As much as I’m sick of talking points—clever phrases designed to land blows in debates or tweak the synapses of your audience towards your positions—some TPs are actually true. Like the anti-supply-side one that says “the folks that drove the car into the ditch now want the keys back. Worse, they’re planning to use the exact same road map that got us so lost in the first place.”
This is, of course, a reference to the supply-side tax cuts and deregulation of the GW Bush years. Instead of delivering the goods re growth and jobs, that agenda is now associated with very poor job creation, higher after-tax income inequality, higher poverty rates, large budget deficits, and a Great Recession born partly of the belief that financial firms would self regulate.
But let’s look a bit more closely at this claim. First, while federal spending as a share of GDP reversed trend under GWB—it was falling in the Clinton years—it stayed well within the historical average. What’s striking about those years in this regard was not the increase in spending; it was the loss of revenue resulting from the Bush tax cuts.
Second, and I know I’m giving the supply-siders story here too much credit, but what are the actual economics of their story? If it were the case that Bush overspent, what set of economic relations does that set off to blow away the fairy dust of supply-side growth?
The usual story is interest rates and investment, as public spending puts upward pressure on interest rates and crowds out private investment. But corporate interest rates trended down in those years, and investment as a share of GDP followed its usual cyclical pattern. (And no, these trends are not evidence that supply side worked—I included the non-supply-side Clinton years in there to make that point—investment did a lot better in those years, as did, of course, jobs and incomes.)
Sources: Inv/GDP, NIPA; Corp bond rate is Moody’s AAA corp rate.
OK, well then maybe GWB doesn’t prove supply side but what about Reagan? Um…he raised taxes 11 times. Moreover, as the first figure above shows, he was also a hefty spender, well above GWB (there was a lot of military Keynesianism in those years).
There really is just no evidence to support trickle-down, supply-side economics, yet that apparently will never stop one particular party from not just touting its success, but counting on the rest of us to ignore the facts and believe them.