Somebody Tell David Brooks That Trickle Down Economics Didn't Work

Let's start this blog off by picking on an easy target: a David Brooks column on fiscal policy.

Brooks thinks tax cuts are old hat, which is good, but in the process he makes factual mistakes and an illogical argument.

In 1974, a group of economists and journalists got together in a bar and launched supply-side economics. It was a superb political and economic package. It addressed a big problem: stagflation. It had a clear policy focus: marginal tax rates. It celebrated a certain sort of personality: the risk-taking entrepreneur. It made it clear that the new, growth-oriented Republican Party would be different from the old, green-eyeshade one.

Supply-side economics had a good run, but continual tax cuts can no longer be the centerpiece of Republican economic policy. The demographics have changed. The U.S. is an aging society. We have made expensive promises to our seniors. We can’t keep those promises at the current tax levels, let alone at reduced ones. As David Frum writes in “Comeback,” his indispensable new book: “In the face of such a huge fiscal gap, the days of broad, across-the-board, middle-class tax cutting are over.”

A more plausible explanation is that tax cuts for the rich also have been shown, especially since the Bush tax cuts failed to promote strong growth, to be ineffective growth policy, while highly effective at increasing the take-home pay of the very wealthy. If they were more effective growth policy, we would be compelled to keep reducing marginal rates. We would always find more regressive ways of financing social insurance programs, whose problems Brooks also tends to exaggerate and distort.

And income tax rates don't have much to do with the viability of these programs. Rather, it's discretionary spending -defense, education, etc.- that's much more at risk when marginal rates are cut, because that's what income taxes are supposed to finance. And most experts now believe that health care costs unrelated to demographic change are the biggest problem facing the nation.

These distinctions are important, but Brooks ignores or contradicts them.

And there's no consensus that the Reagan tax cuts actually addressed stagflation, while there's almost unanimous agreement that monetary policy changes had a strong positive influence. Europeans countries, for instance, have dealt with economic crises without reducing marginal tax rates significantly.

Anyway, I shouldn't be too hard on the guy. The point of Brooks' column is that the GOP should help workers more. I want the Republican party to help workers more, too. But Brooks then goes on to make the case that the Republican presidential candidates are paying more attention to everyday economic problems.

This is a dubious idea. First, nearly all of the GOP candidates have promised to extend the President's tax cuts and to continue fighting wars and occupying countries in the middle east. The most politically likely way to finance a pro-worker agenda would be to do the exact opposite.

And second, as I mentioned above, and which Brooks doesn't mention, is that the GOP's highest priority is to extend all the Bush tax cuts, including ones that exclusively benefit the wealthy. This is not the behavior of a party truly concerned with the middle class.

In sum, this column is a great example of Brooks' writing. He's got a keen eye for politics, but is a policy lightweight and a bit of a hack for the GOP. He's just not worth listening to when he writes about fiscal policy.