in Paul Craig Roberts’s book. Roberts,nnow a professor at Georgetown University,nserved as the Assistant Secretarynof the Treasury for EconomicnPohcy, 1981-82. He had previouslyndrafted the Kemp-Roth tax cut plannand fought in the vanguard of thensupply-siders both on the staff of thenSenate Budget Committee and as annassociate editor of the Wall Street Journal.nIt is this fight to establish a newnframework for policy which is chronicled.nAlong the way, Roberts gives onenof the clearest explanations available ofnsupply-side economic theory.nThe supply-side revolution is associatednwith the Reagan Administration,nbut Roberts reveals the progress madenin Congress in the years before Reagan’snelection. Though Republicansnwere the innovators, it was a bipartisannmovement with key Democrats likenRussell Long, Lloyd Bentsen, andnSam Nunn providing openings. Withnthe Democrats firmly in control ofnboth houses of Congress, the supplysidersnhad to rely on their ability tonpersuade opponents to change theirnviews. By 1979, the Joint EconomicnCommittee had largely substitutednsupply-side ideas for Keynesian, andnmajor victories had been scored innboth the House and Senate BudgetnCommittees. Roberts’s account of thisnstruggle is one of the best parts of thenbook. Ideas do have consequences andnreasoned argument can change mindsneven in an environment dominated bynpartisan politics.nRoberts places some distance betweennhimself and Arthur Laffer,nwhose Laffer Curve became the popularnrepresentation of the supply-sidenidea. The Laffer Curve, by claimingnthat tax cuts so stimulated the economynthat tax revenues would increasenrather than decrease, aroused unrealisticnexpectations. When the budget deficitnwidened in the wake of the taxncuts, critics pointed to the LaffernCurve, proclaimed it (and by extensionnthe entire supply-side idea) tonhave failed. The LaflFerites, in theirnenthusiasm, overran opponents whonwere concerned about deficits or cutsnin spending programs by assuringnthem that tax cuts provided morenfunds than ever. The problem was thatnthere was a time lag of several yearsnbetween the cuts and the new flow ofnfunds. The economy does not expandninstantaneously. As Roberts pointsnout, it took three years for the modestncuts of the Kennedy program to yieldnhigher revenues.nThe effects on the deficit of thenKennedy tax cuts were minimal becausenFederal spending was kept underncontrol. Between 1960 and 1965 thenbudget increased by only $17 billion.nWashington’s share of CNF fell betweenn1962 and 1965, the period followingnthe tax cut. The tax base wasnexpanding relative to Federal expenditures.nIn contrast, despite all of the talknabout spending cuts, Washington tookna larger share of GNP in 1984 than itndid when President Reagan first tooknoffice. Annual spending 1981-85 hasnincreased by over $270 billion. Thensupply-side tax cuts have opened thengap between revenues and expenditures,nbut more important is the gapnopened between expenditures and thentax base of the economy. As long asnspending remains out of control, deficitsnare inevitable unless taxes are increased.nThe supply-siders are correctnwhen they point to the dire consequencesnto the economy which wouldnresult from higher taxation. So what isnto be done?nThroughout the book, Roberts emphasizesnthat the supply-siders arena political movement. He is critical ofnthe GOP “establishment” which arguednfor “responsible” policies tyingntax cuts to spending cuts. This strategynwas politically unpopular, which tonRoberts is more important than whethernit was correct. Any attempt to cutntaxes provoked opposition from thosenwho feared that their programs wouldnbe cut. To break this, tax cuts werenvoted without threats to spending.nThis widened the deficit. Roberts argues,nhowever, that deficits which resultnfrom tax cuts are not as bad asndeficits which result from spendingnhikes because the tax cuts stimulatensavings and investment. In short, deficitsnare bad, but the supply-side effectsnhelp to offset them. Keynesian deficitsnresulting from high spending withoutntax reduction create only bad effects.nYet, this still avoids the central issue:nthe -share of the nation’s resourcesntaken away from productive activity bynthe government. Roberts concedesnthat the tax cuts did not generatenenough new savings to finance thennnadded debt. This means that there wasna net drain of the capital market. Thendiversion of capital from the privatensector to the national debt weakens thenability of the economy to grow. Thentax cuts have not forced the governmentnto control spending, only to shiftnthe method of financing that spendingnfrom taxes to debt—not a change fornthe better.nBy downplaying the spending issuenand the dangers of the deficit in conservativencircles, the supply-sidersnhave, unintentionally, made controlnof the budget harder to achieve. Thenpolitical bias has always been towardnspending (which is popular) andnagainst taxation (which is unpopular).nLiberals have used this to gain controlnover more of the nation’s resourcesnthan the public would have allowednhad the public been forced to pay for itnopenly in taxes. For the right to furthernseparate spending from taxing in thenpublic mind can only make mattersnworse. The people must have the controlnof the purse strings thrust back intontheir hands whether they want it ornnot. The only way political pressurencan be mustered to control spending isnif the majority knows that it will havento pay for every new program out of itsnown pocket. A “free lunch” of programsnwithout taxes is irresponsiblenwhether promoted by the left or thenright.nRoberts is right about the beneficialneffects on the economy from lowerntaxes, but they must be accompaniednby lower budgets brought into balance.nThat is why the next phase of reformnmust go beyond supply-side policy,ntowards a balanced budget Constitu-nAPRIL 1985/9n