What’s the Difference between a Libertarian, a Supply-Sider, a Keynesian, and an IMF Bureaucrat?

Daniel J. Mitchell
Posted: Feb 27, 2012 12:01 AM

I realize the title of this post sounds like the beginning of a joke, along the lines of “A priest, a minister, and a rabbi walk into a bar…”, but this is a serious topic.

A big problem in fiscal debates is that people can’t even agree on what they mean by certain words. For instance, what’s the definition of austerity? Is it budget cuts, higher taxes, or both? Why are people saying the United Kingdom is practicing austerity, when the burden of government spending is going up?

Or how do we define responsible fiscal policy? Should politicians try to balance budgets, or should they shrink the burden of government? Is it reasonable for some people to call Obama a conservative because he wants higher taxes and claims the money would be used to reduce red ink?

I grapple with some of these questions in this appearance on Fox Business News.

But I’m not happy with my performance, largely because there needs to be a simple way of categorizing the various approaches to fiscal policy. So that’s what I’ve done in this Table. This is a first draft, so I welcome suggestions.

I’m serious about looking for input, For instance, I would like to come up with some way to describe Bushonomics without sullying the name of supply-side economics.

But perhaps I am just sensitive to that issue because supply-side economists tend to be serious and sober people who favor smaller government, but some of the politicians associated with supply-side economics – such as Jack Kemp – have been unapologetic big spenders.

I’m also unhappy with the division between IMFers and Keynesians, which is strange because it seems like half of my time is devoted to battling statists who argue for more government spending and the other half is consumed by fights against proponents of higher taxes.

What makes this so frustrating, though, is that Keynesians and IMFers are usually the same people, even though the philosophies are supposedly inconsistent.

I suspect that all they really want is bigger government, and they use any sign of weakness to argue for more spending, and then they quickly pivot and ask for higher taxes because of red ink. The biased analysis of the Congressional Budget Office is a good example.

The right approach, needless to say, is libertarianism. Small government and low tax rates are the pro-growth, pro-freedom recipe. That’s the one part of the Table that’s right on the mark.