Kevin A. Hassett reviews The Big Con: The True Story of How Washington Got Hoodwinked and Hijacked by Crackpot Economics, by Jonathan Chait
Senior Fellow Kevin
With this breathy confession, Chait offers himself up to the reader as a modern-day equivalent of Abbé Faria, the incarcerated Italian priest from Dumas's classic The Count of Monte Cristo who was said to be mad, but was in fact a brilliant scholar with an encyclopedic knowledge of many of the world's most precious secrets.
Chait's precious secret--which he exposes in this, his first book--is that "American politics has been hijacked by a tiny coterie of right-wing economic extremists, some of them ideological zealots, others merely greedy, a few of them possibly insane. . . The scope of their triumph is breathtaking."
The thumbnail sketches provided by Chait of the key actors are often unfair, and at times incorrect.
The culprits, Chait argues, are the supply-siders, who peddle the crackpot idea that tax cuts pay for themselves, and ruthlessly enforce party doctrine. This "coterie" has tilted American policy with cruel efficiency toward themselves (the rich), and obliterated collegiality in government through their blatant intellectual dishonesty.
Increasing inequality in the U.S. is, according to Chait, the most serious outcome of the efforts of these sinister gentlemen, and, ominously, Chait compares the current episode to the America of a century ago--when, he writes, "what finally turned the tide was a wave of labor violence and radical activism." Chait appears to be warning Republicans that they should give up their devotion to low marginal tax rates, or blood is going to be spilled.
There certainly is ample room in the public sphere for a careful and unbiased review of the economic literature addressing the efficacy of tax cuts. Unfortunately, Chait provides no such product, instead relying predominantly on character assassination and guilt by association. He lines up the famous supply-siders--Arthur Laffer, George Gilder, Jude Wanniski, and Steve Moore, to name a few--and attacks them one by one. Gilder, for example, appears to have believed he had ESP. Wanniski cavorted with Farrakhan, and defended Saddam Hussein. In the oddest moment in the book--but one that shows the author's willingness to favor a low blow over genuine analysis--Chait says that Moore's writings look suspiciously like spam e-mails pushing fake Viagra.
There are two problems with Chait's approach. The first is a logical one: Even if one assumes that a theory has been put forward by an unbalanced person, that fact does not mean that the theory is incorrect. Princeton economist John Nash, for example, invented economic theories worthy of a Nobel Prize, despite his battle with mental-health problems. It might be amusing that Gilder thought he had ESP, but it is irrelevant.
But a second problem--and one that's much more significant, given Chait's heavy focus on the personalities involved--is that the thumbnail sketches provided by Chait of the key actors are often unfair, and at times incorrect.
For example, Chait spends a number of pages attacking Grover Norquist. Citing Nina J. Easton's book Gang of Five, he writes that Norquist "kept a pet boa constrictor and fed it a series of mice named after the former Democratic whip David Bonior." This story is, however, an urban myth that appeared to originate in a November 6, 1996, Washington Post article that describes the feeding of a rat to a pet snake at Norquist's office by a young Norquist employee. The Post article clearly indicates that Norquist was not present when the poor rat was fed to the 5½-foot boa.
Chait also repeats the canard that Norquist has called the World War II generation "anti-American." As was ably explained in a 2004 Weekly Standard article, this unfortunate quote was misattributed to Norquist because an interview with him was translated into Spanish by El Mundo, a Spanish newspaper, and then translated back into English by Agence France-Presse. The Standard took a look at the original transcript and found that the successive translations had garbled Norquist's words, and that the journalist had paraphrased Norquist and then put the paraphrased sentences in quotes.
All of this leads one to the impression that Chait is not the most reliable conduit of information about the individuals in his book. One suspects that the topic has aroused strong emotions in the author, which have clouded his impartiality.
He is too quick to believe the worst. Chait's targets, to some degree, bear some responsibility for this: After all, many supply-siders mentioned in the book have advocated policies with assertions that are not well supported by economic science. But sound arguments do abound. The economic literature is full of papers that back much of the supply-side agenda. There is, for example, strong empirical evidence, even some published by the Brookings Institution, that countries with lower corporate tax rates have higher revenues than countries with higher rates. Chait dismisses with the back of his hand scholars such as Martin Feldstein of Harvard and Robert Mundell of Columbia who have relied on such work to support Republican policies and who are, shall we say, less "colorful" than some of the supply-side founders.
Recognition of supply-side effects has spread quickly around the world, not because of the propaganda of crackpots, but because of the data, and the work of scholars like Feldstein. Witness the comments, in 2004, of a former prime minister of Iceland, Davíð Oddsson: "In 1995, Treasury debt in Iceland was equivalent to more than 50 percent of GDP. Next year it is forecast to be down to 15 percent of GDP. The Icelandic Treasury is in a solid position and Iceland's international credit rating has never been better. This success has been achieved not in spite of extensive tax cuts but, to a great degree, because of them." Norquist can't be driving policy in Iceland too.
Finally, the claim that supply-siders have triumphed is, unfortunately, ludicrous. If the most radical supply-siders had actually hijacked American politics, the U.S. would have adopted a flat tax, or the "fair tax," or some other major proposal that reduces the marginal income tax rate enormously. If they had accomplished that, one might correctly cite them as a massively powerful force. Instead, we have seen only a number of minor changes, including the original Bush tax cut that left the top marginal rate seven percentage points higher than it had been under Ronald Reagan. It is hard to understand how anyone could claim that such minor policy changes could possibly be the cause of major, continuing turmoil, especially now that the Democrats control Congress.
So, why the book?
Clearly, the problem is that the Democrats, if they sweep to power, will need to increase tax rates dramatically to fund all of their planned projects--and those tax increases would include a hike in taxes on capital income, one that would be diametrically opposed to the lessons of economic science.
While tax rates do not always pay for themselves, higher marginal rates invariably cause economic harm. Slanted books such as this may well discourage some of our best academic scribblers from participating in the coming debate, because of fears of the vicious attacks of Chait and his howling friends on the Internet.
Which in some sense is the ultimate irony of the book. Chait bemoans the absence of collegial discourse in Washington, and then proceeds to write a book that is filled with tendentious personal attacks. The book might have been worth reading if it had contained a more thorough analysis of the economics of the Republican agenda.
But in the end, irrelevant personal attacks such as those that fill this book will have little effect on the intellectual debate, which will continue to revolve around respectable economists' differing views of the impact of proposed policies. Indeed, Chait would have done well to pay attention to another Dumas character, Bonapartist Noirtier de Villefort, who told his son: "You know as well as I do, my dear boy, that in politics there are no people, only ideas."
Kevin A. Hassett is a senior fellow at AEI.