Economic Fundamentalism

http://www.democracyjournal.org/20/the-triumph-of-taxophobia.php

Issue #20, Spring 2011

The Triumph of Taxophobia

First Principles: Arguing the Economy

Jonathan Chait

To read the other essays in the First Principles: Arguing the Economy symposium, click here.

The conservative movement’s embrace of taxophobia is probably the most important development in American political life over the last three decades. It is the one quality that most distinguishes American conservative elites from conservative elites in other countries. They’re more likely to question climate science, more sanguine about people dying for lack of health insurance, and less xenophobic (which is rather nice). But above all—far above all—they hate taxes.
Taxophobia has spawned an epistemology of its own and has completely reshaped the landscape of American politics. It more than anything else has driven the widely decried rise in partisan conflict. More profoundly, conservative taxophobia has redefined the terms of the political debate. Two generations ago, economic liberalism meant Keynesian deficit spending and a rapidly expanding welfare state with little concern for deficits. Fiscal conservatism meant opposition to deficits and inflation. Today, the old fiscal conservatism has been embraced by the mainstream of the Democratic Party. The old fiscal liberalism has been confined to the margins, espoused by left-wing dissidents to the Democratic mainstream. And the Republican Party inhabits an otherworldly new realm that even the staunchest right-wingers of a generation before could scarcely have imagined. As the two parties trade power back and forth, the ideological basis for economic policy pingpongs between the old right and a loopy kind of far-right. Periods of Republican governance have grown increasingly disastrous, while periods of Democratic governance are largely consumed with staving off fiscal collapse.
How did this happen? All conservatives, and many liberals, explain this transformation as the story of the rise of a new idea. But I don’t think that’s right. As I will explain, ideas only serve to rationalize political and economic self-interest. However, the story does begin with a new idea.

The Birth of a Notion
In the mid-1970s, the new doctrine of supply-side economics suddenly emerged on the right. The doctrine took what had been a marginal notion within the economics profession—the idea that higher tax rates can dampen the incentive to work and innovate—and elevated it to something close to a religion. The supply-side creed held that tax rates, especially on the rich, had enormous effects on economic growth. It was even possible, the supply-siders famously promised, that tax cuts could unleash so much economic growth that the net effect would increase tax revenue.
Jude Wanniski, a Wall Street Journal editorial writer who did more than anybody else to formulate and spread the new doctrine, spoke of the new creed in quasi-religious terms, as did many of his adherents. “It was Jude who introduced me to Jack Kemp, a young congressman and recent convert,” recalled Irving Kristol, who helped spread the gospel of supply-side economics. “It was Jack Kemp who, almost single-handed, converted Ronald Reagan...”

"Opposition to the progressive income tax is at once a sacred and a hidden value for Republicans, and thus one that makes compromise nearly impossible."

"Not long ago, House Budget Committee Chairman Paul Ryan—who enjoys unparalleled prestige on budget issues among conservatives of all stripes—railed against the deficit and was asked about the massive cost of extending tax cuts. He replied, “Keeping tax rates where they are, and preventing them from going up, is not spending, because that is people’s money in the first place.” What on earth could this mean? Here is the answer. Ryan has declared his deep intellectual debt to Ayn Rand. He required all his staffers to read her work. When he responds to a question rooted in simple accounting with a moral claim (“people’s money in the first place”), he is saying that the arithmetic of revenue, outlays, and deficits does not matter to him. None of the pecuniary issues that he claims to care about so deeply ultimately matter. He is fighting a class war, which he views as a war for freedom itself."

"We can identify three phases of supply-side craziness in Republican Party history." [notice he goes from the metaphors of "religion" to "crazy".