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One of the strangest episodes in late twentieth century American economic policy was the sudden rise to prominence in the late 1970s of supply-side economics: the doctrine that tax cuts could be had for free, without causing budget deficits.
America's supply-side experiment in the 1980s turned out to be a disaster. The government deficits it caused drained the flow of capital available to finance investment in America. It made America poorer than it would otherwise have been by somewhere between $80 billion and $400 billion a year in lower living standards and lost incomes.
The puzzle is why so many people in the Republican Party and on the right believed in supply-side economics.
Irving Kristol--then editor of The Public Interest, and a leading figure behind the rise of supply-side economics--has now given us an answer: they never did believe in supply-side economics. In the 1995 Public Interest Kristol writes that:
"The task, as I saw it, was to create a new majority, which evidently would mean a conservative majority, which came to mean, in turn, a Republican majority--so political effectiveness was the priority, not the accounting deficiencies of government."
"...own rather cavalier attitude toward the budget deficit and other monetary or fiscal problems."
On one level, this makes the rise of supply-side economics more intelligible: Irving Kristol and his followers never believed in it, they simply pretended to believe in it because they thought it would be a politically-effective doctrine.
On a second level, this makes the rise of supply-side economics even harder to understand.
Professor of Economics J. Bradford
DeLong, 601 Evans
University of California at Berkeley; Berkeley, CA 94720-3880
(510) 643-4027 phone (510) 642-6615 fax
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