What Rudy Supplies

(AP Photo/Jacquelyn Martin)
Brian Goldsmith is an Associate Producer for the CBS Evening News.
In his first ads of the campaign, Rudy Giuliani picked a memorable phrase to describe his economic plan. Reaching past the typical GOP script—which is to invoke Ronald Reagan's name at every turn—Giuliani invoked the name of a particular Reagan policy.

Giuliani said, "We need supply side policies and reduced government spending—fiscal discipline—to keep the economy growing." The rest of the ad is a very general kind of paean to old campaign saws like "leadership and optimism," and a strong defense. The one specific in the message—and don't kid yourself, every word of this thing was carefully chosen—is "supply side."

Now, if you weren't as politically engaged in the late 70's as you are today—or if, like me, you just weren't born yet—here's a basic refresher on what supply side means. Remember, in your high school economics class, that bit about supply and demand? Well supply side theory is that good economic policy encourages supply more than demand—production more than consumption—because buying stuff isn't possible until you've made money from selling stuff.

Supply side theory is pretty much the opposite of the more liberal Keynesian economic philosophy, which says that stimulating demand is central to stimulating growth—and which was relied on almost continuously by Democratic (and Republican!) presidents from Franklin Roosevelt to Jimmy Carter.

The political difference is clear: If you're a Keynesian, you're for tax cuts and minimum wage hikes for lower income groups (because they're more likely to spend the money—increasing demand). And if you're a supply-sider, you're for tax cuts and subsidies for upper income groups (because they're more likely to invest the money—increasing supply.)

The supply side idea traveled a long road to mainstream acceptance: from university lecture halls, to an influential book called Way the World Works to the embrace of a 1980 Republican presidential candidate named Ronald Reagan—who said that by growing the economy, lower tax rates would produce more money for the federal government (for which he was attacked by a rival named George Bush, who called supply side "voodoo economics").

For Giuliani, saying supply side sends a message—not to regular voters, but to conservative leaders—that even though he's for gun control and abortion rights, he's a Reagan Republican on the economy, just like he's a Reagan Republican on security. And he chose to broadcast the ads on the two most important conservative talk shows—Rush Limbaugh and Sean Hannity—where he knew every Republican power-broker would listen.

Never mind that President Reagan signed what was then the largest tax increase in history after he signed the largest tax cut, never mind that Mr. Reagan negotiated arms control deals with the Soviet Union he called an "evil empire," conservatives in 2008 have decided that Reaganesque is best. And Giuliani—like Reagan—doesn't want conservatives to think they're making any compromises.