Actually, supply- side worked perfectly well in the '80s. Taxes were cut, revenues went up, and the economy boomed, while inflation went down. The only thing wrong was the failure to trim the budget. As the Cato Institute has argued, if it were a demand- driven recovery, inflation would have gone up.
Now, it is true that supply- side focused on marginal rates, which primarily affected that affluent. The idea is that as the marginal rates go up, the incentive to earn at the next level is diluted, and productivity suffers. Additionally, by trading off the closing of loopholes, the distorting effect of tax sheltering is eliminated.
It is also true that the lower and middle sectors of the income scale experienced modest growth. What is not generally noted is that most people did much better if one factors in advancement over time, into a higher income quintile.
Anyway, it was John Kennedy, I believe, who coined the phrase "a rising tide lifts all boats"....... |
