Death Of A Supply Side Salesman - Road to the Middle Class

THERE HAVE been many important figures in the rise of the American conservative movement, but in anyone’s front rank must be Jude Wanniski who died Monday August 29, 2005 aged 69. Obituaries can be found here and here. Bob Novak recalls him here. George Gilder, author of Wealth and Poverty, celebrates Jude as an inspiration: “Economies are driven not by the dollars in people’s pockets but by the ideas in their heads.” Even The New York Times rolls out a decent obit.

It was Wanniski, as one of Bob Bartley’s bright young men, who first advanced on the edit page of The Wall Street Journal the supply-side cocktail of sound money and low tax rates that brought Ronald Reagan to the Presidency and that remains the bedrock of Republican Party economic policy. Wanniski’s economic ideas are expounded in his immodestly titled book The Way the World Works.

Supply-side economics is the basis for the solid economic growth that the United States has enjoyed since the first Reagan income tax rate cuts started to bite in late 1983. The new economic policy seems to have shifted the United States to a decadal business cycle with only two short recessions, in 1991 and 2001, since the start of Reaganomics.

It is natural for the governing class to look with skepticism on supply-side economics. Elites like ideas that boost elites; that is why they loved Keynesian economics. But supply-side economics relies upon a Hayekian understanding of the economy. It is the millions of decisions by millions of economic actors that drives the economy, not the big ideas of powerful people. Bureaucrats and experts simply cannot know enough to outperform the economic decisions of millions of businessmen, entrepreneurs, and consumers.

Understandably, Democrats hate supply-side economics. Their politics is based on dependency and clientage, handing out economic goodies to their supporters in programs and “targeted” tax cuts. In the supply-side world where ordinary people do extraordinary things, there is no need for all-knowing experts and patronage-dispensing political bosses.

Still, the Democrats will probably be hesitant to crank up tax rates again. They tried it in 1993 and were promptly spanked by the voters in 1994 in the Republican takeover of Congress.

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Christopher Chantrill blogs at www.roadtothemiddleclass.com. His Road to the Middle Class is forthcoming.