Politics

Created 1/1/1998
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Irving Kristol and the Coming of Supply-Side Economics

 

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."

Hence his:

"...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
delong@econ.berkeley.edu
http://www.j-bradford-delong.net/

 

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