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Originally Posted by Rajoo
Show me where in the article there is a 'slanted' definition of supply-side economics. From the article:
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Yep, it's right there in the part that you highlighted. It's also right there in the portion of the article Finn posted.
Supply-side economics is about one thing, and one thing only: encouraging the conversion of capital by making the cost of converting capital to goods and services less expensive. That's it. That's all. There's nothing in supply-side theory that addresses spending because that's a
political/governmental/policy decision.
As soon as someone writes commentary like this: "an economic philosophy that claimed to allow Republicans to cut taxes,
maintain popular social programs, robustly fund defense and balance the budget", then you know the writer is, at least, embellishing or at most, lying to you. Connecting supply-side theory to government spending is simply an attempt to discredit a theory that liberals hate because:
1) It doesn't comport with the Gospel according to John Maynard Keynes.
2) It's not a solution that relies on government spending or other myriad Federal interventions to work.
Remember that in the 1970's and early 1980's, high unemployment, high inflation, slumping economic growth, an oil embargo, a war coming to an end, and rising competition from foreign manufacturers. By the time 1980 came along, we had tried everything else already. Nixon tried wage and price controls. It failed. Ford tried to get everyone to wear Whip Inflation Now (WIN) buttons (what a joke that was). Remember Obama's "stimulus" bill? Yep, Carter tried that with the Economic Stimulus Appropriations Act, which lowered unemployment by increasing the Civil Service workforce. That never really worked, and just as the Carter bunch was getting ready to try again, the US embassy in Tehran was attacked.
So, by the time Reagan showed up, a lot of the Keynesian stuff had already been tried and hadn't had any real impact. That's where supply-side came in. It was a relatively new theory, and it was probably the right tool for the economic problems at that time.
Quote:
Originally Posted by Rajoo
Isn't this what Reagan adopted and began the era of deficit funding of government, except he called it Trickle Down Economics. IIRC, Bush1 called it Voodoo economics. Then Bush2 and Trump adopted this Voodoo economics and more tax cuts for the wealthy ensued and deficits soared.
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There is no such thing as "Trickle Down Economics". That is a term that was first uttered by David Stockman and then co-opted by Reagan's political detractors to criticize Reagan's application of supply-side theory.
Here's the thing:
1) economic theory isn't about politics. It becomes political when its application is espoused by a political figure.
2) economic theory is like a tool in your toolbox. A single economic theory doesn't fit every economic challenge, just like you're not going to pull a screwdriver out of your toolbox to drive in a nail.
3) Keynesian economic principles failed to combat the challenges faced by Nixon and Carter. They were the wrong tool for those challenges.
4) Supply-side is a tool that, to great extent, supports getting government tax and regulatory burdens out of the way and letting the free market "do its thing". It was probably the right tool for the challenges that existed by the time Reagan took office.
5) Just like Keynes' ideas, supply-side theory isn't always going to be the right tool for the job.
6) Due to how the theories work (and this is probably way over-simplified, but here goes), you'll find Keynesians on the political left because the left hates/fears the free market and would rather have an activist gov't at the center of economic policy. Supply-side advocates are generally on the right because of the appeal of a less activist government and free market principles. This is where/how these economic theories generally get politicized.
7) This is exactly how we fail to get out of our own way sometimes. The political climate has become so polarized that even economic theories get politicized. It's like politicizing a screwdriver or a hammer, but that's where we are.
By the way, there's nothing new about any of this. JFK was thwarted by his own party when he proposed, as a way to get the economy moving again following a recession in 1958, a package of corporate and individual tax cuts. The Repubs and conservative Dem wouldn't agree to tax cuts w/o budget cuts. In reference to his tax cut proposals actually increasing government revenue, it was Kennedy that pushed back at his critics who wanted budget cuts by stating: "A rising tide lifts all boats."