The GOP's same old tax cut refrain
Perpetually replaying the greatest hits of the Reagan years, today's conservatives have failed to develop new ideas to meet new challenges.
David Frum
Mortimer Zuckerman published an alarming essay in The Wall Street Journal this week. Among the dismal economic numbers he highlighted was this one, which was especially painful and poignant to those of us who served in the Bush administration: The total number of jobs lost since the onset of recession last fall now exceeds the total number of jobs created during the entire Bush administration.
Even before the autumn collapse, the Bush economic expansion ranked among the very weakest since the end of World War II. In terms of employment growth, income growth, investment growth, and GDP growth it lagged well behind the average of the nine other post-1945 expansions. (It did, however, rank among the longest.)
If Republicans are to govern more successfully in the future, we need to open an honest discussion about what went wrong in the recent past.
It's hard to recall it now, but the economic outlook appeared ominous in January 2001. The dot-com bubble had burst, leaving behind a great mountain of business indebtedness. The country had invested heavily in new technology and new capacity, and nobody could quite figure out how these investments would generate a profit.
Consumers, too, staggered under heavy loads of debt, especially credit card debt.
Among top earners, wealth had expanded handsomely in the 1990s. But the middle had not done nearly so well, creating a widening gap between the top and middle, and an even more rapidly expanding chasm between top and bottom.
Confronting these challenges, Republicans rummaged through their tool box and passed an array of substantial tax cuts in 2001 and 2003. Marginal tax rates were cut, followed by capital gains rates and dividend rates. The child tax credit was doubled from $500 per child to $1,000. New credits were offered for energy conservation and for other socially positive actions.
These measures generated some good effects. Economic growth accelerated after the 2003 tax cuts were passed. The per-child tax credit put an average of $547 into the annual budgets of households in the middle fifth of the income distribution. That's almost as much as the typical American household spends on clothing per member.
Still, it has to be acknowledged that the tax cuts did not deliver the more robust benefits we had anticipated. Job growth, for example, consistently underperformed Bush administration projections, and investment growth followed more or less the same path after the 2003 tax cuts as it had after the 1993 tax increases.
So here is a proposition for Republicans and conservatives. Our policy response to the challenges of 2001 was a reprise of our policy response to the crisis of 1981. But whereas the 1981 crisis was a supply-side crisis, marked by slumping productivity, dwindling output, and excess monetary creation, the 2001 problem had very different contours. So we really should not have been surprised if measures that had worked well 20 years before worked less well under very different circumstances 20 years later.
Now the nation faces a third crisis, potentially almost as severe as 1981, but different again in type and nature. And conservatives face a challenge of our own: Can we develop policies this time that respond to the specific needs of the moment? Or are we doomed—like a once-platinum rock band—to reprise forever our greatest hits of three decades ago?
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8 Comments
Posted by John, Thursday, July 16, 2009, 8:35 am Supply side was a disaster in both the 80's and 2000's which piled up mountains of debt that subsequent administrations had to deal with. One fact Frum has wrong is that real income growth for 80 of the country in the period 1980 to 2008 occurred at only one time... in the mid to late 90's. Although the dot com bubble burst it did leave a positive residue of one of the greatest postwar productivity increases and net jobs created over the Clinton presidency was 22 million. As Frum say's were back to 2000 job levels.
Posted by sinz52, Thursday, July 16, 2009, 9:45 am Supplyside economics was the only solution that actually worked to get the U.S. economy moving again in the 1980s.I lived through the 1970s, a period of stagflation with doubledigit inflation, 18 interest rates making it impossible to buy a home, and fuel shortages causing gas lines at filling stations that were 20 cars long. Supplyside economics provided a shot in the arm that ended this parlous conditions. At a time when liberals had no solution to these problems.But now it's run its course. The problems of today are different.
Posted by bob dole, Thursday, July 16, 2009, 11:44 am I am impressed that Frum has become an honest critic of his own side's record in office. One point he makes in error, though: income inequality actually _declined_ in the '90s, due to job creation and the progressive tax rates, for the only time in the past 30 years.
Posted by Brett, Sunday, July 19, 2009, 9:43 am republicans have a major problem in coming up with new ideas and new solutions because they are unwilling to do anything but push their dogma that they refined in the 1990s and 2000s. Anyone, even other republicans, that suggests thinking a little differently because the dogma is invalid becomes an outcast. There are also a lot of bad, short memories and revisionist historians on the republican side, as demonstrated by the comment by 'bob dole'.
Posted by unbound, Monday, July 20, 2009, 12:45 pm Republicans need to find an economic policy that actually works for the economy at large instead of targeting a select group and, in essence, hoping it works for everyone else. Supply side economics is really only accepted by conservative partisans...plenty of data out there that makes supply side economics questionable at best, and working against the economy at large at worst. The hardworking need to be encouraged with real opportunity in sight or any modern economy based on mass production / mass consumption will simply fall flat.
Posted by jack, Tuesday, July 21, 2009, 2:33 am wow. thank god a republican has put this in the record.
Posted by G.W., Saturday, July 25, 2009, 9:33 pm By not suggesting any ideas himself, and instead recapping an incomplete list of economic factoids, it seems Frum answers his own question: the Republicans, according to their own ideology, have no new ideas. Reaganera policies weren't revolutionary they were reborn out of history which is where they should have stayed. Cutting taxes and getting government out of the market is, and always has been, the Republican mantra. It's also their simultaneous undoing. Republicans now have to choose between complete reinvention or ideological death.
Posted by Phil E. Drifter, Tuesday, July 28, 2009, 4:21 am The GOP doesn't want to govern, they want to control.
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