The Nation: Reality Bites

During the 1980 presidential campaign, Republicans latched onto a theory that enjoyed virtually no support among professional economists: so-called "supply-side" economics. Its promoters were a discredited economist named Arthur Laffer and a self-described "wild man" editorialist at the Wall Street Journal named Jude Wanniski. Laffer had drawn up the doctrine on the back of a napkin, and Wanniski promoted it in the Journal's editorial pages before selling it to Jack Kemp, who made it a condition of his withdrawal from the Republican race that the nominee, Ronald Reagan, embrace it as well. Other than in a few Journal editorials, the only discussion of this notion occurred in two pieces published in the neoconservative policy journal The Public Interest, co-edited by Irving Kristol; one was by Wanniski, the other by Kemp aide Paul Craig Roberts. Before Wanniski's "The Mundell-Laffer Hypothesis: A New View of the World Economy" appeared there, neither Laffer nor Robert Mundell, a Canadian economist who had influenced Laffer, was even aware that they had fashioned a "hypothesis" together. Next thing you knew, Reagan was president, supply-side was in place and government deficits took off for outer space.

The supply-side experience taught conservatives they could create their own reality. They never admitted that their fly-by-night doctrine had anything to do with the deficits it created and continued to pummel liberals as fiscally irresponsible. Even after David Stockman revealed to William Greider that the entire exercise had been a hoax designed to cut taxes on the wealthy and spending for the poor and the middle class, the charade continued uninterrupted. (The Reagan administration even concocted a separate lie--that story about the president taking Stockman to "the woodshed" when the first lie was discovered--and that worked just as well.) Journalists, imprisoned by their attachment to consensus, national narrative, the appearance of objectivity--to say nothing of their ignorance of economics--were more than happy to go along for the ride, professing admiration for a conservative president's "bold leadership," however reckless and destructive the results (see also "Iraq, Invasion of").

Now recall that in 1980, there was no conservative counter-establishment to ease the path of this ideologically based nonsense into the mainstream. Today, however, thanks to the likes of Limbaugh, O'Reilly and the New York Times's William Kristol, etc., who will call it round one day and square the next, depending on the needs of their team, the Bush administration has felt empowered to cater exclusively to its increasingly narrow base of wealthy corporations, Christian fundamentalists and neocon adventurers to the exclusion of the rest of us, real-world results be damned. The administration's guiding ideology was explained by the famous but anonymous Bush aide who informed reporter Ron Suskind of the impotence of the "reality-based community"--defined by said aide as individuals who "believe that solutions emerge from your judicious study of discernible reality." "That's not the way the world really works anymore," he explained. "We're an empire now, and when we act, we create our own reality. And while you're studying that reality--judiciously, as you will--we'll act again, creating other new realities, which you can study too, and that's how things will sort out. We're history's actors...and you, all of you, will be left to just study what we do." The net consequences of this philosophy can be seen in Iraq, Afghanistan, New Orleans, the Justice Department, the budget deficit, the housing crisis, the banking crisis, etc. And yet it retains a certain salience in the Alice in Wonderland atmosphere of our political system--particularly with what remains of the Republican base.

More >>