The Perversion Of Supply-Side Economics
By Justin Gardner | Related entries in Economy, MoneyOne of the brains behind the economic theory has harsh words for the current crop of fiscal conservatives.
AS one who was present at the creation of “supply-side economics� back in the 1970s, I think it is long past time that the phrase be put to rest. It did its job, creating a new consensus among economists on how to look at the national economy. But today it has become a frequently misleading and meaningless buzzword that gets in the way of good economic policy. [...]The original supply-siders suggested that some tax cuts, under very special circumstances, might actually raise federal revenues. For example, cutting the capital gains tax rate might induce an unlocking effect that would cause more gains to be realized, thus causing more taxes to be paid on such gains even at a lower rate.
So what happened?
Today, supply-side economics has become associated with an obsession for cutting taxes under any and all circumstances. No longer do its advocates in Congress and elsewhere confine themselves to cutting marginal tax rates � the tax on each additional dollar earned � as the original supply-siders did. Rather, they support even the most gimmicky, economically dubious tax cuts with the same intensity. [...]This is a simplification of what supply-side economics was all about, and it threatens to undermine the enormous gains that have been made in economic theory and policy over the last 30 years. Perhaps the best way of preventing that from happening is to kill the phrase “supply-side economics� and give it a decent burial.
Read the whole thing.
This entry was posted on Friday, April 6th, 2007 and is filed under Economy, Money. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
April 6th, 2007 at 8:24 pm
Your link isn’t working for me — who is the “supply-side” brain?
April 6th, 2007 at 11:49 pm
Works for me.
Bruce Bartlett.
April 7th, 2007 at 1:01 am
I fixed the link.
Sorry everybody.
April 8th, 2007 at 8:38 am
Supply-side economics is now just “economics” - I point this out because your title to this post could be taken two different ways.
April 8th, 2007 at 10:03 pm
Tax cuts aren’t even about stimulating the economy anymore for many politicians. They’re a gimmick, a talking point used to win elections. Not to mention a way to scratch the backs of those contributing to their campaigns.
Take a look at how the current economic recovery compares with others since WWII. This one has seen lower growth rates in GDP, employment, equipment investment, and residential investment. I’m sure you can guess the one economic growth area that has outpaced all others (and is significantly higher than in past recoveries): Corporate profits.
April 9th, 2007 at 11:30 am
Yes, let’s kill the phrase “Supply-Side Economics”. While we’re at it,
let’s kill “Global War on Terror”.
and the point would be?
April 9th, 2007 at 11:36 am
As well as the everyday middle class people who don’t like paying taxes.
April 11th, 2007 at 12:58 pm
Yeah, but the everyday middle class people aren’t the ones who get 90% of the dollars from the tax cuts Republicans have been passing.