The irony couldn’t have been greater.
On Thursday, Sept. 10, John Taylor, one of the most experienced and widely respected economists who identifies as Republican, gave an articulate talk at the Economic Club of Minnesota. He holds an endowed chair at Stanford, and his work is explained in virtually every macro-econ or money and banking textbook printed.
Just two days earlier, presidential candidate Jeb Bush announced his proposed tax plan. It was compiled with the advice of Lawrence Kudlow, Arthur Laffer and Stephen Moore, perhaps the best-known trio of supply-side economists cited by the GOP — essentially advocates that cutting tax rates theoretically increases tax revenues. Graphically, this is known as the “Laffer Curve.”
Kudlow, a columnist and CNBC commentator, has not completed any degree in economics but did hold a position in the Office of Management and Budget during the first Reagan administration and was a vice-president at Bear Stearns for some years.
Arthur Laffer is the best known, currently a self-employed economist who has held academic positions at good schools and has a doctorate from Stanford.
Steven Moore, now a visiting fellow at the Heritage Foundation, has a masters in econ from George Mason University. He founded the anti-tax Club for Growth and has been on the Wall Street Journal’s editorial board.
The irony in this timing juxtaposition is that Taylor is one of many thoughtful, brilliant Republican economists who are deeply respected by their peers, while the trio of Kudlow, Laffer and Moore get short shrift. Greg Mankiw, another distinguished academic who served as head of George W. Bush’s Council of Economic Advisers, described them as “cranks and charlatans.”
Yet both Jeb Bush and rival GOP candidate Gov. Scott Walker consulted the trio.
Supply-siders, especially these three, tend to be passionate, articulate and prolific in turning out op-eds and in being interviewed on TV. Yet virtually no other economists cite these supply siders, and in 34 years of teaching, I have not come across a popular textbook, even one by very conservative economists, that asserts supply-side theories as a truth.
By contrast, the group of conservative economists who get Nobel prizes is not particularly interested in communicating with the general public outside of very occasional op-eds, and they tend to avoid taking appointive policy positions in government other than limited stints on the President’s Council.
Taylor is among these. On many short lists of potential Nobelists, Taylor’s ideas on monetary policy are universally cited. He was the Treasury Undersecretary for International Affairs in the George H.W. Bush administration.
Taylor is a monetary economist, not a tax specialist. So his Economic Club talk this week focused mostly on what the Federal Reserve should do at its then-coming policy meeting. While supportive of the Fed’s emergency measures in the immediate financial meltdown of 2008-09, Taylor has been the most distinguished critic of the repeated extensions of a near-zero interest rate policy — which the Fed ended up extending again on Thursday.
In his talk, Taylor called on the Fed to “get back to a more predictable, steadier, less discretionary, more consistent kind of policy.” His audience included Narayana Kocherlakota, lame-duck president of the Minneapolis Fed, an outspoken advocate of very low interest rates and their continuance.
Beside monetary policy, Taylor certainly understands fiscal affairs, and he is deeply knowledgeable about international financial linkages, as are many other respected Republican economists. But unlike Nobel laureate Milton Friedman a generation ago, conservative economists apparently see less value in trying to convince popular audiences or influence politicians. And they are much less interested than their left-of-center colleagues in seeking or accepting government positions.
This may result from their economic beliefs. From the mid-1930s to the late 1970s, the ideas of British economist John Maynard Keynes dominated Western economic thought. These advocated a broad role for government action to stabilize overall economic activity.
But there was a reaction to Keynesian ideas, based on abstract theory but motivated, at least in part, by the high inflation and high unemployment of the 1970s. This new “rational expectations” school was more conservative, politically as well as in economics, and advocated a much more limited government role.
If you think government should play a big economic role, you are more likely to want to be a part of that by working in government making that policy. If you see government action as futile or even counterproductive, you are less likely to. And the new theory was highly abstract. The ethos among its practitioners valued pure theorizing at top research universities. Taking a job in Washington was looked down upon.
That left the policy field on the conservative side open to cranks and charlatans. And among rank-and-file GOP members, they won hands down. The idea that another tax cut, even in an era in which federal taxes as a percentage of GDP are at their lowest levels in decades, will magically raise revenues, continues to be an article of faith for many. I don’t think GOP candidates John Kasich or Chris Christie believe this, and I suspect Jeb Bush agrees with his father’s apt assessment of it as “voodoo economics.” But to voice this is to be branded a RINO, a Republican In Name Only, by the new right.
This will change only when the right gets a respected and articulate voice to do what Nobelist Paul Krugman has done for the left. But there is no one with quite the same skills, at least not yet.
John H. Cochrane, a finance prof in the Booth School of Business at the University of Chicago, may emerge as the man. His blog, the Grumpy Economist, demonstrates his insight, his articulateness and his productivity. But he still writes more for other economists than for the general public.
Taylor himself writes fine occasional op-eds. But his writing is not that of a general Republican voice over a wide range of economic issues, as is Krugman for the left. That is too bad.