Conservatives in thrall to old black magic of voodoo economics

Even if Republicans take the Senate this year, gaining control of both houses of Congress, they will not gain much in conventional terms: they’re already able to block legislation; and they still won’t be able to pass anything over the president’s veto.

One thing they will be able to do, however, is impose their will on the Congressional Budget Office, heretofore a nonpartisan referee on policy proposals.

As a result, we may soon find ourselves in deep voodoo.

During his failed bid for the 1980 Republican presidential nomination George H W Bush described Ronald Reagan's "supply side" doctrine – the claim that cutting taxes on high incomes would lead to spectacular economic growth, so that tax cuts would pay for themselves – as "voodoo economic policy". Bush was right. Even rapid recovery from the 1981-82 recession was driven by interest-rate cuts, not tax cuts. Still, the voodoo faithful claimed vindication.

The 1990s, however, were bad news for voodoo. Conservatives predicted economic disaster after Bill Clinton’s 1993 tax hike. But what happened was a boom that surpassed the Reagan expansion in every dimension: GDP, jobs and wages.

And while there was never any admission by the usual suspects that their god had failed, it’s noteworthy that the Bush II administration didn’t try to justify its tax cuts with claims about economic payoff.

George W Bush’s economists didn’t believe in supply-side hype, his political handlers believed that such hype would play badly with the public. We should also note that the Bush-era Congressional Budget Office behaved well, sticking to its nonpartisan mandate.

But now it looks as if voodoo is making a comeback. At the state level, Republican governors – and Governor Sam Brownback of Kansas, in particular – have been going all in on tax cuts despite troubled budgets, with assertions that growth will solve all problems. It's not happening, and in Kansas a rebellion by moderates may deliver the state to Democrats. But the true believers show no sign of wavering.

Meanwhile, in Congress Paul Ryan, chairman of the House budget committee, is hinting that after the election he and his colleagues will do what the Bushies never did, try to push the budget office into "dynamic scoring", that is, assuming a big economic payoff from tax cuts.

So why is this happening now? It’s not because voodoo economics is any more credible. True, recovery from the 2007/09 recession has been sluggish, but it has been a bit faster than the typical recovery from financial crisis, despite unprecedented cuts in government spending and employment. In fact, recovery in private-sector jobs has been faster than it was during the “Bush boom” last decade.

At the same time, researchers at the International Monetary Fund, surveying cross-country evidence, have found that redistribution of income from affluent to poor, which conservatives insist kills growth, seems to boost economies.

But facts won’t stop the voodoo comeback, for two main reasons.

First, voodoo economics has dominated the conservative movement for so long that it has become an inward-looking cult, whose members know what they know and are impervious to contrary evidence. Fifteen years ago, leading Republicans may have been aware that the Clinton boom posed a problem for their ideology. Today someone like Senator Rand Paul can say: "When is the last time in our country we created millions of jobs? It was under Ronald Reagan. " Clinton who?

Second, the nature of the budget debate means that Republican leaders need to believe in magic. For years, people like Ryan have posed as champions of fiscal discipline even while advocating huge tax cuts for wealthy individuals and corporations. They have also called for savage cuts in aid to the poor, but these have never been big enough to offset the revenue loss. So how can they make things add up?

Well, for years they have relied on magic asterisks – claims that they will make up lost revenue by closing loopholes and slashing spending, details to follow. But this dodge has been losing effectiveness. Inevitably, then, they’re feeling the pull of that old black magic – and if they take the Senate, they’ll be able to infuse voodoo into supposedly neutral analysis.

Would they actually do it? It would destroy the credibility of an very important institution. But have you seen any evidence that the modern conservative movement cares about such things? – (Copyright the New York Times 2014)