John McCain and Ben Stein's Money

Ben Stein, droll Renaissance man, said in a recent piece in the New York Times that he doesn't like paying taxes. But the lawyer, actor, and one-time speech writer for two presidents (Richard Nixon and Gerald Ford) is unimpressed with the supply side economics of the two most recent two-term GOP presidents, Ronald Reagan and George W. Bush. He's also unimpressed that presumptive Republican nominee John McCain intends to continue supply side policies if elected president in November, stating that at a time when revenues are stagnant, deficits and indebtedness to foreign lenders are exploding, and government is growing, he will not allow tax increases during his tenure. Some increases in spending are essential, Stein believes, especially in rebuilding the US military.

That means, Stein says, that McCain's prescription is precisely wrong. Writes Stein:

...the unhappy fact is that it’s necessary to raise my taxes and the taxes of all upper-income Americans. (I do wish, however, that “upper income” started just a dollar above me.)

The sad truth of the last two two-term Republican presidents is that their economic premise, the key part of their economic game plan, simply has not done what it’s supposed to do.

That is, cutting taxes, especially on upper-income Americans, does not generate so much economic activity that it replaces all the lost I.R.S. take and then some. At least those have been the results so far. When Ronald Reagan lowered taxes, personal income tax revenue stagnated from 1982 to 1984. Now, you may say that revenue rose sharply after that. So maybe that was a mixed result.

But when President Bush drastically cut taxes after he was first elected, the I.R.S. take from individual income taxes fell and did not recover its 2001 level until 2006.A conservative purist might rejoin here that it would be fine if income tax receipts fell, because we would then have a smaller government and a freer society.

That would be nice, but far from true. Instead, government just keeps growing. Government spending grew dramatically under President Reagan, very nearly doubling, and leaving us with a federal deficit vastly bigger than the one he inherited. I know that a large chunk of that increase was to rebuild the military. I heartily approved of it.

But if you want to have a military buildup — and we need one now, desperately — that’s usually a reason to raise taxes, not cut them.

Under the current president, we have had the same story. As income tax receipts fell, military and other spending rose rapidly. Again, this spending was justified as far as I’m concerned. But we have been left with immense deficits and a doubled national debt as President Bush enters his final months in office.

Mr. McCain wants to extend many of President Bush’s income tax cuts and to reduce taxes on corporations. But the facts of life are that we have a large budget deficit, even though some other nations have even larger deficits as percentages of gross domestic product. We have to pay interest on it. As a people and a nation, we owe this money in large part to foreigners — and that can have political implications. The facts of life are that federal spending is almost all untouchable: the military, Social Security, Medicare, interest on the debt, pensions. The discretionary part is tiny.

What's intriguing about Stein's critique of McCain's stated intention of making the Bush2 tax cuts permanent and to not raise taxes during his watch is that Ben Stein, the son of one time chair of the Council of Economic Advisers under President Nixon, Herb Stein, is a conservative Republican. It isn't just in the realm of foreign policy that the neo-orthodoxies of postmodern conservatism are questioned by traditional conservative thinking. That can't bode well for John McCain as he strives to knit a new Republican coalition this year.

Read the whole thing.