Is It the Economy, Stupid? 

These are not the best of times. Rolling along in our economic stupor, the president has now returned from the war front to push a massive tax cut.

With political capital to burn, the incredibly popular Bush proposes to kick-start the economy using abandoned, junkyard, supply-side theories that this newspaper’s business desk quit talking about two decades ago.

Wasn’t it supply-side economics that got us in such a mess in the early ’90s? Yup. Sure was. Do they threaten to get us in trouble again? Uh-huh.

It was Ronald Reagan, who actually shares a lot in common with this president, who jumped headlong into supply-side theory back in the ’80s. Supply-siders were basically buying the Keynesian notion that if you cut individual taxes you could increase consumer spending and thus stimulate the economy. If, simultaneously, you increased government spending, the economy would boom.

In the short-term, the almost certain result was that deficits would spike. Higher deficits of course would require the federal government to take on more debt, which would mean interest rates would climb. But sooner or later, the argument went, so much stimuli would be pouring into the economy that tax revenues would also climb. And the deficit would simply go away.

It was odd that Republicans became the party promoting supply-side theory, but after a while, it was quite a beautiful marriage. The Wall Street wing of the GOP had long backed small, responsible government running on balanced budgets as helpful to the party’s financial interests. But Reagan’s Republicanism was more spectacular and grandiose. Not only did he propose to keep government small, but he suggested a political no-brainer of a way to keep it that way: tax cuts for everyone! Meanwhile, the deficit be damned.

After Reagan, everyone was left to clean up the wreckage. George Bush (41) advised us all to watch his lips—no new taxes. Faced with deficits looming as far as the eye could see, and motivated by an inner core of Yankee prudence, he relented. Income tax rates went up. Then came Bill Clinton, who took his own swipe at the deficit: higher tax rates again. The result, over time, was a balanced budget. Not surprisingly, with so much money free to move around because of unbelievably low interest rates, the nation’s economy went through the roof.

Now, Bush seems to want to move back the clock. This newspaper would prefer he reduce the deficit. In wartime, politicians rarely cut taxes. Taxes are more often raised to pay for the venture. In our view, Bush would be better advised to work at paying ourselves out of this mess rather than hock our future to the deficit monster.

One other coda: It’s been interesting to watch Congress wrestle with Bush’s proposed cuts, which total nearly $1 trillion. A number of Senate Republicans have drawn a line in the sand, saying they will not cut beyond $350 billion. One Republican senator, John McCain, has wisely said no to any cuts at all. Our own Bill Frist, meanwhile, is between a rock and a hard place. He’s got the White House, the conservatives in the House, and the moderates in the Senate all yanking his chain. Fellow Tennessean Howard Baker is said to have advised him recently, “If you end the day feeling like everybody’s mad at you, then you’ve done your job well.”

Frist has an ambitious future and is possessed of great political gifts. Unfortunately, a bad idea from a not-so-smart president is threatening his very bright future. Were our senator simply to do what is right, he would abandon the idea altogether.

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