Why the Supply Siders are Scrambling

Supply-side advocates are steaming mad. Stung by the appointment of two economic traditionalists to top spots in the Bush Administration, such conservatives are launching an offensive to get their voices heard inside the Oval Office. To counter the naming of John W. Snow as Treasury Secretary and Stephen Friedman as National Economic Council director--both of whom are considered deficit hawks--they are pushing their own candidates for lower-level positions. They're not only lobbying the Administration for bigger tax cuts, they also want cuts shaped more to their liking. And they're pressing Congress to adopt a controversial new budget forecasting method, known as dynamic scoring, that will make those tax reductions easier to pass (see box).

Leading the charge are Stephen Moore, head of the Club for Growth, which finances campaigns for supply-side-oriented candidates, and Grover G. Norquist, president of the stridently antitax Americans for Tax Reform. Moore has publicly chastised the Administration for its choice of Friedman as NEC head. His group has frequently annoyed the party's Establishment by opposing moderate Republicans in primaries. Norquist, more of an insider, helps coordinate the lobbying efforts of conservative groups, bringing them together for frequent meetings. He also talks regularly to Karl Rove, Bush's powerful political adviser. And he worked behind the scenes with the White House to defuse the mini-revolt against Friedman.

These and other tax-cut advocates are pushing an assortment of candidates for posts in the Administration and on Capitol Hill. Among the names being mentioned: David Malpass, chief global economist for broker Bear, Stearns & Co.; Alan Reynolds, senior fellow at the Cato Institute libertarian think tank; and J.D. Foster, who's already working for the Administration at the Office of Management and Budget.

Within the Administration, supply siders have set their sights on the Deputy Treasury position under Snow. They're hoping other spots will open up at Treasury and the NEC. "It would be good to have the President surrounded by as many supply-side tax-cutters as possible," Moore says. The White House, for its part, has signaled that it's willing to appoint more supply-sider sympathizers. But it's given no hint as to who they might be.

Still, the two posts coming open that the conservatives prize most are not in the Administration. They're on Capitol Hill, where the heads of both the Congressional Budget Office and the Joint Committee on Taxation are about to leave. The two are critically important because they act as budget scorekeepers for Congress, toting up the costs of changes in taxes and spending.

Supply siders have long complained about the budget-scoring methods employed by the CBO and JCT. They argue that the bean counters have consistently overestimated the potential loss of government revenues from tax cuts because they don't take into account the beneficial impact that lower taxes can have on economic growth. Instead of the static model used now, conservatives want Congress to adopt dynamic scoring that recognizes that tax cuts can enhance long-term growth.

Lower taxes, of course, are the sine qua non of the supply siders, who see them as a means of encouraging entrepreneurship. High on most supply siders' wish list: reduction or elimination of the capital-gains tax, which they argue inhibits investment. In fact, some are pushing the Administration to include a capital-gains tax cut in the package to be unveiled in January. So far, though, the Bushies don't seem to be listening. But that's not stopping the supply siders, who are on the warpath--and likely to stay there until Bush proves his tax-cutting bona fides all over again.

By Rich Miller, with Howard Gleckman and Richard S. Dunham, in Washington

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