Some may question my flexibility on the handling of our economy. I am reminded repeatedly of the maxim offered as proof and truth, that lowering taxes stimulates the economy and raising them depresses it. Not only is the finger of experience pointed at recent history,debatably,as confirmation, but it has also been implied that this is an eternal truism. Is the proper argument over the raising of taxes or the level of taxation? I am not an economist and have no way to contradict or confirm the correctness of the original allegation other than my trust and confidence in those that uphold its validity. However, even the high regard I hold for some of the proponents of this theory does not prevent the anecdotal evidence of my life and memory causing some consternation at its unquestioned acceptance or allow me to concede to what has been described as "a tacit convention that principles are not to be disputed". I remember eras of prosperity in the fifties and sixties when tax policy was other than it is now. The gap between the rich and the middle class and poor was much narrower than it is today. And I grew up in what was then the norm, a one income family, and began adulthood under the same expectation that a household and the requisite 2.5 children could be supported with the same single forty hour wage. Yet today, substitute 'single wage earner' with the phrase 'single parent' and it is too common and unfortunately the same prescription for financial hardship, even in intact families. Additionally, it is often projected that for the first time in our nation's history the next generation will experience less prosperity than its predecessor. I will not lay this trend down to taxes or tax policy solely, but I think an examination of just this one part of our economic puzzle is not without merit or is an inquiry that debases reason. It is a small digestible piece of a great and complicated beast.

Since it is unarguable that taxes have been levied under many different formulations over the course of time, and if we assume the positive or negative gyrations of the economy are post hoc ergo propter hoc symptoms of their efficacy, and if we further hold it true that lower taxes always provides a stimulus to the economy, it would seem the logical conclusion that no taxes at all would be the greatest good. No taxes, for the purposes of conservative stalwarts would upon first blush seem ideal. It would necessarily mean smaller, far less ranging and intrusive government, and the laborer retaining the fruits of labor. However, no one, even the most strident conservative, would suggest that an organized society of more than a few isolated and self-sufficient individuals has ever been able to avoid the necessity for taxation of one sort or another, if there is any connection with or general concern for the concept of "the common good". So, consideration of tax policy, whether "progressive" or "trickledown" or whatever, isn't a question of the inevitability or relative oppressiveness of taxes, but instead leaves us to investigate the moral, social, and economic ether situated between the poles of equality and equity.

If an economy was merely a construction of equations and theorems, free of prognostications of future events, human behavior, and individual and group aspirations, and there could be some reliance that the pecuniary circumstances of the purveyors and receivers of economic and political theory exerted no influence over the perception of self and societal interests, I would be less disposed to question conservative economic orthodoxy in self-opposition to my conservative inclinations. But contemplating the current economic conundrum must cause a sensible person to question if its root causes will be mediated or exacerbated by obstinate consistency. Perhaps what is required is a little heresy. I worry that the calcified opposition to the idea that there may be even a minority portion of indispensible truth inhabiting the neighborhood outside the boundaries of a particular creed, does not portray the vigor of intellectual certainty, but instead advertises morbid torpidity and evidence of stubborn rote recitation of, in this forum, conservative punditry; what someone called, “the deep slumber of decided opinion”. Even the most fortified city needs a means of egress.

“Supply Side” or Reaganomics must be viewed as just one of a series of economic experiments pursued by civilizations over the course of history. It is not the be all or end all. It isn’t necessarily the Holy Grail of economic theory, and in fact some suggest our current crisis shows it represents just the latest implosion of an economic idea this century; following the radical laissez-faire doctrines of the 1920’s, and the model that led to stagflation in the 1970’s. Still to converse on the contemporary situation we must address the ideas often paraded as proof of Supply Side validity, the Laffer Curve and its more refined offspring, Hauser’s Law. Hauser’s Law says that throughout history it can be shown that the tax revenue received by a government is always in the neighborhood of 19.5% of the Gross Domestic Product (GDP), regardless of the level of taxation. Hauser’s conclusion is that the amount of wealth generated by the wealthy, the supposed engine of the economy, hidden from tax collectors by various methods, among which are the machinations of accountants, tax attorneys, and other sundry ways, has historically resulted in the government netting an amount equal to 19.5% of GDP. And since the wealthy and their engines of wealth production are the foundation of GDP, and if it is assumed they will use the above described strategies to maintain their desired margins of retained wealth, it is thus fruitless to tax them at a higher rate as they will simply cut expenses, i.e. jobs and purchases of raw material and instruments of production, thereby lowering GDP; because to maintain or increase those levels will cause them to earn more income, which will exceed the amount that can be conveniently and “legally” hidden, causing them to pay more taxes and proportionately lessening their realized wealth. The result of the lowering of the GDP balanced against any additional tax revenues received by the government will render back at the equilibrium of 19.5% of GDP, with an attendant rise in unemployment and less general prosperity. Conversely, if taxes are lowered then investments will be made to increase GDP, because the lesser tax obligation and the rising GDP will again reach equilibrium at 19.5%, with an increase in employment to complement increased production and greater general prosperity will prevail. This is a representation of Hauser’s Law, if I understand it correctly; and the rationale underpinning Supply Side economics. When I remember the actions of the wealthy in the 18th century, having their silver coins converted into silverware to avoid the tax on specie, the temptation to acquiesce to Hauser’s theory can be compelling. But just as there are many supporters of his position, the army of detractors is legion as well. A survey of the economics fraternity finds a robust debate ongoing and even the interesting spectacle of battling Nobel Laureates.

One of the most prominent faults found with Hauser’s formulation is centered on its proclivity to encourage grossly uneven distribution of wealth. The most succinct reconciliation of the opposition view, again if I understand it correctly, is that if the new top income and capital gains rates are subtracted from the former top rates, the resulting product will be a percentage of substantial wealth that no longer has to be hidden because it is no longer owed, yet is still retained together with the traditional percentage of hidden wealth. This means that although the surface presents the appearance of equality, with the now universal income tax rate and the capital gains (the lions share going to the already affluent) rate capped at 15%, the new rates actually allow the amount of real wealth retained by the upper income group to increase geometrically, and explains the widening and accelerating gap between the rich and poor. There are economists, capitalists even, who find this inequity troubling and ultimately dangerous for the economy and democracy at large. When the rapid migration of wealth to the top is considered in conjunction with the current scenario where the government is scrapping for revenue, unemployment is rising, and GDP is dipping, is it unreasonable to question what E.J. Dionne describes as, “free market clichés that have passed for sophisticated economic analysis”?

My attempt in this and previous posts is simply to show that conservatism doesn’t have to mean stagnation and a refusal to let go of an economic experiment that never had the potential for immortality. Supply Side economics was an experiment advanced by an eloquent spokesman able to gather together the political will to have it implemented. What we need is a new model fit for contemporary circumstances, which rewards success, incentivizes industriousness, makes reachable the most prosperity to the greatest number, fosters greater equity between the component parts in the production of wealth, and funds the people’s government adequately for legitimate needs. We haven’t yet found the best way to do that, but we can’t anchor in one spot and hope to progress.