Supply-Side Economics: The “Voodoo” Elixir

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The Clinton presidency made for a compelling case that centrism – not extremism – forges the most effective economic policies. Image courtesy of Bob McNeely, The White House

Supply-Side Economics: Are They Effective?

Even with decades of empirical data, the debate continues as to the effectiveness of supply-side policies.

Proponents use the twelve years of consecutive growth during the Reagan and Bush years, with GDP increasing at an average rate of 3.2%, as evidence in favor of the supply side philosophy.

Employment expanded by 21 million jobs during that period, and despite lower marginal tax rates, governmental revenues — as predicted by the Laffer Curve — increased.

Opponents, on the other hand, argue that budget deficits were exacerbated and the economy as a whole improved more demonstratively when supply-side was not the emphasis.

They point to the Clinton presidency as prima facie evidence against Reaganomics.

The truth, as in all debates, likely lies somewhere in the middle.

Citing Clinton’s economic performance as evidence against supply-side theories fails to recognize that Clinton was a centrist and embraced elements of both supply and demand-side stimuli.

Political ideology, minimized during Clinton’s presidency, has otherwise dominated economic policy.

Republicans generally advocate supply-side principles, while Democrats lean toward Keynesian theories. It can be readily advanced that strategic implementation of both theories — as Clinton skillfully employed — would provide the greatest likelihood for sustainable economic growth. Alas, when it comes to major policy issues and political gamesmanship, the left and the right can only agree upon one thing: to disagree.

Resources:

Gwartney, James D. Supply-Side Economics (2008). Library of Economics and Liberty. Accessed August 17, 2012.

Solynm. Obama and Supply-Side Economics (2012). RedState. Accessed August 17, 2012.

Marshall, Jonathan. On Economics: Supply-Side Economics Embraced by Clinton, Dole(1996). SFGate. Accessed on 8/16/12.

Harper, David. Understanding Supply-Side Economics (2010). Investopedia. Accessed August 17, 2012.

Bartlett, Bruce. How Supply-Side Economics Trickled Down (2007). New York Times. Accessed on 8/16/12.

The Laffer Center For Supply Side Economics. Arthur Laffer. (2012). Accessed August 17, 2012.

Herman, Arthur. Pro: Supply-side economics worked wonders for Reagan; Obama should give it a shot (2012). AEI. Accessed August 17, 2012.

Ettlinger, Michael and Linden, Michael. The Failure of Supply-Side Economics (2012). American Progress. Accessed August 17, 2012.

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