Having had an opportunity to read your published comments about the supply-side revolution in today's New York Times, I find your ideological attacks against President Reagan's policies quite surprising.(posted 8758 days ago)The supply-side movement is premised on the idea that, beyond reconfiguring economics from a demand-oriented model, lower and flatter marginal tax rates influence economic growth. This idea remains anathema to numerous "scholars," many of whom persist in classifying economics as a science. Economics is a social science, with all the concomitant room for error from unexpected, irrational (paging Alan Greenspan) human behavior. That Paul Krugman and his fellow neo-Keynesians do not understand this amazes me. But arrogance is a trait more foggy than, and perhaps less intelligible than, simple economic science. Alas, I digress.
The central argument in your piece, from which opponents of supply-side economics have borrowed extensively, is that President Reagan's policies increased the deficit, which is undoubtedly true. What you fail to point out is that public debt is almost always irrelevant. Even Paul Krugman believes governments do not go bankrupt. Politicians are not usually as felicitous with numbers. Hence the temptation to conflate public and private debt. Simply stated, people can and do declare bankruptcy; governments rarely go Chapter 11. To my knowledge, the only way a government can go bankrupt is to lose a war and thereafter invalidate its currency (see the Confederate States of America).
More important is the importance of delineating between capital spending and current spending. The federal budget does not make this distinction, distinguishing between investments and current government outlays for things like Social Security and Medicare. Under this current system, how can one calculate the cost for Bill Clinton's "bridge to the twenty-first century"?
Finally, how do you explain the unprecedented economic growth during Reagan's presidency? Supply-side critics normally point a wavering finger to Paul Volker. But Volker's policies arguably worsened the 1982 recession, whereas Reagan's tax cuts began the economic rejuvenation we are still enjoying.
Like Paul Krugman (and other supply-side opponents) the temptation is strong to belittle Ronald Reagan as a lightweight, who was probably suffering from Alzheimer's Disease circa January 20, 1981. This is the fatal error most academics make: they personalize their criticisms, reducing arguments to ad hominem attacks between those with Ivy league degrees (Henry Kissinger notwithstanding) and the simpletons that support Reagan.