Sunday, July 16, 2006

More on Economists, "Conservatives" and the Wall Street Journal

I often marvel at my own stupidity. Yeah, I like to fancy myself a moderately bright fellow, but in truth I seldom see how the world really works until some much wiser person smacks me over the head.

I started reading a book by Brian Robertson entitled Forced Labor: What's Wrong With Balancing Work and Family. (At the moment, you can purchase this little book for $5 from Spence publishing.)

In the preface, Robertson examines recent policy proposals to alleviate work-family pressures. Of course, conventional wisdom is that the GOP is the party looking out for our families and sharing our conservative values. Surely, as you read that last sentence, your inner monologue was dripping with sarcasm.

In any event, Robertson, who I believe works for the Family Research Council, says, "Republican proposals, though perhaps less motivated by an affinity for commercial daycare, have been worse in many ways." Robertson continues:

In the name of doing away with the marriage penalty--itself a result of tax policies that neglected to take account of the effects that changes in the tax code have on families--President George W. Bush has proposed a sizable new tax deduction available only for two-earner married couples. Is this penalty to single income families with one parent at home inadvertent? By no means: Bush economic advisor Martin Feldstein wrote in the Wall Street Journal that "by lowering marginal tax rates, Mr. Bush's plan will change taxpayers' behavior in ways that make up for much of the revenue loss...[It will] induce people to work and earn more. Married women are particularly sensitive to lower rates, responding with higher labor-force participation rates and greater average hours of work per week." Another of Bush's economic advisors, Lawrence Lindsey, has argued that luring more married women into the workforce with lower tax rates for two-earner couples is necessary to maximize economic growth and tax revenue: "Economic studies clearly indicate that women's decision to work is quite sensitive to their after-tax wage. High taxes on working women are very detrimental to the labor supply."



Supply-side economists like Lindsey and Feldstein argue that individuals typically respond to incentives. In this case, lower tax rates will induce more people into the workplace, more entrepreneurial activity, and a general increase in economic growth. The consequence is that though tax rates may decline, revenues will increase. In short, though the government is taking a smaller percentage of the pie, the pie is growing.

There were few professional economists who bought this argument in the 1970's. But an enterprising congressman named Jack Kemp was influenced by the work of Arthur Laffer, and I guess Robert Mundell as well, and began to champion supply-side economics in the political sphere.

Supply-side economics was extremely useful as a political tool. In the past, there were some Republicans that actually believed in balanced budgets, fiscal restraint, that sort of thing. Ah, those were the good old days. But according to Kemp, you could not only cut taxes, but increase spending because the tax cuts would spur economic growth.

Quite quickly, the Wall Street Journal (including the late, great Jude Wanniski and probably my favorite columnist, Paul Craig Roberts) latched on to supply-side economics and it has been an article of faith among conservatives ever since.

I have no interest in critiquing the theory itself, which I think has some merit. It has always been obvious to me, however, that conservatives largely accepted supply-side dogmatics for political reasons--they didn't really ever believe in limited government and had no intention of cutting spending.

But it never really occurred to me that the primary target of these policies was married women (hey, I'm stupid, right?). Most of the forces driving women into the workforce today are, I think, cultural rather than economic. But I'm not so sure about that.

In 1950, 88% of women with children under six stayed in the home. That was certainly an era of higher wages for working men, with companies providing pensions and health care as well. Moreover, the tax burden would have been low enough on the single bread winner that having a second income was seldom necessary.

Today, 64% of American women with children under six are in the labor force. Many women are there for economic reasons. Taxes (income, SSN, state and local, etc.) consume between 40% and 50% of family income, and often a spouse must work to provide health insurance.

All of this is much too complicated to sort out in this brief post. My point is simply to show how "conservative" economists (Lindsey, Feldstein and their supply-side brethren) conspire with "conservative" politicians (Bush) and "conservative" media (the WSJ) to drive women from their homes and children, into the marketplace where they can live "fulfilled" lives being cogs in the Big Machine.

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