- Apr 1, 2011
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Middle Class Series: The Failure of Supply-Side Economics
Three Decades of Empirical Economic Data Shows That Supply-Side Economics Doesn’t Work
When President Bill Clinton, raised taxes that same year did the economy suffer a slowdown, as was predicted by those who believe in supply-side economics? The data says no.
Adherents of the economic theory known as supply-side economics contend that by cutting taxes on the rich we will unleash an avalanche of new investment that will spur economic growth, and boost job creation, leading to economic improvements for everyone. For most of the past 30 years this idea has dominated the economic debate, resulting in two sustained eras of tax cuts aimed at the wealthy, separated by a brief respite in the 1990s.
Now, as our economy struggles to emerge from the deepest recession in generations—and as we argue over what to do with the expiring Bush-era tax cuts—it is more important than ever to understand one simple fact: When put to the test in the real world, supply-side policies did not deliver as promised. In fact, by every important measure, our nation’s economic performance after the tax increases of 1993 significantly outpaced that of the periods following the tax cuts of the early 1980s and the early 2000s.
Investment growth was weaker under supply-side policies
Productivity growth was weaker under supply-side policies
Overall economic growth was weaker under supply-side policies
Employment growth was weaker under supply-side policies
Income growth for middle-class households was lackluster under supply-side policies
Hourly earnings were flat or declined under supply-side policies
Our nation’s fiscal health deteriorated under supply-side policies
Conclusion
Did the supply side policies of Presidents Ronald Reagan and George W. Bush work? Did they boost investment, spur growth, and cause prosperity to trickle down? The data says no. And when President Clinton raised taxes in 1993, did the economy suffer a slowdown, as was predicted by those who believe in supply-side economics? Again, the data says no.
This data does not mean that higher taxes are always better and lower taxes are always worse for the economy. That would be making the same mistake that many supply-siders make, but in reverse. Indeed, there were obviously other forces at work in our economy besides tax policies over this 30-year period. But it does mean that lower taxes aren’t always the answer, aren’t a magical economic cure, and that higher taxes can coexist with, and perhaps even aid, a strong economy.
The Failure of Supply-Side Economics
AmericanProgress.org? That's a Soros funded commie propaganda organ.
