See my review of Jonathan Chait’s new book The Big Con.
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The Big Boom
By Bret Swanson | September 13, 2007
In 2007, U.S. GDP will approach $14 trillion, tax revenue will easily top $2.5 trillion, and the budget deficit will drop towards a trivial 1% of GDP. Despite recent volatility, domestic stock markets remain near all-time highs achieved earlier this summer. Riding a worldwide surge of tax cuts, free trade, and innovation, global output this year will surpass $50 trillion. But in reading Jonathan Chait’s new book “The Big Con,” one would assume that the Reagan and Bush economic programs had plunged the U.S. into depression and the global boom did not exist.
One would have to assume. Because in this book about “crackpot economics,” Chait has remarkably little to say about economic growth, tax receipts, budgets, or the epochal story of globalization. With all the global evidence refuting Chait’s predetermined conclusion that supply-side economics doesn’t work, he retreats to a political analysis of the Republican Party and petty defamation of some of the era’s most important economic thinkers.
Chait’s thesis is that the Republican Party has been captured, and the U.S. therefore governed, by the supply-siders, a small economic “cult” of “off the wall,” “insane,” “totally deranged, completely nuts,” “sheer loons.” He begins with the assertion that supply-side economics has been “conclusively disproven” and moves on to ridicule the excesses of K Street lobbyists. Chait’s exposé of K Street bloat is undeniable and humorous, but he seems not to realize that the K Street explosion utterly contradicts his central charge against supply-side economics.
After 25 years in which supply-side tax cuts dominated U.S. economic policy, how is it possible to pay for K Street’s preposterous pork, perks, and narrow tax preferences, not to mention Iraq, Afghanistan, and entitlements, all with a miniscule deficit? If supply-side tax cuts didn’t positively affect economic growth and thus tax receipts, how could federal tax revenue, at nearly 19% of GDP, possibly be higher today than the 18.2% average of the last 40 years?
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