historians' commentaries on supply-side economics? Opinion, mostly. Historians may have interesting opinions about many things--particularly things having to do with history—but until they practice their disciplinary specialty and read the pertinent sources, their opinions are not informed as historians' opinions can and should be. . . .

Perhaps these points would be not so piquant if the sources pertaining to the history of supply-side economics in archives and libraries were not so vast and rich. . . .

Econoclasts, pp. 22-23

. . . And Domitrovic proceeds from there . . . to reference the sources and to create what (by the process of elimination we know) he is claiming to be the first legitimate historical secondary source on supply-side economics.

And why should we want to read this? Besides sheer curiosity, Domitrovic suggests (p. 24):
  1. It's time. "The early history of supply-side economics is now half a century into the past. It's high time for history to be true to its responsibilities and to consider in a methodologically serious way the momentous phenomenon that was supply-side economics."
  2. To discover the historical interplay between politics and economics. Supply-side economics "attended the greatest domestic political realignment of recent history: the reestablishment of the Republican Party as a national, indeed populist, political force . . . It did not have to be that way. Democrats advocated supply-side economics until Reagan endorsed it. Had they stuck to their original position, perhaps the realignment would not have occurred."
  3. America's economic crisis today cries out for useful insights from the past. "Public officials (and others) have been quick to compare [today's] crisis with that of the 1930s. Strangely, they have not thought to make comparisons closer in time: the colossal 1974-75 or 1980-81 stagflation recessions, for example." How sad that "there are no histories of these latter crises, and in particular no histories of what solved them" available to today's political leaders! Might we actually learn something from studying what happened in the '70s and '80s?
I thought maybe I could (and, if I talked about it, perhaps it could be helpful to others, too). And so I read Domitrovic's book. And, as I said last time, I'm glad I did.

Next post in this series: The Terrible 1970s (Econoclasts, Part II)
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