By DAVID BROOKS / New York Times
In 1974, a group of economists and journalists got together in a bar and launched supply-side economics. It was a superb political and economic package. It addressed a big problem: stagflation. It had a clear policy focus: marginal tax rates. It celebrated a certain sort of personality: the risk-taking entrepreneur. It made it clear that the new, growth-oriented Republican Party would be different from the old, green-eyeshade one.
Supply-side economics had a good run, but continual tax cuts can no longer be the centerpiece of Republican economic policy. The demographics have changed. The U.S. is an aging society. We have made expensive promises to our seniors. We can’t keep those promises at the current tax levels, let alone at reduced ones. As David Frum writes in “Comeback,” his indispensable new book: “In the face of such a huge fiscal gap, the days of broad, across-the-board, middle-class tax cutting are over.”
The political situation has changed, too. Republicans used to appeal to the investor class with economic policies and the working class with values, crime and welfare policies. But that formula has broken down. The workers are walking away from the G.O.P., and the only way to win them back is by listening to their economic concerns.
As a result, smart Republicans are groping for a new economic model, and as they do, Republican economic policies are shifting. The entrepreneur is no longer king. The wage-earner is king. As the presidential campaign rolls into Michigan, it’s clear that Republicans are adjusting their priorities to win back the anxious middle class.
The rest after the click ...
My comment: If this is the shift, its hugely important. However, none of the candidates seem to have caught on. Like the current administration they echo, they believe they can solve all problems we have with tax cuts ... even problems that don't have anything to do with taxes.
As I've said many times before, government has only two ways to generate revenue. Government can either tax or government can borrow. We are currently living in the maelstrom created by their borrow-and-spend approach ... the belief that somehow one can borrow one's way to wealth and prosperity. It has left us in a position similar to that of the underdeveloped nations that owe the bulk of the GNP to the World Bank ... and haven't a chance in hell of digging out of debt ... ever.
Maybe it's time to try a little pay-as-you-go.
Here's a bit more on tax cuts and how they "pay for themselves" ... or don't.