Does America Need a Supply-Side Comeback?

May 27, 2025  | 806 words | Economic Policy

A couple of things in the paper caught my eye over the weekend.  One was an interview in the Wall Street Journal with supply-side economist Arthur Laffer who lent a hand back in the Reagan administration.  Now 84 years old, Mr. Laffer has always believed lowering taxes spurs economic growth.  This interview makes clear, though, that he does not think lowering taxes will ipso facto increase government revenue, which is how critics frequently mischaracterize and debunk the supply-side approach.

Instead, the well-known Laffer Curve depicts the proposition that tax revenue rises with marginal tax rates only up to a point – beyond which revenue actually starts to decline.  This is a fascinating observation and suggests to me more effort should be put into identifying what that tipping point is, on maybe a regular basis.  Though I am not sure how adjusting the marginal tax rate each year would go over with the electorate. Or with the Internal Revenue Service, which by all accounts is already overburdened.

In any event, Mr. Laffer is not interested in such accounting adjustments, for he has boiled everything down to one, simple proscription: “lower taxes.”   This singular policy will accomplish every worthy objective:  increase opportunity and growth, create a larger tax base which will result in higher government revenues, all while generating higher wages and an increase in living standards.

But higher wages and an increase in living standards for whom, exactly?

At one point in the interview, citing the burgeoning car manufacturing in his home state of Tennessee, he tells us rust-belt states like Ohio, Michigan, Pennsylvania, Illinois and Wisconsin drove those manufacturing jobs away with high taxes and “other policies that raise business costs.”

In a glib bit of analysis, he then notes how manufacturing jobs have increased in Southern states like Florida, Georgia, and Texas.

Is there anyone reading this interview who is not able to immediately recognize that auto manufacturers have moved away from a unionized work force at the first opportunity, in favor of a cheaper, non-union workforce?   How does this move substantiate Mr. Laffer’s claim that higher wages are a natural by-product of spurring economic growth through lowering taxes?

To point out as Laffer does that when taxes go up the rich report less income, either because they use tax dodges that Congress has allowed, or because they work and invest less, says more about the mindset of our richest citizens, rather than identifying a flaw in the concept of marginal tax rates.  

This, then, is where I must politely part company with the supply-siders.  While I am four-square in favor of spurring economic growth, I am not nearly as convinced as Mr. Laffer that the benefits of such growth have ever been or will ever be spread around in any sort of equitable manner.  The benefits always seem to coalesce at the top, or near the top.   

The only thing a successful corporation seeks out more than lowering/eliminating its tax liability, is lowering/keeping a lid on its labor costs.  It may offer rich compensation packages to top talent where the market forces it to.  Everyone else in these organizations remain expendable, little more than an interchangeable part.

In the same paper on the same day, Senator Pat Toomey of Pennsylvania (2011-2023) wrote in to the Opinion page of the WSJ to sing the praises of the work he and his colleagues did in 2017, when Congress lowered the top corporate income tax rate from 35% to 21%.  

“We recognized that increasing capital expenditures on technology and equipment would lead to productivity gains and higher worker pay.  We thus reduced the after-tax costs of capital expenditures by allowing full expensing in the year in which it occurred rather than depreciating the costs over many years.  Investment and workers’ pay surged.”

I, too, happen to think full expensing of a capital expenditure in the year it occurs is a great idea.  I just take issue with how Mr. Toomey causally invokes the claim that workers’ pay surged.  And I wonder if readers of The Wall Street Journal are too quick to take such statements at face value, in order to reassure themselves that all is right with the world.

In short, I do not have a serious argument with either Arthur Laffer or Pat Toomey since I am convinced both men have a handle on an important piece of the economic puzzle:  how to spur economic growth – growth that obviously benefits all of society.  

I just wish they and other supply-side advocates like them would spend more time thinking about the other important piece of the economic puzzle:  how to move beyond ‘trickle down’ to achieve a more equitable distribution of the fruits of our country’s dynamic economic growth, among those with no ownership stake in the enterprise, and no leverage at the bargaining table.

Robert J. Cavanaugh, Jr.

www.robertjcavanaughjr.com

bobcavjr@gmail.com

Pomp and Plainness

May 22, 2025 | 329 words | Papal Politics, World Economics

The Catholic Church just selected a new Pope, amid much pomp and circumstance.  Some 133 old guys who had achieved the rank of “Cardinal” cast their votes in the Sistine Chapel, one of the world’s most intricately decorated sacred spaces, while dressed in flowing red vestments and matching caps.

Once the ‘winner’ was announced all the participants changed into flowing white vestments with pointy white hats, to formally acknowledge the elevation of one of their own into this new, very demanding role, leading an organization with 1.3 billion members.  As it did for many people around the world, this announcement and the accompanying ceremony brought tears to my eyes.

But the Catholic right in the United States responded with fear and alarm, as reported by Kathryn Joyce in Vanity Fair magazine.  She quotes a variety of ‘traditionalist’ pod casters who are not fooled by Leo XIV’s decision to wear the formal vestments Francis shunned when greeting the multitudes for the first time as Pope from the balcony in St. Peter’s Square.  They don’t care if he will be more amenable to the Latin Mass that Francis was trying to quell near the end of his papacy,

Instead they ruminate about what they feel is a new liberal status quo.  They sense Leo will follow what for them is a heretical path, where the word ‘ecumenicism’ is hijacked to mean all religions will get you to heaven.  They brood over the continued implementation of Amoris Laetitia, Francis’s 2016 apostolic exhortation that opened the door for divorced and remarried Catholics to receive communion.

Meanwhile, far away from both the majesty of the Sistine Chapel and the strain of traditionalist complaint, much of the world’s Catholic population contents itself to worship in quite modest structures, amid a daily struggle for one or more of life’s necessities – food, clothing, and shelter.  Things the most ardent conservative podcasters here in the privileged United States already have in abundance, and therefore take for granted.

Robert J. Cavanaugh, Jr.

www.robertjcavanaughjr.com

bobcavjr@gmail.com

The New Pope’s True Colors

May 14, 2025 | 1,334 words | Papal Politics, World Economics 

Having beaten the odds to be selected as the first Supreme Pontiff of the Catholic Church from the United States, the low-key, little-known Bob Prevost is now an object of the world’s attention, as we all wonder what he will do next as Pope Leo XIV.  

Some are encouraged by Prevost’s decades spent ministering in Peru, as a parish priest and then a bishop, along with his opening pronouncements after being tapped at the conclave.  The unmistakable first impression is that he will advocate on behalf of the world’s poor and downtrodden – and especially on behalf of immigrants – just as his immediate predecessor, the Argentinian-born Francis, did.

Others are heartened by how much more reserved our new Pope seems to be compared to Francis, is not as “charismatic” as some have put it, and will therefore be less inclined to rock the boat or stir the pot.

Traditionalists may be smitten by the new man’s choice of a name, since the previous Leo’s time in the big chair (1878-1903) came well before the Second Vatican Council (1962-1965), when they think their church took a dire turn for the worst.  To such believers, anything pre-conciliar is ipso-facto good, while everything post-conciliar is questionable at best.

Then there are the savvy conservatives who were not taken in by the newly elevated pontiff’s measured tone, even for a moment.  They have quickly identified the hey-I-just-got-here Leo XIV as another social justice softie in the vein of Francis, predicting he will be “just another Marxist” in the Vatican.

Of all the hot button cultural issues of the last 60 years that have divided faithful Catholics into bitterly opposed partisan camps, one might say it is the idea of ‘social justice’ that lies at the heart of all the disputes.   And for me what lies at the heart of social justice is economic justice.

This connection was brought home a few years ago by a piece Christopher Manion had published in The Wanderer newspaper.  Mr. Manion was holding forth in a familiar way on how too many Catholics have strayed from the straight and narrow in one well-known form or another.  

In a novel twist, Manion suggested this laxness on the part of the faithful had actually been encouraged over the years by the legislative agenda of the Democratic Party, under the guise of ‘social justice.’  He traced what he saw as this nebulous, hard-to-define concept back to the 1930s and the 12-year reign of FDR, as many before him have done.

But then Christopher Manion pulled a rabbit out of his hat, and informed his readers the root cause of what he considers our contemporary dithering over social issues – at the expense of unencumbered orthodox belief and practice – actually started with Pope Leo XIII, who first introduced the concept of social justice into the lexicon in 1891, with an encyclical entitled Rerum Novarum.

That Latin translates as “On New Things,” or “On Revolutionary Things.”  The document carries the subtitle “On the Rights and Duties of Capital and Labor.”

Mr. Manion is correct, of course, in citing the origin of the phrase.  And, of course, Rerum Novarum is a towering work on the subject of social justice, cast in the much larger framework of economic justice.  It is gratifying to hear and see this document being referenced so much again, now that Leo XIV is stepping into his new job.  Even better would be if anyone was taking the time to read it.  

*

Dan Hitchens reminds us in The Last Modern Pope, recently published in the journal First Things, that the Catholic Church has been in an all-out war with the modern world since 1864, when Pius IX came out with his Syllabus of Errors.  That Pope condemned the notion that “The Roman Pontiff can, and ought to, reconcile himself, and come to terms with progress, liberalism, and modern civilization.”  I guess for Chrisotpher Manion writing in The Wanderer, Leo XIII made a regrettable concession in that war some 27 years later, in 1891.

But in discussing the importance of the new Pope’s choice of a name, Bishop Robert Barron offers a slightly different take: “When the revolutions in the 18th century happened, and the philosophical revolutions of the 19th century, the (Catholic) Church initially said ‘no’ to much of that.  Leo XIII represented a very nuanced, intelligent engagement with modernity – not caving into it, not saying yes completely, but not saying no – using the resources of our own traditions to engage modernity creatively.  That makes him (Leo XIII) a bridge figure.”

I love Barron’s perspective on this, because I think that’s what every single Pope since Leo XIII has been trying to do.  

One alternative interpretation of the topsy-turvy, back-and-forth Francis years that The Last Modern Pope captures so well in its opening mash-up might go something like this:  

Francis spent his pontificate trying to engage modernity creatively as did his predecessors of the last 150 years.  His formal writings reflect a careful, nuanced approach.  But all that nuance hadn’t gotten through.  Especially when the subject is economic justice.  And especially when the audience are conservatives who refuse to admit free-market capitalism has some rough edges.

In 1961 William Buckley issued a very public rebuke of Pope John XXIII on this score.  Since then, the preferred tactic of Buckley’s acolytes has been to politely reframe what both John Paul II and Benedict XIV wrote on economic matters, to assure one and all that Catholicism is four-square behind the grand American Experiment in “economic freedom.”

Which brings us to Francis, who appears to have made a conscious decision to “amp up” the rhetoric.  I would suggest he may have done this at least in part out of frustration, since nobody had taken the admonitions of his predecessors to heart, specifically as they pertain to economics. 

An example would be his 2015 address in Bolivia.  In a case of exaggeration for the purpose of illustration, Francis declared unfettered capitalism to be the dung of the devil.  We are told he was quoting his favorite Bishop from the 4th century, who at that time had directed his ire more broadly at the pursuit of money, since capitalism was still a millennium away from being invented.

That remark, and many others like it, were taken as unwarranted provocations by Catholics in the United States who follow the Gospel according to The Wall Street Journal, and who are convinced the vexing problem of greed has been solved for all mankind, since it was successfully re-purposed as ‘enlightened self-interest’ by Adam Smith in 1776.

Francis did indeed have a tendency to present himself as the “scourge and critic” of conservative Catholics, as Ross Douthat described him just the other day.  The man had good reason to do so, in my opinion, but a case could be made that perhaps he enjoyed the role of provocateur a little too much at times.  And he did occasionally overshoot the mark.  Like Mr. Douthat, I too thought the sort of last-minute attempt to cancel the Latin Mass amounted to a thoroughly unnecessary – and almost petty – gesture.  

But I guess I gave Francis a wide berth on most everything else, because deep down I was convinced – even with all the unexpected twists and turns – his ultimate objective was worthy:  an earnest, faithful attempt to carry Catholic principles forward and apply them to the modern world, just as his predecessors had tried to do.

Here’s hoping the new Pope will walk through the door the last Pope managed to pry open.  Maybe the First World needed someone ‘noisy’ like Francis to get its collective attention.  And maybe now Leo XIV can follow up with a quieter, more disciplined manner that will yield better results in getting through to conservatives regarding economics.  This is what all Catholic pontiffs have been trying to do since 1891 – get through to the conservative contingent when it comes to their economic behavior.

Robert J. Cavanaugh, Jr.

www.robertjcavanaughjr.com

bobcavjr@gmail.com