Supply-Side Slander

Stephen Friedman has found himself in the line of fire. Hard-line conservative activists have ginned up an attack that’s delayed his appointment as President Bush’s top economic advisor. They complain, in effect, that Friedman, a staunch Republican, won’t pass their “litmus test” of devotion to tax cuts. But it is Friedman’s opposition to big federal deficits that true fiscal conservatives will support and that makes him a good man to have around as the economy stumbles and a costly war with Iraq looms.

Friedman has incurred this wrath because he was director of the Concord Coalition, a bipartisan organization intent on curbing the federal budget deficit. He gets more bad marks for having run the Goldman Sachs investment firm from 1990 to ’92 with Robert E. Rubin, who went on to be President Clinton’s Treasury secretary.

Yet it was Rubin’s policy of slashing debt and his willingness to support tight spending and higher taxes that helped create a prosperous economy and allowed President Bush to point to budget surpluses to justify his 10-year, $1.35-trillion tax cut.

To opponents, though, Friedman’s record makes him a dangerous Trojan horse for anti-tax-cutting policies. “DUMP Friedman! He’s no tax-cutter,” declared National Review Online. Stephen Moore, head of the free-market Club for Growth, complained that there’s no sign Friedman “has a supply-side bone in his body.” Moore and others worship supply-side economics -- the Reagan-era belief that cutting taxes miraculously pays for itself. The idea is that the lower taxes go, the more people invest. The result is supposed to be that the government ends up collecting more revenue overall because the economy has expanded. But the massive deficits the Reagan administration created, as it slashed taxes and increased military spending, showed that supply-side economics is a triumph of hope over experience.

Like the successful Rubin, Wall Street’s Friedman is hardly a Marxist lackey. It’s unlikely that Friedman could persuade the president to end his deep embrace of tax cuts, although he might temper the worst excesses.

Dumping Friedman would show only that the administration fears a powerful Republican constituency more than a faltering economy; the White House wisely has indicated that it’s going to give Friedman the nod despite the carping. We hope that despite all this posturing the White House remembers that real fiscal conservatives hate spiraling debt.