It’s been a strange month of May for the supply-siders. First, all of punditry came alive with talk about how the supply-siders misled a generation of Republicans into thinking that tax cuts pay for themselves. Then another charge hit. This was that the tax-cutters of the last generation sold us a bill of goods with the theory of “starve the beast.” The argument goes this way: since the beast of government spending got fatter in the wake of the Reagan and W. tax cuts, it was an outrage whenever tax-cut advocates suggested that reductions on the revenue side would make similar cuts on the spending side all but inevitable.

So here’s the tally:

a) Tax-cutters made outsized promises about government revenues, given tax cuts.

and

b) Tax-cutters insisted that tax cuts would cause colossal drops in revenues, such that spending had better be curtailed and fast.

Collectively, this makes for confusion city. You’ve got to hand it to the opponents of supply-side economics. They’re nothing if not rhetorically opportunistic.

To discipline this mess, let’s look to history. The charge that supply-siders did not try to control spending – and manfully – is completely false. As Econoclasts readers know, the iconic centerpiece of supply-side economics, the Kemp-Roth tax cut, passed in Congress twice in 1978, once in May and again in October. The twist in 1978 was that Kemp-Roth in that year also included spending caps. The bills that passed provided for the three-year, 30% tax cut (the original provision of Kemp-Roth), plus a ceiling on the yearly increase in federal spending, of inflation plus 1%.

This extra provision, added first by Rep. Marjorie Holt of Maryland, and then Sen. Sam Nunn of Georgia, was the reason that Kemp-Roth stormed through Congress that year. By 1978, it was screaming obvious that the nation needed a tax cut. There had just been a decade’s worth of mega-inflation, and the tax code was unindexed for inflation. Thus real tax rates had gone up by some ungoldly amount. At that point, you needed a raise every year of inflation plus 30% just to keep pace with the rise in the cost of living and the unindexed tax code.

When Holt and Nunn tacked on the spending caps to Kemp-Roth, it simply became political gold. Were the supply-siders disappointed that their clean tax cut bill had become “diluted” with the spending cap? Not namesake Sen. Bill Roth. Everyone started calling the Nunn bill “Son of Kemp-Roth,” and Roth responded by passing out cigars as if he were a beaming father outside the nursery.

I know what you’re asking: so by what freak did this bill that won over Capitol Hill not become the law of the land? You’ve got to remember who was president. Jimmy Carter. Carter killed the thing, and this qualifies as one of the most catastrophic decisions of the modern presidency.

The lurid story is in the book, but Carter – on Friday the 13th no less, in the Halloween month of October – ordered his staff to snuff out the tax-cut-spending-cap portion of the bill that had just passed through Congress with a veto-proof majority. Staff was to inform Members of Congress, in conference, that if the final version stuck with Kemp-Roth and the caps the president would go after pet pork projects of the Members with abandon. Members rapidly capitulated against this grave threat, and the bill that became law had the Kemp-Roth tax cut and the spending caps excised.

Over the remaining two some years of Carter’s term after that Friday the 13th, the president got to watch inflation go to 14%, the misery index and prime hit 21, the economy tank into recession, bonds freefall, and oil and gold double yet again, as well as experience being driven from office in the November 1980 election by 440 electoral votes. But let these shocking developments not obscure the historical record: in 1978, Kemp-Roth got hitched to a simply marvelous spending cap plan and attracted votes like flies at a picnic.

And here’s another dirty secret. Once the whole drama was over, Kemp-Roth’s opponents in Congress re-jiggered the amendments process so that spending caps would be ruled out of order in the future. Thus in 1979, the supply-siders could not figure out a way to insinuate Kemp-Roth into the legislative process. Paul Craig Roberts was vociferous about this at the time, in the pages of the Wall Street Journal, where he had transferred from Congressional staff, so there’s quite a paper trail. Here’s what real historical evidence shows: the supply-siders were bent on getting spending caps attached to tax cuts, and supply-side’s opponents pulled out the stops to frustrate this plan.

As for who was being unreasonable about future revenue and balanced budget projections, let’s again let the evidence speak for itself. Jimmy Carter’s 1980 budget said that over the next four years, should the Carter course be stayed, revenues would increase in real terms by 34%, spending would grow at less than a third of that rate, and there would be a $100 billion federal surplus at the end. Also, inflation would top out at 5% and quickly fall to 3%.

You’re rubbing your eyes, as you should. For in 1980, the US ran a deficit of $74 billion (2.7% of GDP) and inflation was in the double digits. The Carter plan for that year: I’ve got it all figured out. You’re going to get Nothing But Good Things. Click here for the actual documents from the 1980 Carter budget.

Alan Reynolds added this delicious fact in his recent piece taking on the charges against supply-side economics. One of the reasons this manifest supply-sider was picked for the Reagan forecasting team in the 1980-81 transition was that he had been publishing strategies for cutting spending.

Here’s Alan in NRO:

http://article.nationalreview.com/434070/hello-supply-side/alan-reynolds