Noah Smith, Econ/Finance professor, has a column that proves two groups of people have no useful ideas, one on purpose, the other on Accident. The column is called Do Conservatives Have Any New Ideas?, and takes aim at the GOP. Smith demonstrates the problem for the GOP with various facts. But he also tries to rely on the product of professors like himself, "economic theory" and, in doing so, shows economists need new ideas, as well.
Noah makes his first point with a mishmash of facts and economics:
The fact is, policies that work in one era may not work in another. One reason is that success can’t be repeated ad infinitum. When Reagan came into office, top federal income tax rates were 70 percent. By the time Obama arrived in the White House, they were half that. You can’t cut taxes forever; eventually, you stop being able to fund programs that the voters want. And the economic boost from cutting taxes gets smaller and smaller as taxes get lower. This comes directly from economic theory, but you can sort of see it by looking at a graph of federal tax revenue as a percent of U.S. gross domestic product. Reagan’s tax cuts didn’t reduce revenue very much -- as Arthur Laffer might have predicted. But when George W. Bush cut taxes from a much lower base, revenue plunged.
So, ignoring the nonsense about Laffer and "economic theory", we find out that Reagan cut taxes and this lowered revenue. When Bush the Elder cut taxes, revenue dropped even more. The facts in the quotation show that the more you cut taxes, the government's source of revenue, the less revenue you collect. Awesome. We already knew that, but thanks.
Add the economic theory back in and Noah the economist concludes:
In other words, some conservative ideas may have been a victim of their own success.
Wait, what?
This is the logical contortion that results from asking the practitioners of a useless endeavor to explain their endeavor's usefulness. Economic theory (in this case, Laffer) predicted that cutting taxes would not lower revenue because economics. This (shocker) is not what happened. But if you say (contra reality) that it sorta happened ("didn't reduce revenue very much"), then later, when it doesn't work again, you can say it stopped working. It's the old, "when did you stop beating your wife?" trick.
Noah's next point involves a fair amount of econ jargon like "hard money policy" but the substance is simply that you shouldn't worry about inflation when there's no inflation. If you want to know why that point needs to be made in the first place, the culprit is Noah's profession.
Finally, Noah makes the point that eventually, there's no more productive cutting of government:
There may be some areas where we still need to just slash the government -- simplification of regulation, perhaps? -- but in most areas, we’ve cut so much that going further is either impossible or inadvisable.
This is just basic logic. The value added of Econ? Zero.
In conclusion, economics serves to confuse the truth while observation of reality serves to illuminate it. But you knew that already.
