Let Them Eat Tax Breaks : THE SEVEN FAT YEARS: And How to Do It Again <i> By Robert L. Bartley</i> , <i> (The Free Press: $22.95; 301 pp.) </i>

This is an unfashionable, even outrageous book. It says that the supply side economics of the Reagan years, now being blamed for the burning of Los Angeles among other ills of our country, were the best thing to happen to the U.S. economy in decades. We would profit from an encore, argues the author.

“The Seven Fat Years” has been dismissed as a polemic in Business Week but praised as a book of the year in Forbes.

What it is, really, is a mixture of ideological argument, which gets tedious, and important insight on the forbidding subject of public finance in the last 20 years as the United States groped its passage to the global economy.

That may not sound exciting, but one way or another, shifts in public finance have been at the center of events in the last two decades--from dollar crisis through oil crisis and inflation to recession, deficits, stock market boom and crash and recession again.

Author Robert L. Bartley, as editor of the editorial pages of the Wall Street Journal, was a participant in the emergence of supply-side thinking--the idea that if taxes are reduced and people can keep more income, they will work harder, produce more, raise the general level of the economy, and incidentally pay more taxes.

Bartley points out that supply side took hold in the capital gains tax reduction of 1978--almost three years before the Reagan Administration took office. Then Bartley’s compatriots advising or serving in the Reagan government--Arthur Laffer, Paul Craig Roberts, Norman Ture and Robert Mundell--helped ultimately to bring top income tax rates down to 31% or so.

The tax trend along with a shift of policy and the appointment of Paul Volcker at the Federal Reserve, says this book, rescued the economy from inflation and stagnation and “unleashed a wave of sustained growth and a dynamic outburst of entrepreneurial creativity” that allowed the U.S. economy to create 18 million jobs.

That’s just the kind of claim that drives critics of the 1980s crazy. Look around you, they say, the Reagan years created a desert and called it progress! The ‘80s left us with a government hobbled by debt, and American living standards diverging, with incomes falling for factory workers but rising for fatcats.

“Seven Fat Years” does not deny that the 1980s were a time when investment bankers reaped fortunes for, in effect, putting people out of work as international competition and technological change swept through U.S. industry. The author views the process with a fine detachment: “While an information-based society will offer huge opportunities for the educated, the uneducated may be left behind,” writes Bartley.

The problem with that view, however, is that society is not a jet plane nor even a stagecoach. Those “left behind” do not go away. And though Bartley’s intellectual pals may deny being their brother’s keeper, they cannot avoid being his neighbor. During the time this book calls the “fat years,” federal funding to U.S. cities was cut, straining the supports that might have held back the flames we’ve seen first in Los Angeles.

Partisanship and ideology are the book’s big weaknesses. Bartley is hard on the intellectual failings of the Carter administration but scarcely admits any failings in the Reagan government. He fears that the current mood of reform may curb the ‘80s “animal spirits,” which, considering that those spirits included Charley Keating cheating old people and bribing public officials, would not be everybody’s fear.

Yet the book is strong in analyzing the roots of today’s U.S. economy--how President Nixon’s freeing the dollar from gold in 1971 led oil producers to raise their prices, which led to ruinous inflation and the near collapse of the international system at the end of the 1970s.

It is strong in recognizing how technological change is making old control mechanisms obsolete. If billions of dollars are traded, borrowed, saved and sequestered around the world, attempts to control money flows or interest rates within the borders of the United States are doomed to fail. If the microchip and communications revolutions brought down the Kremlin’s power, it is not surprising that old-fashioned corporate structures are crumbling as well.

The book captures the essential mystery of business development and economic change. Bartley recalls that in the 19th Century railroads were punched westward by men who would later be called Robber Barons with no clear notion of what the trains would carry--and many loud predictions of failure. “Yet in 1867 an Illinois entrepreneur named Joseph G. McCoy bought up a load of lumber and shipped it to the end of the tracks of the Kansas Pacific. In Abilene he built some pens and loading chutes and founded an industry. Soon cowboys drove cattle from Texas to Abilene, shipping them on by rail to the Chicago stockyards.”

It is the kind of image to give us pause when coming to quick conclusions about our own time.

When it comes to our own time, the book argues that the U.S. economy should be roaring ahead. The trends of the day, from the rout of totalitarianism to the advance of the semiconductor, are “liberating,” says the author.

So to release the economy’s true, underlying energies, Bartley argues for lowering the capital gains tax--a tactic that worked in 1978 to boost business activity. He would convene a conference to bring stability to currency exchange rates--to remove current fluctuations that, the author argues persuasively, are a distraction for business.

And to solve problems of the U.S. government budget, Bartley would take power from the 535 members of Congress and put more power “in the executive department which is more unified and disciplined.”

In other words, in a world where everything from empires to corporations are decentralizing, Bartley would move toward monarchy for the U.S. government.

But then, that’s the kind of book “Seven Fat Years” is: a mixture of keen insight on global finance and ideological argument, which gets silly.