Saturday, February 4, 2012

Bartlett: Not the Time for "Reaganomics"

At, Bruce Bartlett writes:
Judging from the [Republican] candidates’ tax proposals, they seem to believe that the most Reagan-like candidate is the one with the biggest tax cut. But as the person who drafted the 1981 Reagan tax cut, I think Republicans misunderstand the premises upon which Reagan’s economic policies were based and why those policies can’t — and shouldn’t — be replicated today.
Although I am skeptical of "supply-side economics" in general, and I don't think that it should be considered a success in the 1980's (see this post, for example) I think Bartlett makes a reasonable case that it made more sense (or at least was less non-sensical) in 1980 than today:
When comparing Reagan’s policies with Republican proposals today, several things stand out. Inflation is low now. We are not looking at “bracket creep” or sharply rising taxes, as we were in the late 1970s. The top income tax rate is 35 percent, half the rate Reagan inherited. And federal revenue is at a 60-year low of about 15 percent of GDP, compared with a post-World War II average of about 18.5 percent.

These differences are essential to understanding why Reagan’s policies worked when they did — and why they are not appropriate today.

All of the evidence tells us that the economy’s fundamental problem today is not on the supply side but the demand side.


The Arthurian said...

Still, Bartlett is talking of nothing but tax rates, and tax rates are *NOT* the economy. The man who wrote Starve the Beast is not to be trusted.

You quote Bartlett: "All of the evidence tells us that the economy’s fundamental problem today is not on the supply side but the demand side. "

Yes... and yet in mid-2009 Bartlett was saying "We do not need a second stimulus plan"... "The first one was justified by extraordinary circumstances. But it must be given time to work. People should not allow their impatience to lead to the adoption of policies that will not only fail to reduce unemployment this year, but could stoke inflation in the not-too-distant future."
// from Kurt Brouwer at Seeking Alpha:

Bartlett's only concerns are inflation and tax rates. He offers exactly the same simplistic analysis that has driven economic thought and economic policy for the last 60 years, and landed us where we are today.

Sorry. Sore subject. :)

Bill C said...

Indeed. I usually find Bartlett's perspective interesting and he's written some useful things for dispelling the mythology surrounding Reagan policies. But I hope the wording of the post made clear I don't fully agree with him.