IN THE EARLY 1970s, two young editorial writers on The Wall Street Journal began championing a set of radical remedies for the inflation and unemployment that were ravaging the economy.
The columns contradicted much of the liberal economic dogma that had dominated government policy since the New Deal. But the suggested medicine for curing the economic ills was also too strong for many of the paper's older Republican readers.
The editorials favored shifting most people and businesses into lower tax brackets, adjusting tax rates to inflation, curtailing government regulation, going back to a convertible currenty, possibly linked to gold, and taking stern measures to restrict the money supply.
Today these ideas form the intellectual core of the newly fashionable "supply-side economics." President Reagan and his advisors have embraced them. Paul Craig Roberts, has moved into government as an assistant secretary of the Treasury while others in the Journal's inner circle of guest writers are playing important roles in the early stages of the Reagan administration's economic planning.
How "supply-side economics" moved from the fringe of the nation's economic debate to the center of the policy stage in Washington provides some revealing insights into the ways ideas enter the American mainstream.
The Wall Street Journal editorial board did not invent the concept of "supply-side economics," but it was editorial page editor Robert L. Bartley, his associate Jude Wanniski and a close circle of outside economists and intellectuals who popularized this thought, interpreted and translated it for a mass audience, cloaked it with the respectability of The Wall Street Journal and carried the conservative message to the nation's movers and shakers.
For Wanniski, who quit the Journal in 1978, his belief in the new economics took him beyond the bounds of journalism, into political activism. "I became a true revolutionary, a fanatic," says Wanniski, who is not a private consultant.
For Bartley, this has been a year of vindication. In 1980 his editorials won him the Pulitzer Prize. A few months later Ronald Reagan was elected president on a platform that included many of Bartley's own hopes for the economy.
When Bartley, then 35, took over the editorial page in 1972, it was a well written and influential defender of busines, influenced considerably by the economic views of Milto Friedman.
Bartley, a protege of retired editor Vermont Royster, set about building a young, conservative staff of his own. When his attempt to hire George Will, then a legislative assistant to Sen. Gordon Allot (R-Colo.), failed, he brought in Wanniski, the Washington columnist of Dow Jones & Co.'s money-losing and now defunct National Observer.
Bartley, a cool, precise, intellectual, contrasted with Wanniski, the garrulous, emotional son of a Pennsylvania coal miner who had taken his family to Brooklyn when Wanniski was only 4. But in several important respects, they were well suited to work together. Neither had any connections to the New York business and financial establishment with which the Journal often was identified. Bartley, son of a veterinarian, grew up in Minnesota and Iowa and attended Iowa State and the University of Wisconsin. Wanniski attended Brooklyn College and the University of California at Los Angeles before drifting into journalism in Alaska and Nevada.
Bartley, an admirer of the "vigorous entrepreneur," waged frequent wars against big business. He opposed government loans to Lockheed and later to Chrysler, and he railed against the government's Export-Import Bank as a crutch for corporate giants unable to make it on their own. In one of his prize-winning 1979 editorials, entitled "Down With Big Business," Bartley jabbed that "business giants have rather equivocal interests in free enterprise."
To Wanniski, established corporations were selfish organizations "which think the only problem is that the people and the workers want too much."
Both men had been mildly liberal in their student years -- an early Wanniski hero was columnist James Reston of The New York Times -- but both had reacted personally to the turmoil of the 1960s. Bartley still speaks bitterly of a time when "the secretary of defense could not speak freely at Harvard," when "you had grown up thinking America is a pretty good place and then suddenly . . ."
As Bartley recalls it, the shift to a more radical editorial page came about "partly because I'm a more obstreperous person than they [his predecessors] were and partly because the tone of the times was changing." But he also acknowledges that "Jude had a tremendous influence over the tone and direction of the page. He taught me the power of the outrageous."
By the time Bartley took over the page, his philosophy was closely attuned to the new conservatism. Bartley was a believer in a militarily strong American, deeply suspicious of the Soviet Union and fervently committed to traditional American values as defined by the New Right. Now he had at his disposal the resources of The Wall Street Journal, the nation's only national newspaper, then in the process of pushing daily circulation close to the 2 million mark with the use of satellite technology permitting simultaneous printing in 12 cities.
But Bartley was still in search of an economic philosophy that would distinguish his conservatism from the weary Republicanism of Wall Street. Both men were disillusioned by Nixon's policies -- particularly his 1971 wage and price controls, which they saw as a complete betrayal of conservative trust in markets and opposition to government intervention. And so, around the water cooler at the Journal, Wanniski began to educate Bartley about the radical economic theories of his friend Arthur B. Laffer, whom Wanniski had known in Washington when Laffer was chief economist at the Office of Management and Budget.
Laffer was a "classical" economist who rejected the "monetarism" of Milton Friedman as well as the "Keynesianism" of liberals. Disciples of the late John Maynard Keynes favor use of government spending to tune the economy, while Friedman argues for managing the economy by adjusting the supply of money.
Laffer rejected both in favor of policies that put all the emphasis on making individuals and businesses more productive and efficient. If the part of the economy that produced -- the "supply side" -- was helped, unemployment would go down, incomes would rise and there would be less need for huge government spending programs.
Inflation, Laffer argued, constantly pushed people and companies into ever-higher tax brackets, but without any gain in their productivity. Laffer argued that a sharp reduction in the tax rates would give the government the same tax revenues as a much higher rate by making the entire economy more productive.
Most of the economic establishment dismissed Laffer's ideas as ludicrous and dangerous. But as Wanniski, ensconced in the Journal's downtown New York office, telephoned Laffer at the University of Chicago every morning at 10 to discuss the day's news, Wanniski became a convert. And so did Bartley.
In their editorials, Bartley and Wanniski began lobbying for reform of tax rates. Then, in December 1974, Wanniski wrote a long editorial introducing the Journal's readers to the ideas of Laffer's collaborator, the Canadian economist Robert Mundell.
Mundell favored combining the tax cuts with a policy of extremely tight money, a proposal that seemed even more heretical than Laffer's ideas."Nobody understood what he was talking about," recalls Bartley. "I thought it was a little wacky myself." This was half a dozen years before the Carter administration sanctioned the tight money policy and the Reagan administration announced a tax cut to go with it.
As Bartley and Wanniski were venturing these ideas on the economic front, the page was becoming a sort of national bulletin board for political and military commentary by the network of conservative and neoconservative intellectuals and out-of-power policymakers.
But it was on economic matters that Bartley's page played its most activist role, in publicizing and popularizing theories that still seemed extreme to people grounded in orthodox economics.
In addition to his own writings and those of Waniski, Bartley also began to open the page to outside contributors with unorthodox economic views. These included Laffer himself, whose early articles argued that currently devaluations did not help countries' trade balances; Norman Ture, a supply-sider recently named assistant secretary of the treasury for tax policy; and businessman Lewis Lehrman, a leading gold standard advocate who helped write the pre-inaugural memo to President Reagan from Reps. Jack Kemp and David A. Stockman (now director of the Office of Management and Budget) warning of an "economic Dunkirk" unless drastic economic steps were taken.
At the same time, Bartley gave space to writers whose work otherwise was buried in the conservative periodicals -- George Gilder, for example, author of the just-published "Wealth and Poverty," and Irvin Kristol, editor of The Public Interest. In this way, a body of work made up of hundreds of editorials and articles explaining the new conservative economics was built up beween 1975 and the election of 1980.
Bartley met Kemp early in the Journal's economic "revolution" and told Wanniski, "Go back down and get to know him -- he's some piece of horseflesh."
Wanniski, who subsequently helped convert Kemp to the supply-side gospel and became his close adviser, needed no prodding, for he already was straining at his journalistic bonds. While still working for the Journal in 1975, Wanniski recalls, he lobbied with then-President Ford's adviser Donald Rumsfeld to get the administration to abandon a 5 percent surtax plan.
A year later he went to Atlanta and attempted to sell the staff of president-elect Jimmy Carter on supply-side ideas. In 1977, he wrote television advertisements for Pennsylvania gubernatorial candidate Bob Butera. Then, in 1978, a day after a Dow Jones executive complained that Wanniski had been handing out political leaflets for New Jersey Senate candidate Jeffrey Bell, Wanniski resigned.
Critics of the Journal's editorial page focus on the gendency of articles to misrepresent the positions of those with whom the Journal disagrees in order to devastate them. Liberal economists point out that the first big post-war tax cuts were engineered by President Kennedy, a fact they complain is often conveniently ignored.
"Sometimes they overstate liberal positions and use them as a punching bag," says economist Walter W. Heller, a signed contributor to the page himself.
Bartley reports that as the influence of the paper has grown, he has opened the page to many writers with differing points of view, including regular contributors such as Heller, Arthur M. Schlesinger, Jr., Milton Friedman and more recently former State Department spokesman Hodding Carter III and Village Voice columnist Alexander Cockburn.
Reagan's election thrust Bartley into a new and apparently not altogether comfortable role. Before Nov. 4, the page was a sharp unflinching instrument of opposition. Since then, Bartley has taken it upon himself to be the self-appointed monitor of the new administration's ideological purity. But at times, he has sounded more like the hand-wringing parent on the sidelines during a not-too-gifted son's Little League game.
Since the election, the Journal's editorials have alternated between nervous concern over possible ideological softness and sighs of relief. "We feel better now," confided last Tuesday's editorial, summing up Reagan's first few weeks in office.
Now that he has done his part in launching the economic experiment that is about to be given the ultimate test on 226 million of his countrymen, Bartley is resigned even to the possibility that it will end in wrecked hopes.
"I think these are very imporant ideas." he says. "But I couldn't give you any guarantee that they'll work. Maybe they won't. I just can't see anything else on the horizon.