What? GDP has gone from contracting 5+% annually to growing almost 3%. Unemployment claims are down 20%, job shedding is down by 100s of 1000s to 11,000, and the unemployment rate dropped last month from 10.3% to 10%. The overwhelming majority of economists agree that the stimulus has worked. See, e.g., the Wall Street Journal survey of economists, Mark Zandi (McCain economics adviser), and that guy named Bruce Bartlett. I find it simply absurd for conservatives to continue to argue that the stimulus hasn’t worked in the face of all facts to the contrary. They sound exactly like — and I mean exactly like — liberals/Dems arguing the surge didn’t work in crushing al Qaeda in Iraq. Now, if conservatives wanted to argue we’re going to double dip, fine (just as it would have been fine for liberals/Dems to argue that the surge was still a bad idea because Afghanistan was more important), but to argue that it hasn’t worked thus far seems to me to be absurd.

“They recommended instead a policy combination of tight money (to quell inflation) and marginal tax cuts (to stimulate growth). The Nobel-winning Yale economist James Tobin complained that such a combination would be like trying to board two trains at the same time, one bound for Boston, the other for New York-. Bob Bartley of the Wall Street Journal would later taunt Tobin: “yet here we are, arrived in both Boston and New York.””

As I believe Bartlett himself has pointed out repeatedly, the economy began to grow again in 1983 despite Reagan raising taxes in 1982 and after (and because of) Volker slashing interest rates. I believe that the better argument supporting supply side tax cuts is that it had long term benefits (it takes awhile for the increased work, savings, investment, and productivity to develop) but was unlikely a direct cause of turning the economy around in the mid-80s. The turnaround likely was due to Volker crushing inflation (causing the double-dip recession) and then cutting rates when the beast was safely killed. Also, I would argue Tobin was right: jacking up interest rates to restrain liquidity is at odds with cutting taxes, and the interest rates possibly was higher than always would’ve been necessary (a counterfactual that can never be proven, but interest rates were so high, it seems to me that Bartley’s boast is hardly proven correct).

It’s also worth noting that the insight of 1970s conservatives was simply that “cutting taxes from too-high marginal rates can help growth.”

No rational person anywhere ever has concluded that “cutting taxes is always good, and raising taxes is always poison.” Reagan in 1982 and Clinton in 1993 raised taxes because they were concerned about the deficit. That’s politically difficult, and very easy to rail against, but in neither case was it damaging to the economy– especially in 1993!

No one is contemplating returning rates to their pre-Reagan levels. But today’s mainstream conservatives are fighting their battles like it’s 1979.