The American Spectator

AmSpecBlog

The Tyranny of the Obvious

By Hunter Baker on 5.27.09 @ 1:53PM

In my latest commentary for the Acton Institute (the best Catholico-Evangelical-Hayekian think tank you ever saw), I try to warn public policy makers away from "the tyranny of the obvious" and "wishing makes it so" tendencies in governing.  

Here's a clip:

Ronald Reagan gave birth to a long boom when he successfully repudiated the Keynesian economics and punitive marginal taxation that had come to characterize the American approach to running the economy. By doing so, he restored prosperity to a nation mired in the twin crises of unemployment and inflation and wondering whether the presidency was simply too big for one man. His formula of stimulating the economy through tax cuts rather than government distribution of centrally-confiscated dollars fueled increases in American productivity and thus provided the nation with a basis for real wealth generation.

There is an important lesson to be learned from Reagan’s boom. Practioners of public policy should be required to memorize it: Beware the tyranny of the obvious.

When Reagan took office, he brought with him a message Jack Kemp had been proclaiming ahead of time like some John the Baptist of the beltway. The message was counterintuitive, but incredibly powerful. What was it? You can cut taxes, and if they have been too high, you will actually gain revenue. The “obvious” answer is that Reagan was wrong. Higher taxes mean greater revenue, don’t they? In fact, it is still an article of faith among many leftists that Reagan’s tax cuts led to spiraling deficits and a mounting national debt. In this case, however, the faith is misplaced. An empirical examination shows that Reagan’s massive tax cuts led to real (inflation-adjusted) gains in federal revenue. Lower rates mean more incentive to earn and less incentive to cheat. At the same time, the sea change in tax policy put the fundamentals in place for long term economic growth. In short, what seemed obvious (cutting taxes would lead to disaster for a government already sorely pressed financially) was clearly incorrect. Reagan derailed the express that heads for the place where all empires end: high taxes and empty coffers.