Supply-side economics still needs its day in court, proponent says
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Mr. Roberts maintains his contacts with Reagan administration insiders - and still joins in the intellectual fray, strongly criticizing those who oppose some of his views, such as Martin Feldstein, chairman of the Council of Economic Advisers, or David A. Stockman, director of the Office of Management and Budget. He blames Mr. Stockman for not delivering sufficient spending cuts sought by the administration in its first years in office. And he lambastes Mr. Feldstein for drawing attention to the huge deficits by terming them a cause of high interest rates.Skip to next paragraph
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After searching the economic literature for three years, Mr. Roberts says he has not found ''a shred of evidence'' that federal deficits affect interest rates or that borrowing to finance a deficit is worse for the economy than raising taxes to reduce that deficit.
Noting that Rudolph Penner, head of the Congressional Budget Office, has made similar charges about the budget deficit (even though, according to Mr. Roberts, some of his own staff spoke to him of the lack of evidence), Roberts asked: ''How do they get away with it?''
Asked for a report card on Reaganomics, Mr. Roberts reviewed its four main elements, what Murray Weidenbaum, Mr. Reagan's first chairman of the Council of Economic Advisers, called ''the four pillars of wisdom:''
1. Reduce the growth of government spending below the growth of the economy to reduce the burden of government on the economy gradually. However, government budgets would continue to grow in absolute terms year after year.
With the recession, notes Mr. Roberts, President Reagan ''lost control of economic policy'' and was unable to cut spending any further after 1981. Any cuts since then have actually been boosts in spending subsequently cut back in size.
2. Stop the tax burden from growing faster than people's income, which it had been for at least a decade. Also, stop the confiscation of business assets through insufficient depreciation allowances.
Mr. Roberts maintains the government had more success here than with any other ''pillar.'' Though eroded by inflation and social security tax increases, the 25 percent cut in personal income taxes at last reduced real tax rates in 1983. Further, business got some needed tax cuts in 1981, though these were trimmed back a year later.
Nonethless, tax revenues as a percent of gross national product remain under President Reagan above their average levels in the 1960s and 1970s. ''I would certainly never agree that we had any huge tax cuts,'' says Mr. Roberts.
3. Curtail the rate at which regulations stream out of the bureaucracy - ''they stream out so fast nobody knows what the law is,'' said Roberts.
The administration had ''some successes,'' but then it ran into political difficulties and the Bush commission on deregulation just ''declared victory and closed up.''
4. Beat inflation gradually with a steady, slow reduction in the nation's money supply.
Mr. Roberts says ''monetary policy is a total failure.'' The Federal Reserve System first of all tightened money too much, creating a serious, long recession that created huge deficits, and ''put the President on the defense.''
Moreover, monetary policy has continued on an even steeper roller-coaster ride. The Fed creates money at a rapid pace for six months, opening the door for inflation, and then tightens money for six months, threatening recession. ''The monetary policy the Fed delivered had nothing to do with the one we requested,'' he recalls.
Supply-sider Roberts still clearly favors the Reagan administration. But he hasn't given its economic policies a good report card.