Death of a Supply-side Salesman

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.