Ignorance Isn't Strength

Fred Thompson has a tax plan:

Speaking on Fox News Sunday, the presidential candidate recommended extending President Bush's tax cuts, due to expire in 2010, eliminating the estate tax, repealing the alternative minimum tax and lowering the corporate tax rate to no more than 27 percent from the current 35 percent.

Thompson also said that he would adopt the approach of the conservative Republican Study Committee in the House of Representatives that would offer, as an alternative to the current income tax, a two-rate income tax system stripped of deductions and credits.

Here's Ramesh, in response:

I see two possible problems with this plan. The first is that it would have to be coupled with a plan to restrain spending, or even to cut it, to avoid a large expansion of the deficit. The second is that, as presented, it shifts the tax burden onto parents. Indeed, it shifts it from corporations onto parents. If I were Mike Huckabee or Mitt Romney, I might have something to say about that.

Good points both, but Ol' Fred doesn't buy into that whole "expansion of the deficit" business:

Estimates devised earlier this year by the nonpartisan staff of the Congressional Joint Committee on Taxation indicate that major parts of Thompson's plan would lose at least $2.5 trillion over ten years, nearly as much as the entire federal government is expected to spend this fiscal year.

In the interview, Thompson said such official estimates are often wrong and that his tax cuts would stimulate "growth in the economy" and bring in more revenue than expected.

Obviously, affluent business-class types are deserting the GOP primarily because of its stance on social issues. But I can't help thinking that this sort of transparently bogus supply-side dogmatism - which fits into a larger narrative, sometimes fair and sometimes not, of the Republicans as the know-nothing party - has more than a little to do with it as well. Business-class voters want lower corporate tax rates, sure, but they also want a party that acts like it knows how to manage the economy more generally, particularly as the dollar weakens and the country edges toward recession. And sound economic management would seem to require, at the very least, demonstrating an understanding of basic principles like how tax cuts affect revenue.

If I'm right, this raises the possibility that the party's commitment to supply-side orthodoxy is hurting the GOP coming and going: To savvy business-class voters, the Thompson-style magical thinking it requires makes Republicans look ignorant and untrustworthy; to middle-income families, meanwhile, the emphasis on estate taxes, corporate tax rates and upper-bracket cuts makes the party look out-of-touch with kitchen-table concerns.

But hey - at least it keeps the Club for Growth from bolting to the Democrats.

Comments

My personal anecdotes suggest you're right. A lot of people who are "deficit hawks" and think lots of deficit spending has consequences are no longer really supporting Republicans.

Posted by Nicholas Beaudrot | November 26, 2007 11:36 AM

Nice bit of demolition work there, Ross. You're tilting at windmills, of course, but there's something admirable about your quixotic quest to build a Republican Party that engages with issues of taxes and spending in a rational manner.

Posted by LaFollette Progressive | November 26, 2007 11:44 AM

But hey - at least it keeps the Club for Growth from bolting to the Democrats.

I agree with LFP above, but I'd like to note that your snark here in some ways obfuscates the issue.

The Club For Growth, obviously, is a very small number of very conservative people who won't stop voting Republican, like, ever. The Club For Growth is also a small group of people who are connected to and allied to a much larger group of incredibly rich people and incredibly rich corporations. These incredibly rich people and corporations bankroll most of the Republican party.

If you want to cut into the influence of these moneyed elites on the Republican party, you need to acknowledge the breadth of their power, predicated on their wealth.

See Mike Huckabee's fundraising numbers for a quick glance at what happens to a candidate who veers ever so slightly off the path preferred by the moneyed elites of the party.

Posted by DivGuy | November 26, 2007 12:54 PM

Is there any evidence (it isn't in the article that Douthat linked to) that the Republicans are faring disproportionately ill among "affluent business-class types"? Obviously, if the election were held right now, the Republicans would do worse among almost every group than they did in 2004, but that's not the question. Absent such evidence, I wouldn't look for factors that are supposedly alienating such voters other than the factors that are alienating all voters, i.e., primarily, a war that isn't going well.

Posted by y81 | November 26, 2007 1:34 PM

I think Ross misses the point. Supply side economics-- at this point-- isn't an ideological persuasion. It is the tool that the very corporate elites he is talking about deliberately adopted to sell the tax cuts.

So these elites, having deliberately adopted that rhetorical strategy, aren't exactly concerned about sound fiscal management. They never have been. Rather, they want low taxes.

I guess it is possible that a few of them have some buyer's remorse about the strategy as they see it being taken to absurd heights. But how much buyer's remorse are we talking about-- are they willing to give up their tax cuts?

Posted by Dilan Esper | November 26, 2007 1:35 PM

A fair reading of the very article you cite shows that your characterization of Thompson's policy is inaccurate. He, like any reasonable "supply sider", is not denying that cutting taxes causes a drop in revenue. Rather, he is disputing the $2.5 trillion estimate as inappropriately high.

The full quote from the article you cite, including the following paragraph:

"In the interview, Thompson said such official estimates are often wrong and that his tax cuts would stimulate 'growth in the economy' and bring in more revenue than expected.

But he did cite one change in spending that he would use to make up for any revenue losses--his previously announced Social Security plan..."

So in the very next paragraph, Thompson admits that his tax plan will bring in less revenue. It is simply untrue that Thompson claims that cutting tax rates will raise revenue.

What he does claim is that a lower tax rate will bring in more revenue than static analysis would suggest. This is completely reasonable; when tax rates change, people's incentives change as well. Surely you agree with the principle that if you tax something more, you will get less of it, and vice-versa.

Posted by William Bruntrager | November 26, 2007 3:31 PM

Ummm....do we have any evidence that cutting tax rates will in fact bring in more money?

Posted by grumpy realist | November 27, 2007 6:36 PM