Saturday, June 5, 2010

How's Supply Side Economics Working Out For You ?

The four stated goals of Supply Side Economic Policy
1. Reduce government spending,
2. Reduce income and capital gains marginal tax rates,
3. Reduce government regulation of the economy,
4. Control the money supply to reduce inflation

Government Spending

Effective Individual Income Tax Rates

Adjusted Monetary Base

Wealth Distribution

Total Government Debt as a % of GDP

It seems to be working out rather well for the banks.
Six Giant Banks Made $51 Billion Last Year


  1. I guess the first question is, have we ever had true "supply side" economics applied. I would say no, more so inept Keynesianism. I think Laffer's thoughts on effective tax rates and government revenues is suspect, as we are realizing that federal government tax revenues as a percentage of GDP have been constant even though top marginal rates have fluctuated between 90 and 28%.

    What I would say, is regardless of what the talk is - revenues are more or less the same, and spending keeps going out of control. "supply side" seems more of a marketing term along with "third way".

  2. Good points Mitch. I suppose that the gist of this entry is to demonstrate the ineptitude of elected officials in sticking to a plan. I am sure that the intentions of Reagan's cronies actually believed in their economic model but the reality of politics put an end to any effective application of Laffer's economic principles. Spending is the problem--which is not surprising considering that Congress views the retention of power more important than adhering to any form of discipline in administrating economic policy. As usual, greed and lust for power trumps any notion that politicians are guided by a moral compass.