RN: The Memoirs of Richard Nixon, Volume 2: 18

For my write-up today on volume 2 of Richard Nixon's memoirs, I'll use as my starting-point something that Nixon says on pages 522-523:

"Before long I concluded that the release of the income tax returns had been a mistake.  It was the same old story: those who had been demanding that I put out my returns did not really want conclusive proof that the stories about the allegedly illegal purchases of my houses and the supposedly vast secret investment portfolios were false.  They seized on the fact that I had large deductions as if it were immoral not to pay more taxes to the government than the law required to be paid."

The context of this passage is Nixon's tax scandals.  Overall, Nixon affirms that the accusations against him were false.  In a couple of cases, however, Nixon acknowledges that things were rather murky.  First, there was the question of whether Nixon's sale of some of his San Clemente property was a capital gain subject to taxation, and Nixon says that his own accountant and tax professionals said no, whereas others said yes.  My impression is that Nixon went with the no answer!  Second, there was the tax deduction on the donation of pre-presidential papers to the National Archives, a deduction that had been used by Lyndon Johnson.  In 1969, the deduction was eliminated, and Nixon just assumed that those doing his taxes and handling the donation documents took that into consideration.  Unfortunately, they did not.  It was in the context of disclosing his finances that Nixon said his famous line of "I am not a crook."

What I'd like to talk some about in today's post is Nixon's statement that "They seized on the fact that I had large deductions as if it were immoral not to pay more taxes to the government than the law required to be paid."  I'm reminded of a variety of things here: Mitt Romney's release of one of his tax returns during the 2012 Presidential election, and the criticism of him for not paying enough taxes, as if he lacked civic-mindedness in taking the deductions that he did; how prominent Democrats, such as Al Gore and Tom Daschle, have been criticized for trying to avoid paying higher taxes, when Democrats are the ones who promote raising taxes on the rich for the common good; statements by wealthy men such as Bill Gates and Warren Buffett that they should be paying higher taxes than they do; and Desperate Housewives actress Eva Longoria's statement at the 2012 Democratic National Convention that she needed a tax cut when she worked as a waitress, but she did not need a tax cut as a successful actress.

What can I say about all of this?  On the one hand, I think that taxes are necessary for the public good----for parks, for programs for the needy, for public libraries, and for a host of other services, as well as deficit reduction.  Government, in my opinion, accomplishes a lot of good.  On the other hand, government can also be quite wasteful, and so I can understand the concern of some that taking more of their money and giving it to the government is not a good use of their money.  Economist Bruce Bartlett says that, in parts of Europe, people get their money's worth from their taxes.  Here in the U.S., my impression is that many people don't think that they're getting their money's worth.  Either they take certain services for granted, or they have had bad experiences with government, or something else accounts for their cynicism about government.

While I believe that the rich should pay more taxes, I don't judge Mitt Romney for deciding not to pay as much as he could have.  The reason is that he donated a lot of money to charity.  He's civic-minded, but that's expressed through private donations, as opposed to paying more taxes.  I am much more disheartened by the wealthy and prominent Democrats who try to dodge higher taxes, for, if they are so optimistic about the government doing good, then they should demonstrate their commitment to that notion in their own lives.  And I admire the wealthy people who admit that they don't need a tax cut.

I think that, somehow, the government needs to show people that it actually deserves more of their money, rather than just assuming that it does.  Perhaps it can do so by making people feel that they're getting their money's worth through government programs, and by cutting out governmental waste and inefficiency.

Political Discussion: We Didn't Change Each Other's Minds, but We Saw Each Other's Points

My brother came to visit this week, and we had a big political discussion on Sunday afternoon.  My brother is a Republican who voted early for the Mitt Romney-Paul Ryan ticket.  As for myself, while I registered as a Republican so that I could vote for Ron Paul in New York's closed primary, I ended up voting for the Barack Obama-Joe Biden ticket.  I was thinking of voting for Jill Stein of the Green Party, since I figured that New York would go for Obama anyway, and I agreed more with Jill Stein's support for a single-payer health care system and her opposition to drones, which have reportedly killed innocent civilians.  But I decided to vote for Barack Obama because of the impact of Hurricane Sandy on New York City, a city that provides a significant amount of the state's Democratic vote.  I feared that the aftermath of Hurricane Sandy could inhibit Democratic voters there from getting to the polls, and so Barack Obama needed my vote here in upstate New York.

In this post, I'd like to talk some about my political discussion with my brother, specifically where he could see my points, and where I could see his.  I should make a couple of things clear at the outset.  First, if my brother were to write this post, he'd probably tell the story differently from how I'm telling it: perhaps he'd highlight where he thinks that he presented better arguments than I did!  So I'm writing this post from my own perspective.  Second, neither one of us changed the other's mind.  He's still a conservative Republican, and I'm still, well, whatever I am----somewhat of a leftist, I guess!  We have fundamentally different worldviews.  That particularly came out when we were discussing health care: I said that I trust the government more than the private health insurance companies, and he said that he did not.  But, while it would probably be going too far to say that we found common ground, we did acknowledge the validity of each other's points, on certain topics.

I'll start by listing areas in which my brother acknowledged validity in my points (and yet calling that a concession on his part would be going too far), sometimes with reservations, then I will say where my brother got me thinking about certain issues, or made me aware of things of which I was previously unaware.

Where my brother acknowledged my points:

----My brother could see validity in the government rejuvenating the economy by spending money to improve our country's dilapidated infrastructure, especially when many in the private sector are not spending money.  But he doesn't think that the government does this all that well or efficiently, but rather that there's a significant amount of waste. 

----My brother and I were talking about pre-existing conditions.  He could see my point that a health insurance mandate could address the problem of people getting health insurance after they become sick rather than paying into the system beforehand.  As I think about the issue some more, though, I have some reservations about this.  There are reasons that people get health insurance after they get sick: in some cases, they may have had health insurance but they lost their job or moved to another state and thus lost it, and now they're sick and need to find another insurer.  That's why I think that national health insurance or a national health insurance exchange is important: a person can be covered, even if she loses her job or moves to another state, plus she'd have established a track-record of paying into the system.

----My brother said that Ronald Reagan improved a bad economic situation much more quickly than Barack Obama did.  I responded that we really cannot replicate what Ronald Reagan did and expect an economic boom to result.  Reagan reduced income tax rates from high rates to much lower rates, and that had a more stimulative effect than we would have were we today to reduce income tax rates, since income tax rates are already rather low.  My brother could see my point there, and he added that interest rates came down from high to low during Reagan's Presidency, which was stimulative, whereas interest rates are already low today.

Where I acknowledged my brother's points:

----My brother seemed not to buy into the notion that tax cuts would work the economic magic that a number of conservatives and libertarians think.  Or at least he was realistic in that he did not see tax cuts as the end-all, be-all when it comes to stimulating the economy.  But he also thought that tax increases on the rich would not help the economy, for that could discourage investment.  He also said that there are small businesses making over $200,000 a year, and a tax increase on those making that amount or more could hit them especially hard.  When I responded with the typical Democratic talking-point that the vast majority of small businesses make under $200,000 a year, he replied that small businesses making over $200,000 a year still employ a lot of people, and thus a tax increase on them could discourage hiring.  I've long struggled with this issue on this blog.  I recognize that taxing small businesses making over $200,000 a year could discourage hiring.  At the same time, I believe that people who make more money than they know what to do with should pay a higher income tax rate.  Is there a way to increase income tax rates on those making over $200,000 a year while exempting small businesses from that tax increase?  Perhaps the problem there would be that rich people could then dodge the tax increase by incorporating themselves.  I don't know.

----My brother argued that increasing the corporate tax rate could encourage companies to go overseas, where the corporate tax rate is lower.  He also said that rich people can always find loopholes, and he also stated that corporations often pass on the cost of higher corporate taxes onto their consumers.  My brother is a supporter of the fair tax: replace income and corporate taxes with a national sales tax, which would have exemptions for the low-income.  Whereas corporations can dodge paying a significant amount of taxes, the argument runs, a national sales tax would be collected when people make a purchase.  I've struggled some with this issue on this blog before.  One point that stood out to me in Mitt Romney's book, No Apology, is that corporations don't just buckle under and pay higher corporate taxes.  What that means is that raising the corporate tax rate won't necessarily bring in a lot of revenue.  I believe that we do need revenue, though, for a social safety net is important, as is paying off the deficit, and other things (i.e., defense).  I think of European countries and Canada: by and large, they have low corporate tax rates, but they raise money for their generous social safety net in other ways.  Many European countries have a Value-Added Tax (VAT), for example.  Perhaps this approach can preserve the best of both worlds: corporations are attracted by the low corporate tax rate, resulting in more jobs for the area, and yet money is raised for the social safety net.  I still have questions about the national sales tax and the VAT, however, but I'll save my discussion of that for a future post.

----My brother knows far more than I do about alternative energy.  He argued that nuclear power and wind and solar power are very expensive, in terms of construction.  He also said that we are not far along in terms of solar power, and that the government should not subsidize companies when they cannot produce a cheap solar-powered car at this point.  He did see some promise in hybrid cars, however, and he noted that oil companies themselves are doing research on solar power.  Moreover, he was open to the government spending money on research.  I'm not sure how to respond to my brother's arguments, but they do tell me that there are challenges in the area of pursuing alternative energy.    

Bruce Bartlett's The New American Economy 7: Europe, and Concluding Thoughts

I finished Bruce Bartlett's The New American Economy: The Failure of Reaganomics and a New Way Forward.

In my latest reading, Bartlett continued to promote the Value Added Tax (VAT) as a way for the federal government to raise revenue and thereby offset the problem of ballooning entitlements.  I especially appreciated what Bartlett said on pages 183-184 about Europe.

First of all, Bartlett says that European countries have higher tax/GDP rations than what the U.S. has, and yet they have not suffered significantly.  Rather, the standard of living in European countries is not that much lower than what exists in the U.S.  Bartlett also notes that countries in Europe have a VAT and higher taxes on gasoline and alcohol, and these taxes bring in a significant amount of revenue.  At the same time, Bartlett says that "European countries also generally tax capital more lightly than the United States does" (page 184)----and Bartlett's observation here may correspond to a point that he makes earlier in the book: that mainstream economics has incorporated the insights of supply-side economics.  Bartlett cited countries' reduction in individual and corporate taxes as evidence for this phenomenon.  From what Bartlett says, I gather that Europe is a place that has a solid safety net, and yet it has welcomed the parts of supply-side economics that can be conducive to economic growth.  I like that sort of ideological openness and flexibility. 

Second, Bartlett denies that government spending on benefits leads to a "creeping totalitarianism" (page 183).  A number of conservatives and libertarians aver that it does, but we don't see that sort of totalitarianism in Europe, with its generous welfare states.  By contrast, Bartlett states, "Many of the world's most oppressive states, especially in Africa, have very small governments based on taxes and spending as a share of GDP" (page 183).

Third, Bartlett explains why big government in Europe has not been deleterious to society.  People get back their tax money in the form of benefits, so, unlike many in America, many Europeans don't feel as if their tax dollars are going down a "rat hole", for they get their money's worth (page 184).  Moreover, Bartlett states that "government spending in Europe tends to be more growth-enhancing than spending in the United States" (pages 183-184).

I thought that those were valuable points to note.  Now, onto my general assessment of the book.  I got a lot out of the book, even though there were plenty of times when I was not following what Bartlett was saying.  I think that those who are better versed in economics, however, may get more out of those parts----for Bartlett details the economic mistakes that were made in the past, yet he also explains what the rationales behind those mistakes were.  I just wish that he broke things down into easier chunks, at times.

Another problem that I had: I was going into this book expecting a critique of Reaganomics.  The title, after all, says that Reaganomics was a failure.  But, after reading this book, I'm unclear as to how Bartlett regards it as a failure.  He still appears to agree with many of its insights----that there are tax cuts that result in growth.  When he criticizes Republicans, he contends that they are not entirely faithful to what the supply-siders themselves said----that Republicans support tax cuts that even supply-siders did not think would generate growth, and that George W. Bush diverged from supply-side, in key areas.  So I don't see how supply-side failed, in Bartlett's opinion, at least in reading this book.  Bartlett did note that even certain supply-siders are saying that a tax increase may be inevitable due to entitlements, and that may call into question the notion that tax cuts are the end-all-be-all when it comes to fixing the economy.  And yet, even here, Bartlett appears to assume supply-side principles: he prefers a VAT to higher taxes that could discourage investment, which implies that (like supply-siders) he does believe that certain taxes have ill economic effects.

I once read Bartlett say elsewhere that tax cuts would not be as stimulative now as they were in the 1980s because, early in the 1980s, the initial top income tax rate was really high, and so Reagan's dramatic tax cuts had quite an impact.  But, now, the income tax rate is not that high, and so a tax cut would not be overly stimulative.  I wish I saw more of this sort of insight in Bartlett's book.

Overall, though, I'm glad that I read this book.  It detailed the rise and fall of Keynesianism----and why it rose and fell.  I found that to be helpful.  I also enjoyed the book's narrative of how prominent figures in American history, such as Woodrow Wilson, heralded supply-side principles (i.e., that there can come a point where taxes are so high that they actually decrease revenue) before supply-siders articulated them.  This book also taught me some economic insights that I did not know before----that inflation can lead to high interest rates, for example.

Bruce Bartlett's The New American Economy 6: Entitlements, Deficits, and the VAT

My latest reading of Bruce Bartlett's The New American Economy: The Failure of Reaganomics and a New Way Forward scared me, to tell you the truth.

I usually get scared when I think about the ballooning of federal entitlements.  Bartlett, like others, contends that, in the future, in order to take care of the increasing number of people who will be receiving Medicare and Social Security, payroll taxes will have to go up----and that will affect all sorts of people, including the middle class.  Or we can borrow or print the money to help pay for the entitlements, in which case we'd probably have to put up with inflation and higher interest rates.  (And, whereas I have read economists set high interest rates against inflation, as if high interest rates cure inflation or an abundant money supply keeps interest rates low, Bartlett actually makes the point that inflation can lead to high interest rates.  If I lend you money, and I realize that the money that I will get back from you when you pay me back will be worth less than what I loaned you, I may just increase interest rates so that I can get a decent amount.)  

We have a deficit, and we have debt.  Bartlett argues that we're in a worse situation now because other countries own a sizable amount of our Treasury securities, and Bartlett contends that this situation makes Americans less wealthy and could increase the trade deficit.  Moreover, other countries will be reluctant to buy our securities, which are a significant source of our government's revenue, if they think that we won't pay them back. 

How can we solve this problem?  Bartlett says that even going so far as to eliminate every domestic discretionary program would not have been sufficient in 2008 to get rid of the deficit.  Regarding entitlements, Bartlett talks about raising the retirement age so that people could qualify for Social Security and Medicare later in life, but he doesn't appear to think that even that would be enough.

I haven't finished this chapter, but, in what I have read so far, Bartlett supports the Value Added Tax as a way to bring in a lot of government revenue.  On page 179, he explains what that tax is by telling a story about the making of bread.  Suppose that you have a farmer who sells his wheat to a miller.  The farmer pays a tax on the wheat's sale price, and that tax is a part of the wheat's price, presumably because the farmer is passing the cost of the tax on to the miller who's buying the wheat.  The miller then makes flour out of that wheat and sells it to the baker.  There is a tax on that sale, too, but the miller "subtracts the tax he paid when he bought the wheat."  And yet, the baker in buying the flour from the miller is paying the tax that was "included by the miller, which also includes the tax paid by the farmer."  The baker then makes bread and sells it, and in selling the bread he "gets credit for all the previous taxes paid."  But, ultimately, the tax's "full burden...falls on the final purchaser, the consumer."

I'm a little confused here.  Why would the full burden fall on the consumer, if the baker was able to get a credit for the previous taxes that he paid (in the form of higher prices)?  The baker wouldn't have to pass on to the consumer the tax paid by the farmer, and the tax paid by the miller, for the baker is getting credit for those taxes, right?

Another point that Bartlett makes is that a tax on consumption----such as the Value Added Tax----has less of an impact on the economy than the income tax because the VAT does nothing to savings, which Bartlett calls "the wellspring of growth" (page 177).  Bartlett also says that consumption taxes are "less burdensome because people can usually choose to reduce their consumption to avoid the tax" (page 177).  But, earlier in the book, Bartlett criticizes the tax rebates during George W. Bush's Administration because people saved them rather than spending them (page 138).  Doesn't that imply that spending----consumption----is important when it comes to stimulating the economy?  And would a VAT discourage consumption? 

On the issue of entitlements and the deficit, I hope that there's a way for us to keep our commitments to people and not throw them out into the cold, while also avoiding a lot of the financial burdens that would negatively impact so many of us.  Is this possible?  I don't know.  One thing that comes to my mind is the argument that a single-payer system is less costly than what the U.S. has.

Bruce Bartlett's The New American Economy 5: Did the Bush Tax Cuts Work?

For my write-up today on Bruce Bartlett's The New American Economy: The Failure of Reaganomics and a New Way Forward, I'll use as my starting-point Bartlett's assessment of the Bush tax cuts on page 140:

"To be sure, some of Bush's tax cuts, such as the cut in the capital gains tax, did have supply-side effects and undoubtedly recouped much of the static revenue loss.  But the vast bulk of Bush's tax cuts in dollar terms involved rebates and tax credits that had no supply-side effects whatsoever.  Therefore, to claim, as Bush often did, that his tax policies as a whole had such strong supply-side effects that they paid for themselves is the grossest of exaggerations.  The truth is that they increased growth a little, but at a very large cost in terms of federal revenue, and far less than would have been the case had the supply-side elements of Bush's tax cuts been made permanent and not phased in."

Earlier in the book, Bartlett says that the rebates were not strengthening the economy because many of the people getting them were not spending them, but rather were saving them, since the rebates primarily went to people "with relatively high incomes" (page 138).

I appreciate Bartlett's argument that some tax cuts stimulate economic growth and bring in revenue more than other tax cuts.  Although I have moved somewhat to the Left over the past couple of years, I myself prefer a degree of flexibility when it comes to tax cuts.  If the capital gains tax cut stimulates economic growth and recoups a lot of lost revenue----and maybe even increases revenue (see here)----then why not have it?  At the same time, I do think that it's problematic to give tax cuts to people who make so much that they probably won't spend it, for that doesn't stimulate the economy.  I tend to gravitate towards Bill Clinton's approach, as I understand it: cut the tax on capital gains, yet also increase income tax rates on people making over a certain amount.

Bruce Bartlett's The New American Economy 4: Tax Cuts, Supply, and Inflation

In my latest reading of The New American Economy: The Failure of Reaganomics and a New Way Forward, Bruce Bartlett discusses the rise of supply-side economics.

Probably the clearest definition of supply-side economics that I've encountered is from David Stockman's July 14, 1978 testimony before the Senate Finance Committee.  Bartlett quotes from it on page 116:

"We are not merely advocating a simple tax cut, an election-year gimmick.  Instead, we view this measure as just one policy step in a whole, new fiscal policy program based on the supply side of the economy; based on the idea of getting more labor, capital, innovation, risk-taking, and productivity into the economy by removing government barriers and deterrents, the most important of which, I would suggest to the committee today, is the rapidly rising marginal tax rates that Congressman Kemp has just discussed..."

I'll admit that I have long misunderstood the definition of supply-side economics----and I especially communicated that misunderstanding when I was blogging through Henry Hazlitt's Economics in One Lesson.  I won't go back and correct those posts, since that would take a lot of work, and I have other things to do.  Plus, I never claimed that every post that I ever wrote was perfect!  But back to supply-side economics.  The way that I understood it was as follows: the government cuts taxes, and people are thereby left with more money that they can spend.  They spend that money, and that stimulates the economy.

The thing is, that focuses on demand rather than supply.  Demand deals with people spending their money.  Supply pertains to companies producing products.  And supply-side economics is about supply.  How so?  It goes back to what Stockman said: You cut taxes to remove "government barriers and deterrents" to such things as investment and productivity, with the result that there is more investment, productivity, risk-taking, etc.

Tax cuts have been viewed by a number of detractors as inflationary.  This was especially the case during the 1970's, which was when supply-siders were promoting tax cuts as a means to economic growth.  If you read or watch the Presidential debates from 1980, you'll see that this was an issue: inflation was rampant at the time, and Reagan was promoting tax cuts, and so he had to interact with the argument that tax cuts were inflationary.

How would tax cuts be inflationary?  I can think of at least two ways.  First, tax cuts increase consumer demand.  People now have money to spend, and that means that there are more customers demanding things.  When demand exceeds supply, prices go up.  Second, tax cuts put more money into the economy.  When there is more money in the economy, there is inflation, as companies raise prices with the realization that there is now more money in the economy.

But one could also argue that tax cuts can counter inflation.  How so?  It goes back to what Stockman was talking about, and other factors.  First of all, when you remove the tax barriers on investment and productivity, then the result is that companies produce more.  There is now a greater supply of products.  And, when supply exceeds demand, prices come down.  Second, companies pass on the cost of taxes to their consumers in the form of higher prices.  Cut those taxes, and the prices will come down (one would hope!).

The thing is, from what I read in Bartlett, supply-siders tended to focus on monetary policy in terms of fighting inflation.  They did not focus on the role of (say) deficits and massive employment on inflation, but rather on monetary policy----how much money is in circulation.  Their approach to bringing down inflation was to have a tighter monetary policy.  They were rather revolutionary in the sense that they supported both tax cuts and also a tight monetary policy.

In the following chapter, Bartlett goes into the fall of supply-side economics.

Bruce Bartlett's The New American Economy 3: Public Works Projects

In my latest reading of The New American Economy: The Failure of Reaganomics and a New Way Forward, Bruce Bartlett critiques public works projects.  This took me aback somewhat, for Bartlett (if I understand him correctly) believes that the government needs to spend money to stimulate the economy when people in the private sector are not spending.  What does he want the government to spend money on, if not public works projects?

I thought that Bartlett's critique of public works projects was cogent, however.  I didn't really understand his arguments about how public works projects impact the business cycle, but he made sense when he said that public works projects take a while to get off the ground, that they often get off the ground after the economy has recovered and thus increase inflation (by increasing demand) when it would be harmful, that states spend less on infrastructure when they realize that the U.S. government will give them money for it, that many states take the stimulus money and use it to create a budget surplus rather than to stimulate the economy, and that public works projects mostly employ people who already have jobs rather than the unemployed.  These arguments strike me as rather contradictory, since Bartlett says that public works projects increase spending and demand, while also saying that there is not necessarily a net increase in infrastructure spending because federal spending is taking the place of state spending, or states are creating budget surpluses.  But what he says is worth thinking about.

Bruce Bartlett's The New American Economy 2: John Maynard Keynes

In my latest reading of The New American Economy: The Failure of Reaganomics and a New Way Forward, Bruce Bartlett talks about John Maynard Keynes.

One misconception that Bartlett corrects is that Keynes was pro-inflation, for Bartlett notes that Keynes acknowledged dangers in both extreme inflation and also extreme deflation, supporting stable money instead.  Keynes knew of the disastrous hyper-inflation in pre-World War II Germany, as Germany printed a lot of money to pay off its huge war debts under the Treaty of Versailles, resulting in hyper-inflation.

Keynes did support the U.S. government combating deflation through a loose monetary policy, however.  Deflation was a problem during the Great Depression for a variety of reasons----it made debts more of an oppressive burden (Bartlett quoted someone who likened it to having to pay $1.60 plus interest for every dollar that you borrowed), and it resulted in lower wages and people getting laid off as businesses sought to adjust to extremely low prices. 

Keynes preferred a policy of readjusting currency to the government setting prices and wages, for he thought that "the social cost of [the latter] policy was so great that it would threaten the maintenance of liberal democracy, leading to an authoritarian state such as that in the Soviet Union" (Bartlett's words on page 48).  Although Keynes supported government spending to stimulate the economy, he was later an admirer of F.A. Hayek's Road to Serfdom, which criticized the "growth of government...partly as the result of the widespread adoption of Keynesian economic theories" (Bartlett's words on page 57).  Keynes wrote to Hayek that he was "in a deeply moved agreement" with The Road to Serfdom (Keynes' words).

According to Bartlett, Keynes' desire for government stimulus was realized with World War II.  This point intrigued me because of the conservative argument I have heard that the New Deal did not get the U.S. out of the Great Depression, but World War II did.  But, even if that point were granted, World War II arguably got us out of the Depression through Keynesian means----government spending stimulating the economy.

There is much about Keynes that I do not know, but I have gained respect for him through my reading of this book and the last book that I read, Pat Buchanan's The Great Betrayal, which narrates that Keynes shifted from being a free-trader to being a protectionist, even though he was renowned in a society that largely regarded free trade as an orthodoxy.  I used to dislike Keynes because I knew that elements of liberal economic policy came from him, but he was actually quite open-minded and receptive even to views that could be characterized as conservative (i.e., Hayek's).

Bruce Bartlett's The New American Economy 1

I started Bruce Bartlett's The New American Economy: The Failure of Reaganomics and a New Way Forward.  Bruce Bartlett served in the administrations of Ronald Reagan and George H.W. Bush.

To be honest with you, there is a lot in this book that I do not understand.  But I'll blog about what I do understand, as I understand it.

The main point that I got out of my latest reading is that different economic approaches work in different contexts.  Keynesianism was appropriate during the time of the Great Depression, for that was when there was serious deflation, plus people were not spending much money.  Within that context, the Keynesian approach of printing more money (to elevate prices) and government spending was a panacea.  But Keynesianism did not work that well in the 1970's, when the United States was having a serious inflation problem.  In that period of stagflation, supply-side economics was beneficial, and Ronald Reagan helped to enact supply-side policies in the early 1980's.  Monetary policy needed to be much tighter to fight inflation, and Reagan accomplished that with Paul Volker of the Federal Reserve.  And the dramatic tax cuts under Reagan stimulated the economy.  According to Bartlett, the tax cuts were especially appropriate for that time because inflation was subjecting many people to a higher tax burden by putting them into the upper-income levels, even though they were not exactly rich and prosperous.  Their income only appeared that way due to inflation.

Bartlett is critical of the current Republican obsession with tax cuts, and he states that Republicans don't even consider the sorts of tax cuts that can stimulate spending, such as the Investment Tax Credit, which would encourage "business spending on capital equipment" (page 7).  Bartlett believes that Republicans push the same old tax cuts "out of dogma" and not because they have "any rational reason to believe that they would stimulate the economy" (page 7).

And yet, while my impression is that Bartlett holds that Keynesianism would be a good approach to the current financial crisis----that the government should spend money to stimulate the economy because people aren't doing so themselves, thereby contributing to deflation----he does believe that there will come a time for "fiscal retrenchment" (which probably means austerity), for increased government spending is inflationary, and there will come a time when inflation will be harmful rather than helpful.  But Bartlett has fears in the government-spending department on account of ballooning entitlement spending.  Bartlett maintains that a Value Added Tax (a sort of consumption tax) will be an effective way to "raise a lot of revenue at a very low cost in terms of lost output" (page 11).  Bartlett----at least in this book----does not appear to support taxing businesses and entrepreneurs at higher rates, for that can be deleterious to the economy.  But Bartlett maintains that the VAT is a preferable alternative, which can raise revenue for the government.