Supply-Sider in Chief (Expanded Edition)

The following is the complete version of the "Supply-Sider in Chief" which appeared on Feb. 9th, 2007 in Human Events. This version was published on Feb. 14th, 2007 in The National Review Online.-KWN

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On economic issues, Giuliani is the right candidate.

Republican primary voters should rally around the GOP field’s most accomplished supply-sider, the all-but-announced Rudolph W. Giuliani. Having sliced taxes and slashed Gotham’s government, New York’s former mayor is the leading fiscal conservative among 2008’s GOP presidential contenders.

Before Giuliani’s January 1, 1994, inauguration, New York’s economy was on a stretcher. Amid soaring unemployment, 235 jobs vanished daily. Financier Felix Rohatyn complained: “Virtually all human activities are taxed to the hilt.” Punitive taxes helped fuel a $2.3 billion deficit that threatened to swallow the city.

Mayor-elect Giuliani sounded Reaganesque when he announced he would “reduce the size and cost of city government” to balance the budget. In his first State of the City address, he said: “We’re going to cut taxes to attract jobs so our people can work.”

Giuliani spent eight years keeping these promises.

“America’s Mayor” cut or killed 23 levies, saving taxpayers $9.8 billion. Giuliani pared Gotham’s top income-tax rate by 20.6 percent. The chief financial officer of Washington, D.C.’s municipal government produces an obscure but invaluable survey called Tax Rates and Tax Burdens in The District of Columbia – A Nationwide Comparison. It indicates that between 1993 and 2001, local taxes on a family of four New Yorkers earning $75,000 fell 19.3 percent. For such a household making $50,000, city taxes consumed 23.7 percent less of its income. At $25,000, the drop was 33.9 percent. Giuliani’s tax cuts left moms and dads more money to cover such things as day care, clothing, and private-school tuition for their children.

Giuliani cut the commercial-rent tax, curbed sales taxes, and curtailed the marriage penalty on taxpaying couples. Giuliani proudly shaved Gotham’s hotel tax from 6 percent to 5 in 1994. Consequently, revenues from that tax soared from $115 million in 1993 to $235 million in 2001.

Giuliani defends his supply-side instincts with bracing candor. Asked after September 11 if he would hike taxes, Giuliani called that “a dumb, stupid, idiotic, and moronic thing to do.”

In 1995, Giuliani was equally clear on spending: “We must choose between pulling ourselves into the late 20th Century or remaining mired in the tired and abandoned policies of the Great Society.”

Giuliani’s expenditure growth averaged 2.9 percent annually, while local inflation between January 1994 and December 2001 averaged 3.6 percent. His FY 1995 budget decreased outlays by 1.6 percent, while his post-9/11 FY 2002 plan lowered appropriations by 2.6 percent.

If President Bush had followed Giuliani’s example and limited Washington’s spending to 2.9 percent average, annual growth, the just-unveiled FY 2008 federal budget would cost $2.275 trillion, not $2.9 trillion, saving taxpayers $625 billion, Cato Institute fiscal analyst Stephen Slivinski estimates. Such fiscal discipline would generate a $386 billion surplus, not an anticipated $239 billion deficit.

Ironically, Giuliani restrained spending with only, at most, six Republicans on the 51-seat City Council. (Speaker Peter Vallone, a moderate Democrat from Queens, often backed Giuliani.) Meanwhile, President Bush, blessed until January with a Republican Congress, has boosted non-defense, non-Homeland Security spending 41 percent — outpacing Lyndon Johnson’s Great Society.

Giuliani shrank local bureaucracy. While hiring 12 percent more cops and 12.8 percent more teachers, Giuliani whittled municipal manpower elsewhere by 17.2 percent, from 117,494 workers in 1993 to 97,338 through December 2000. Including police and pedagogues, full-time, city-funded employees fell from 222,836 to 215,891 — a 3.1 percent overall decline.

Giuliani repeatedly privatized municipal assets. Among 30,358 abandoned housing units previously seized from tax-delinquent owners, 23,625 (77.8 percent) were sold to families and individual occupants. Giuliani sold WNYC radio for $20 million, WNYC-TV for $207 million, and Gotham’s share of the U.N. Plaza Hotel for $85 million. Divesting the New York Coliseum excised an eyesore from Columbus Circle and added $345 million to city coffers. Giuliani also let the private Central Park Conservancy manage all 843 acres of Manhattan’s fabled urban forest.

Giuliani endorsed real-estate developer Larry Silverstein’s purchase of the previously government-owned World Trade Center. Silverstein signed a 99-year lease on the facility on July 24, 2001, just seven weeks before al Qaeda demolished it.

These eight years of tax reduction and fiscal responsibility helped hammer unemployment from 10.4 percent in 1993 to 5.7 percent in 2001. Simultaneously, personal income advanced 53 percent. Meanwhile, Gotham’s population grew by 679,000 or 9.3 percent, as locals stopped fleeing, and hundreds of thousands came to prosper in a safe, thriving metropolis.

(Click here for detailed figures on Mayor Giuliani’s record.)

It’s hard to compare a two-term mayor, a one-term governor of a state with a smaller population than Gotham’s, and a four-term U.S. senator from Arizona with no executive-branch experience. Nevertheless, Cato’s 2006 Fiscal Policy Report Card on America’s Governors gives former Massachusetts chief executive Mitt Romney a “C.” While the top personal tax rate fell 6 percent on his watch, thanks to a referendum voters approved before he arrived, Romney’s first budget raised $140 million by closing corporate-tax loopholes. That budget also featured some $501.5 million in increased fees, including higher marriage licenses (from $4 to $50), pricier gun permits ($25 to $100), costlier elevator-inspection fees, steeper public ice-rink charges, a $100 biannual fee for volunteer firefighters (rescinded under pressure), and a $10 expense for previously free ID cards that let blind people ride Boston public-transit gratis.

“If you consider the massive costs to taxpayers that his universal health care plan will inflict,” writes Cato’s Slivinski, “Romney’s tenure is clearly not a triumph of small-government activism.”

Few in Congress expose outrageous federal boondoggles as fervently as does John McCain. However, he is an ambivalent tax fighter. According to Club for Growth research, McCain opposed President Clinton’s 1993 tax increases and supported his 1997 capital-gains tax cuts. He also voted to extend President Bush’s 2003 tax cuts by two years. For 2005, McCain earned a 78 percent National Taxpayers Union rating — an “A.”

Unfortunately, McCain opposed President Bush’s 2001 and 2003 tax cuts. Only one other GOP senator so voted: Rhode Island’s Republican renegade loser, Lincoln Chafee. McCain voted against repealing the death tax in 2002. Also, in 1998, McCain embraced former Senator Tom Daschle’s (D., S.D.) motion to waive the Budget Act and approve Big Tobacco’s Master Settlement Agreement, including a $1.10-per-pack cigarette-tax increase.

“I know a lot less about economics than I do about military and foreign policy issues,” McCain conceded to the Wall Street Journal editorialist Stephen Moore in November 2005. “I still need to be educated.”

Conservatives seeking a proven leader to lasso taxes and rein in runaway spending have a natural choice for president: Rudolph W. Giuliani.

-Deroy Murdock

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This article originally appeared in The National Review Online on February 14th, 2007. It is reprinted here with the author's permission

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