What is an economic conservative?

It is said that John McCain is no true conservative because he did not support Bush’s tax cuts. Remember, though, that economic conservatism used to mean cutting spending and balancing the budget. To this mindset, the government should not spend money it does not have, which sometimes means raising taxes. Those old school conservatives would consider the current practice of cutting taxes while also increasing spending to be LIBERAL.

McCain is that old school kind of an economic conservative, being a consistent budget-trimmer and opponent of pork-barrel earmarks. Whether his economic policies are good or bad is a separate question. But it’s not correct to say he isn’t conservative. It just depends on what kind of conservatism you are advocating.

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • Richard

    Well said, Dr. Veith. Some “conservatives” have an almost Pavlovian negative reaction to anything McCain does. I have lost count of the times I have heard conservatives label McCain as crazy or insane.

  • Richard

    Well said, Dr. Veith. Some “conservatives” have an almost Pavlovian negative reaction to anything McCain does. I have lost count of the times I have heard conservatives label McCain as crazy or insane.

  • fw

    Well said. I am a democrat. I would vote for McCain over Clinton. This is NOT because Mc Cain is a liberal by any means……

    I could not vote for Romney (foundational dishonesty) or Huckabee (kooky policies without consistent underlying philosophy )

    I would seriously consider Mc Cain for my vote.

    I am not alone.

  • fw

    Well said. I am a democrat. I would vote for McCain over Clinton. This is NOT because Mc Cain is a liberal by any means……

    I could not vote for Romney (foundational dishonesty) or Huckabee (kooky policies without consistent underlying philosophy )

    I would seriously consider Mc Cain for my vote.

    I am not alone.

  • spicedparrot

    Ummm…actually, in modern times fiscal conservatism has generally meant supply side economics. Yes – cutting spending and the budget are important, but tax relief is just as important. While I don’t want to get in a debate specific to McCain – at least in my book – an fiscal conservative has to support both spending AND tax cuts (or tax reform).

  • spicedparrot

    Ummm…actually, in modern times fiscal conservatism has generally meant supply side economics. Yes – cutting spending and the budget are important, but tax relief is just as important. While I don’t want to get in a debate specific to McCain – at least in my book – an fiscal conservative has to support both spending AND tax cuts (or tax reform).

  • Joe

    One problem with many people who think they are fiscal conservatives is they fail to grasp the effects of different kinds of tax cuts and their effect on the economy and federal revenues. Bush’s 2001 tax cuts were just junk – send everyone a $600 check which creates only a temporary spending boost but creates no new investment or jobs. On the other hand the 2003 cap gains marginal rate cut spurred new investment, created new jobs and double the pre-cut federal revenue from cap gains taxes. These later taxes are what I believe fiscal conservatives should champion.

    But most of the rap on McCain’s lack of credentials as a conservative are less economic. It’s his willingness to champion things like the greatest attack on free speech since the Sedition Act.

  • Joe

    One problem with many people who think they are fiscal conservatives is they fail to grasp the effects of different kinds of tax cuts and their effect on the economy and federal revenues. Bush’s 2001 tax cuts were just junk – send everyone a $600 check which creates only a temporary spending boost but creates no new investment or jobs. On the other hand the 2003 cap gains marginal rate cut spurred new investment, created new jobs and double the pre-cut federal revenue from cap gains taxes. These later taxes are what I believe fiscal conservatives should champion.

    But most of the rap on McCain’s lack of credentials as a conservative are less economic. It’s his willingness to champion things like the greatest attack on free speech since the Sedition Act.

  • S Bauer

    If being a conservative means a pavlovian reaction against ever raising taxes and spending more than one takes in, then I am no longer a conservative.

  • S Bauer

    If being a conservative means a pavlovian reaction against ever raising taxes and spending more than one takes in, then I am no longer a conservative.

  • fw

    #4 Joe

    U got my attention. what free speech attack was that?

  • fw

    #4 Joe

    U got my attention. what free speech attack was that?

  • Eric

    The modern definition of fiscal conservatism is reason #2 why I left the Republican party in 2003/2004.

    These new borrow and spend conservatives are as evil as tax and spend liberals. Even if they do hide behind the Laffer Curve and “supply side” economics, they forget the law of dimishing returns. Every additional tax cut beyond an optimal point has a reduced positive impact on revenues. 0% of any given dollar amount is ZERO.

    If revenues are not matched to spending, you have to raise taxes to pay for the spending and interest charges. If you do not do this, you eventually enter an era where your money sinks in value against other currencies and commodities. That is called inflation.

    You can only borrow till you can not pay back. We are learning this in the mortage crisis. Once the toxin is in the system it can only be worked out over time and at cost.

    I have been trying to come up with a catchy name to market this old school economic conservatism. How about “pay as you go” conservative; “pay now or pay big time” conservative. Any other ideas out there?

  • Eric

    The modern definition of fiscal conservatism is reason #2 why I left the Republican party in 2003/2004.

    These new borrow and spend conservatives are as evil as tax and spend liberals. Even if they do hide behind the Laffer Curve and “supply side” economics, they forget the law of dimishing returns. Every additional tax cut beyond an optimal point has a reduced positive impact on revenues. 0% of any given dollar amount is ZERO.

    If revenues are not matched to spending, you have to raise taxes to pay for the spending and interest charges. If you do not do this, you eventually enter an era where your money sinks in value against other currencies and commodities. That is called inflation.

    You can only borrow till you can not pay back. We are learning this in the mortage crisis. Once the toxin is in the system it can only be worked out over time and at cost.

    I have been trying to come up with a catchy name to market this old school economic conservatism. How about “pay as you go” conservative; “pay now or pay big time” conservative. Any other ideas out there?

  • http://www.bikebubba.blogspot.com Bike Bubba

    The free speech attack was the McCain-Lenin-Feingold Campaign Finance Deform Act of a few years back, FW. Not that you can guess my opinion of it. :^)

    My take; a true economic conservative is one who recognizes that there were genuine, and good, reasons that the Founders prohibited paper money and direct (income) taxation, and that these policies are ruinous to a nation.

    Doubt this? Well, the GAAP estimate of the “national debt” (including unfunded liabilities of Socialist Insecurity & Mediscare) exceeds the national wealth. We aren’t rich, we’re broke, and the big hitters in the true national debt aren’t possible without the 16th Amendment.

  • http://www.bikebubba.blogspot.com Bike Bubba

    The free speech attack was the McCain-Lenin-Feingold Campaign Finance Deform Act of a few years back, FW. Not that you can guess my opinion of it. :^)

    My take; a true economic conservative is one who recognizes that there were genuine, and good, reasons that the Founders prohibited paper money and direct (income) taxation, and that these policies are ruinous to a nation.

    Doubt this? Well, the GAAP estimate of the “national debt” (including unfunded liabilities of Socialist Insecurity & Mediscare) exceeds the national wealth. We aren’t rich, we’re broke, and the big hitters in the true national debt aren’t possible without the 16th Amendment.

  • Joe

    Eric – no one hides from the law of diminishing returns behind the Laffer Curve – its a Curve by definition the entire left have of it expressly demonstrates that you can cut marginal tax rates to much and thus lower instead of increase revenues. The question is: are we at that point yet or can we generate more revenue with more tax cuts. I don’t know the answer to that question but the data indicates that we have not gone too far yet as all of the marginal rate cuts that have occurred since 1920 have yielded additional revenues. (remember two things – the Laffer curve is only about marginal tax rates and the 2001 tax cuts were not marginal rate cuts. They were demand-side tax cuts)

    “If revenues are not matched to spending, you have to raise taxes to pay for the spending and interest charges.” – This statement assumes that we have crossed into the left have of the Laffer Curve (at which point it would be absolutely true) but the data would suggest that we have not gone over yet.

    But, I do agree that over spending is a huge problem. But spending more than you take in is not supported by the Laffer Curve or supply side economic theory. It is straight Keynesian economic theory. So I agree that it is a problem and when people who claim to be fiscal conservatives do it – they are not betraying their principles.

  • Joe

    Eric – no one hides from the law of diminishing returns behind the Laffer Curve – its a Curve by definition the entire left have of it expressly demonstrates that you can cut marginal tax rates to much and thus lower instead of increase revenues. The question is: are we at that point yet or can we generate more revenue with more tax cuts. I don’t know the answer to that question but the data indicates that we have not gone too far yet as all of the marginal rate cuts that have occurred since 1920 have yielded additional revenues. (remember two things – the Laffer curve is only about marginal tax rates and the 2001 tax cuts were not marginal rate cuts. They were demand-side tax cuts)

    “If revenues are not matched to spending, you have to raise taxes to pay for the spending and interest charges.” – This statement assumes that we have crossed into the left have of the Laffer Curve (at which point it would be absolutely true) but the data would suggest that we have not gone over yet.

    But, I do agree that over spending is a huge problem. But spending more than you take in is not supported by the Laffer Curve or supply side economic theory. It is straight Keynesian economic theory. So I agree that it is a problem and when people who claim to be fiscal conservatives do it – they are not betraying their principles.

  • Joe

    fw – I was referring to the campaign finance reform bill more commonly known as McCain-Feingold.

  • Joe

    fw – I was referring to the campaign finance reform bill more commonly known as McCain-Feingold.

  • kerner

    I believe that McCain tries to be guided by his principles that are generally conservative, but he makes mistakes.

    Example 1: Voting against the Bush tax cuts.

    McCain said at the time that he couldn’t support the Bush tax cuts because there weren’t spending cuts to go with them. Now he says that he would make the tax cuts permanent, but now he will push for spending cuts to go with them. McCain was right about the need for spending cuts. Supply side economics does work to an extent, but McCain has long been appalled at the wasteful pork barrel spending and the runaway growth of government. So appalled that he was willing to hold up tax cuts to fight the pork and the growth of government. McCain’s mistake was his all-or-nothing approach. Doing this incrementally would have been better. The tax cuts actually DID help the economy, as McCain now acknowledges. If he can cut spending and shrink the size of government, that will help the economy even more.

    Example 2: McCain-Feingold >:o(

    It pains me to admit that Russ Feingold is my senator (go Wisconsin). He is probably the worst liberal on this planet, and that should have been a tip-off to McCain, but it wasn’t. McCain was, and remains, appalled by the corruption that was, and still is, going on in congress. He hates pork barrell spending, and he hates the influence of the people who spread money around Washington (often in the form of campaign contributions) that keeps all that pork flowing. He took a shot at stopping it with this legislation, and it may be the worst mistake he has ever made. First of all, it didn’t even work. The money guys just found other ways to spread the money around. More importantly, it WAS unconstitutional because it stifled the political free speech. These days you can’t get a political message out without spending money on media time, and this law severely restricted that. Thank God Wisconsin Right to Life (go Wisconsin!) took the time and trouble and money (which should have been devoted to defending the pre-born) to take its case to the US Supreme Court, and win. So, the damage of this mistake is largely corrected, but only after a considerable waste of resources.

    All of this said, I continue to think that the GOP’s best bet is to get behind McCain and try to get some influence with him. If someone bases his decisions on basicly conservative principles, he will be receptive to arguments from those principles, and he will be less likely to make mistakes. I believe this is the right course because I really think that McCain is motivated by a sincere desire to do what’s best for this country. Even when he is wrong, I have to respect that. All of the other candidates have their own faults, and they aren’t any better than McCain. Most of them are worse. But I also think it is imperative that McCain find a VP that will help bridge the gap between McCain and the rest of the GOP. McCain may only be good for one term and an acceptable successor should be in the works so that all this chaos doesn’t happen next time around.

  • kerner

    I believe that McCain tries to be guided by his principles that are generally conservative, but he makes mistakes.

    Example 1: Voting against the Bush tax cuts.

    McCain said at the time that he couldn’t support the Bush tax cuts because there weren’t spending cuts to go with them. Now he says that he would make the tax cuts permanent, but now he will push for spending cuts to go with them. McCain was right about the need for spending cuts. Supply side economics does work to an extent, but McCain has long been appalled at the wasteful pork barrel spending and the runaway growth of government. So appalled that he was willing to hold up tax cuts to fight the pork and the growth of government. McCain’s mistake was his all-or-nothing approach. Doing this incrementally would have been better. The tax cuts actually DID help the economy, as McCain now acknowledges. If he can cut spending and shrink the size of government, that will help the economy even more.

    Example 2: McCain-Feingold >:o(

    It pains me to admit that Russ Feingold is my senator (go Wisconsin). He is probably the worst liberal on this planet, and that should have been a tip-off to McCain, but it wasn’t. McCain was, and remains, appalled by the corruption that was, and still is, going on in congress. He hates pork barrell spending, and he hates the influence of the people who spread money around Washington (often in the form of campaign contributions) that keeps all that pork flowing. He took a shot at stopping it with this legislation, and it may be the worst mistake he has ever made. First of all, it didn’t even work. The money guys just found other ways to spread the money around. More importantly, it WAS unconstitutional because it stifled the political free speech. These days you can’t get a political message out without spending money on media time, and this law severely restricted that. Thank God Wisconsin Right to Life (go Wisconsin!) took the time and trouble and money (which should have been devoted to defending the pre-born) to take its case to the US Supreme Court, and win. So, the damage of this mistake is largely corrected, but only after a considerable waste of resources.

    All of this said, I continue to think that the GOP’s best bet is to get behind McCain and try to get some influence with him. If someone bases his decisions on basicly conservative principles, he will be receptive to arguments from those principles, and he will be less likely to make mistakes. I believe this is the right course because I really think that McCain is motivated by a sincere desire to do what’s best for this country. Even when he is wrong, I have to respect that. All of the other candidates have their own faults, and they aren’t any better than McCain. Most of them are worse. But I also think it is imperative that McCain find a VP that will help bridge the gap between McCain and the rest of the GOP. McCain may only be good for one term and an acceptable successor should be in the works so that all this chaos doesn’t happen next time around.

  • fw

    #10 Joe

    Oh. I agree. The cure is far worse than the desease there.

    I like the Obama approach of sunshine laws that require full disclosure. Let the republican AND democratic cockroaches do whatever they want (imagery used only to describe what roaches do when lights are turned on, not perjoratively ;)…. ), but make then do it openly for all to see, and be accountable.

  • fw

    #10 Joe

    Oh. I agree. The cure is far worse than the desease there.

    I like the Obama approach of sunshine laws that require full disclosure. Let the republican AND democratic cockroaches do whatever they want (imagery used only to describe what roaches do when lights are turned on, not perjoratively ;)…. ), but make then do it openly for all to see, and be accountable.

  • Joe

    “I like the Obama approach of sunshine laws that require full disclosure.”

    This has always been the correct answer to the problem. But Obama is certainly not the first to advocate such an approch. There have been several supreme court concurring opinions that have told congress to go that route.

  • Joe

    “I like the Obama approach of sunshine laws that require full disclosure.”

    This has always been the correct answer to the problem. But Obama is certainly not the first to advocate such an approch. There have been several supreme court concurring opinions that have told congress to go that route.

  • fw

    #13 Joe

    Glad to hear that. Unfortunate that this is one area where democrats and republicans seem to agree…… that the DON´T want to do this!

  • fw

    #13 Joe

    Glad to hear that. Unfortunate that this is one area where democrats and republicans seem to agree…… that the DON´T want to do this!

  • Eric

    Joe @ 9

    What data suggests we have not crossed the peak of the Laffer curve? Are those comparisons since 1920 in constant dollars?

    Go here for fun with Laffer Curves.

  • Eric

    Joe @ 9

    What data suggests we have not crossed the peak of the Laffer curve? Are those comparisons since 1920 in constant dollars?

    Go here for fun with Laffer Curves.

  • Joel

    Mr. Parrot (#3) has it right – this is a debate between deficit hawks and supply-siders. (As opposed to fiscal liberals, who are tax-and-spend types). The principles of the Laffer Curve have been established beyond dispute. That said, the GOP has refused (despite explicit promises in 1980 and 1994) to take the tough political stands necessary to cut spending.

    So the choices are Democrats who create a deficit through huge spending increases and modest tax increases, or Republicans who have modest spending increases and flat (or declining) taxes.

    Clintonistas like to brag about declining deficits in the 1990s, but frankly even a pet rock could have presided over the economic growth brought by the invention of the Internet.

  • Joel

    Mr. Parrot (#3) has it right – this is a debate between deficit hawks and supply-siders. (As opposed to fiscal liberals, who are tax-and-spend types). The principles of the Laffer Curve have been established beyond dispute. That said, the GOP has refused (despite explicit promises in 1980 and 1994) to take the tough political stands necessary to cut spending.

    So the choices are Democrats who create a deficit through huge spending increases and modest tax increases, or Republicans who have modest spending increases and flat (or declining) taxes.

    Clintonistas like to brag about declining deficits in the 1990s, but frankly even a pet rock could have presided over the economic growth brought by the invention of the Internet.

  • Joe

    Eric @9:

    “Are those comparisons since 1920 in constant dollars?” The comparison that matters is actual revenue collected after the marginal rate cut vs. revenue collected immediately before and the projections made prior to the cut. In other words if you cut the rates in 1920 then what you look at is: did the revenue increase to a level higher in 1921 than was projected without the rate cut.

    Did we cross the maximization of revenue point yet? The data indicate that we have not.
    I posted this in a different post around here just a few days ago:

    “As for the marginal tax rate cuts. Here is a pretty good paper that discusses the Mellon, Kennedy, Reagan cuts and the increased revenues they generated.
    http://www.heritage.org/Research/Taxes/BG1443.cfm

    With regard to the Bush tax cuts we have to remember that their were 2, the 2001 cuts and the 2003 cuts. The 2001 cuts were not marginal tax rate cuts – they were rebates, and increases in tax credits for people who don’t pay taxes. (I actually made money off the federal gov’t in 2001 and 2002 – I paid no taxes and got money back because of the ridiculous 2001 cuts). These did not generate any economic growth or corresponding revenue increases. They were demand-side tax cuts. The 2003 cuts were traditional marginal rate cuts on income and cap. gains and dividends. These increased revenues. With regard to cap gains the revenues doubled from the previous year and out performed pre-cut projections.

    Here is a quasi-comprehensive look at both the 2001 and 2003 cuts. http://www.heritage.org/Research/Taxes/bg2001.cfm

    I don’t think all tax cuts are equal (or even good). But until we cross the maximization point on the curve, marginal tax rate cuts will continue to yield higher revenues for the gov’t while allowing people to keep more of there own money.

    The problem will be what happens when we do go to far. Because the negative consequence of this is that the gov’t gets more money. Thus, there is no incentive to cut spending or apparently even to confine it to the level of the increased revenues. Once, we cross the maximization point it is inevitable that taxes will go up and will go up too far.

  • Joe

    Eric @9:

    “Are those comparisons since 1920 in constant dollars?” The comparison that matters is actual revenue collected after the marginal rate cut vs. revenue collected immediately before and the projections made prior to the cut. In other words if you cut the rates in 1920 then what you look at is: did the revenue increase to a level higher in 1921 than was projected without the rate cut.

    Did we cross the maximization of revenue point yet? The data indicate that we have not.
    I posted this in a different post around here just a few days ago:

    “As for the marginal tax rate cuts. Here is a pretty good paper that discusses the Mellon, Kennedy, Reagan cuts and the increased revenues they generated.
    http://www.heritage.org/Research/Taxes/BG1443.cfm

    With regard to the Bush tax cuts we have to remember that their were 2, the 2001 cuts and the 2003 cuts. The 2001 cuts were not marginal tax rate cuts – they were rebates, and increases in tax credits for people who don’t pay taxes. (I actually made money off the federal gov’t in 2001 and 2002 – I paid no taxes and got money back because of the ridiculous 2001 cuts). These did not generate any economic growth or corresponding revenue increases. They were demand-side tax cuts. The 2003 cuts were traditional marginal rate cuts on income and cap. gains and dividends. These increased revenues. With regard to cap gains the revenues doubled from the previous year and out performed pre-cut projections.

    Here is a quasi-comprehensive look at both the 2001 and 2003 cuts. http://www.heritage.org/Research/Taxes/bg2001.cfm

    I don’t think all tax cuts are equal (or even good). But until we cross the maximization point on the curve, marginal tax rate cuts will continue to yield higher revenues for the gov’t while allowing people to keep more of there own money.

    The problem will be what happens when we do go to far. Because the negative consequence of this is that the gov’t gets more money. Thus, there is no incentive to cut spending or apparently even to confine it to the level of the increased revenues. Once, we cross the maximization point it is inevitable that taxes will go up and will go up too far.

  • Eric

    Economics is an avocation and not my vocation. I will present my points with a few links to try and make my case.

    1. We are on an unsustainable fiscal course.
    Please see the Fiscal Wake-Up Tour at GAO.gov. Watch the 11 minute video.

    The Concord Coalition is also a good source of information on the fiscal challenges our economy faces.

    2. Do taxes cuts pay for themselves or help solve the fiscal problem? Where are we on the Laffer curve?

    You can see a nice chart of Historical top rates for married couples filing jointly at truthandpolitics.org. I do not know this organization beyond the nice chart of historic rates they provide. The Mellon Tax cuts were from 1918 to 1922, a 50% cut. The Kennedy tax cuts were from 1963 to 1965, a 21% cut. You can see the Gipper’s tax cut from 1981 to 1982, another 20% cut

    I have not found any numeric analysis of the Mellon and Kennedy cuts. Justin Fox, TIME’s business and economics columnist, has recently been blogging about the Reagan tax cuts. His Blog is The Curious Capitalist. Mr. Fox does not like projections either.

    3. Tax cuts are nice, but a balanced budget is nicer. At this time it is the more important end.

    Balanced Budget Conservatives of America unite! Cast off the economic ruin of the supply side.

    Is that slogan to revolutionary? Maybe a Star Wars riff. Luke, turn from the Supply Side.

  • Eric

    Economics is an avocation and not my vocation. I will present my points with a few links to try and make my case.

    1. We are on an unsustainable fiscal course.
    Please see the Fiscal Wake-Up Tour at GAO.gov. Watch the 11 minute video.

    The Concord Coalition is also a good source of information on the fiscal challenges our economy faces.

    2. Do taxes cuts pay for themselves or help solve the fiscal problem? Where are we on the Laffer curve?

    You can see a nice chart of Historical top rates for married couples filing jointly at truthandpolitics.org. I do not know this organization beyond the nice chart of historic rates they provide. The Mellon Tax cuts were from 1918 to 1922, a 50% cut. The Kennedy tax cuts were from 1963 to 1965, a 21% cut. You can see the Gipper’s tax cut from 1981 to 1982, another 20% cut

    I have not found any numeric analysis of the Mellon and Kennedy cuts. Justin Fox, TIME’s business and economics columnist, has recently been blogging about the Reagan tax cuts. His Blog is The Curious Capitalist. Mr. Fox does not like projections either.

    3. Tax cuts are nice, but a balanced budget is nicer. At this time it is the more important end.

    Balanced Budget Conservatives of America unite! Cast off the economic ruin of the supply side.

    Is that slogan to revolutionary? Maybe a Star Wars riff. Luke, turn from the Supply Side.

  • Eric

    Sorry for the dead links. My web skills need some improving.

  • Eric

    Sorry for the dead links. My web skills need some improving.


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