You asked me about to defend supply side as successful between 1980 and 2000.
First of all, if I remember correctly, Clinton raised taxes, not lowered them. Secondly, its a myth that Reagan's tax cuts stimulated growth:
"First, the 1970s had been a time of stupendous inflation which had required a huge effort by the Federal Reserve. As a result, the initial Reagan tax cut acted as an important temporary stimulus to a deeply recessed economy, which was reinforced by Reagan's huge increases in military spending. See, e.g., James Tobin, Fiscal Policy: Its Macroecnomics Effects, Yale Journal of Politics, Spring 2001. Tobin concluded that the famous "supply-sider" (read---right-wing) in fact shepherded the country out of the recession to growth based on standard "demand-sider" (read--left-wing) strategies.
In practice Reaganomics turned out to be the biggest and most successful Demand-side fiscal gambit in peacetime U.S. history. What it was not was what it was intended to be, a Supply-side transformation of the economy. There was zero evidence that the American economy's capacity to produce goods and services at full employment was any greater at the end of the eighties than would have been prophesied a decade earlier without Reagan fiscal policy. Id.
Second, the Reagan tax cut of 1981 was followed, under Reagan, by the biggest tax increase in American history, in terms of taxes raised as a proportion of GDP, and then followed by additional tax increases every year that Reagan was in office until the last, and increases under Clinton and Bush I. Here's how Bruce Bartlett (an economist and Reagan adviser who supports Republican taxcutting policies) describes the Reagan tax increases that followed the Reagan 1981 tax cuts:
Reagan may have resisted calls for tax increases, but he ultimately supported them. In 1982 alone, he signed into law not one but two major tax increases. The Tax Equity and Fiscal Responsibility Act (TEFRA) raised taxes by $37.5 billion per year and the Highway Revenue Act raised the gasoline tax by another $3.3 billion. According to a recent Treasury Department study, TEFRA alone raised taxes by almost 1 percent of the gross domestic product, making it the largest peacetime tax increase in American history. Bruce Bartlett, A Taxing Experience, National Review Online, Oct. 29, 2003.
Bartlett, by the way, also believes that Bush has "bankrupted America" with his tax policies. See this 2007 Travis Smiley story. (Though he finds faults with the Bush team's version of supply-side thinking, he still believes that the supply-side story is the right one. New Keynesians disagree. For more on that, there's a good series of exchanges in Angry Bear back in April 2007, at these links: April 2007 Angry Bear exchange and this description of Bartlett's supply-side views versus New Keynesian supply side views.)
So while Reagan's legacy is the myth of a taxcutting policy that pays for itself and provides for growth, the Reagan fact is that the tax cut was in large part reversed by necessary tax increases--both in the corporate and individual income taxes and in payroll taxes, which together with significant government spending laid the foundation for the growth through the next decade, though the establishment of the Reagan myth about supply-side and tax cuts and the concommitant failure to adequately address the long-term deficit problem also laid the foundation for our fiscal mess today."
ataxingmatter.blogs.com
I think these were good times. We wound up with a tech bubble but i understand that mess.
The really good times were under Clinton, not under Reagan. |
