A welcome stand against economic interventionism. Arguments for supply-side economics (as that term should be understood) are making a comeback, and that's good news. The conversation on boosting economic growth is redolent of the 1980s, when top-down planning gave way to bottom-up commerce. Unfortunately, high officials in the Biden administration, such as Treasury Secretary Janet Yellen, fundamentally misunderstand the sources of sustainable prosperity. What they too sometimes describe as supply-side economics is anything but. Blowout spending on green energy and health care won't make the economy more productive. We need a return to fundamentals. Thankfully, a coalition of Freedom Conservatives has penned a statement of principles to show us the way.
Released last month and now with about 200 signatures of conservative writers and thinkers, the document has generated significant buzz and sparked another intramural dispute. So-called national conservatives, enamored with the administrative state, permanent deficits, and industrial planning, think the Freedom Conservative economic agenda is a broken record. They're wrong. The supply-side paradigm embedded in Freedom Conservatism will restore our nation's economic vitality. Big-government meddling, whether of the left-wing or right-wing variety, won't.
The philosophy of supply-side economics is simple: We can't consume goods and services that haven't been produced. The economic role of government is to create a strong foundation for property rights and free exchange. This isn't just about marginal tax rates. Properly understood, supply-side economics calls for streamlining or removing needless regulations, which serve political interests rather than economic interests. Freedom Conservatives recognize that a corrosive combination of government intervention and private cronyism is the main source of drag on today's economy. It's time to fix it by embracing clear, predictable, and nondiscriminatory rules. That means ousting unaccountable and unelected regulators who routinely exceed their statutory authority.
Government spending, too, must be controlled. Too many figures on the left and right think directing resource flows from Washington can bring a greater degree of prosperity than decentralized market transactions. Not so. At best, government spending merely shuffles resources around, making us neither richer nor poorer. But most of the time it destroys wealth. By diverting capital from productive purposes to failed crony enterprises, such as electric-bus manufacturers, fiscal activism clogs the engine of growth.
It also adds to our unsustainable debt, which creates a host of additional problems. Skyrocketing federal debt, the Freedom Conservatives say, is an existential threat to the future prosperity, liberty, and happiness of Americans. Larger debt means larger interest payments, which crowd out other national priorities. The inevitable political squabbles over a shrinking pie of spending will increase partisan rancor. This makes policy unpredictable, and perhaps even dangerous, which undermines the long-term investment planning needed to grow the economy.
Critics would contend that, whatever its merits in fostering growth, a supply-side agenda would leave behind those without the capital and skills to participate in our new economy. On the contrary: The best way to help these individuals is by embracing broad-based wealth creation. Freedom Conservatives recognize that our rigged economy is making the cost of living unaffordable to many Americans. Rising productivity means falling prices, which benefit lower-income households most. There can and should be supporting programs to boost social mobility, but these will not make a difference unless the economy is already firing on all cylinders.
More than 40 years ago, the first supply-side revolution reinvigorated America's stagnant economy and helped to cure our national malaise. The only problem was it didn't go far enough. Reaganomics was too dovish on deficits and the administrative state, not too hawkish. We need to roll back unproductive spending and regulations and ensure what remains actually serves the American people, rather than lobbyists or too-big-to-fail banks. American leadership in the 21st century requires a strong economy. Freedom Conservatism's next supply-side revolution can deliver.
Alexander William Salter is the Georgie G. Snyder Associate Professor of Economics in the Rawls College of Business at Texas Tech University, a research fellow at TTU's Free Market Institute, a Sound Money Project senior fellow, and a Young Voices senior contributor.