President Biden has proposed raising taxes, and so it is that we are being treated to a chorus of doom and gloom from the conservative Chicken Little caucus.
There was House minority leader Kevin McCarthy on Wednesday, after meeting the president in the Oval Office to discuss infrastructure, declaring that “raising taxes would be the biggest mistake we can make.” (Even worse than selling one’s soul — and one’s party — to Donald Trump, at least in the eyes of the man who would be speaker.)
And there was Newt Gingrich on Fox News, telling viewers that if “you have the kind of tax increases and regulatory increases that Biden is asking for, you are going to crush this economy as it is just beginning to come out of the whole COVID-imposed recession.”
And there was Larry Kudlow, Donald Trump’s former economic flimflam man, whose predictions of 3 percent annual growth “as far as the eye can see” from the 2017 tax cuts proved to be a supply-side mirage, declaring on Fox Business that Biden’s tax package would “throw a wet blanket over an economy that wants to boom.”
Those uninitiated in the ways and wiles of reflexive revenue rhetoric might hear some of that and worry. Don’t. When it comes to tax hikes, the conservative crystal ball is as cloudy as it was for the faulty futurists who predicted that flying bicycles would let everyone commute by air, that 3-D “smellevision” would infuse one’s den with apt odors to accompany this or that TV scene, and that each family would have trained apes to do household chores and maybe even drive the kids to all those pesky practices and playdates.
Perhaps the best point of comparison here is to the 1993 tax hike proposed by Bill Clinton.
As Jonathan Chait recounts in “The Big Con: Crackpot Economics and the Fleecing of America,” it was a foregone conclusion among supply-siders that Clinton was making an epic mistake.
The Heritage Foundation warned that “higher taxes will shrink the tax base and reduce tax revenues.” Then-GOP House whip Newt Gingrich predicted Clinton’s plan would “shrink the economy, put people out of work, lower tax revenues.” Rather like Linus from Peanuts, Kudlow had his damp conceptual comforter in hand even then, declaring that there was “no question” Clinton’s tax increases would “throw a wet blanket over the recovery.” The Wall Street Journal prophesized a return to the stagflation of the Carter years.
When an economic boom came instead, the supply-side camp was unbowed. They simply declared that the Clinton-era economy really should be counted as a continuing success for Ronald Reagan’s policies.
Speaking of Reagan, when in 1982 the Gipper acceded to a package of tax increases to address the burgeoning budget imbalance created by his mammoth 1981 tax cuts, conservative voices — yes, you guessed it — warned of the economic consequences to come.
“Every schoolchild knows you don’t raise taxes in a recession unless you want to make it worse,” scolded The Wall Street Journal’s editorial page. Yes indeed, chimed in the US Chamber of Commerce. The Reagan hikes would “make the economy sicker,” added none other than Newt Gingrich.
It didn’t happen. As former Reagan Treasury Department official Bruce Bartlett has written, “Looking at the data . . . it is very hard to see any evidence that [the tax hike] had a negative effect on growth. Indeed, one could easily make a case that its enactment stimulated growth.”
It’s important to understand that in the supply-side view of things, there is never a good moment to raise taxes. Not in a time of recession, when a tax hike will inevitably throw things into depression. Not during a recovery, which higher taxes are sure to choke off. And not in good times, which will go “poof” as though targeted by one of those space lasers that Representative Marjorie Taylor Greene worries about.
So take all the conservative lugubriousness with a shaker — no, actually, a pillar — of salt. As the brief review above shows, those predictions have proved about as accurate as the repeated supply-side claims that tax cuts will pay for themselves.
This isn’t economics, it’s stopped-clock codswallop — but absent even the accidental accuracy unwound timepieces sometimes enjoy.