Supply Side Economics: an Alternative Fact


Supply side economics, or “trickle-down theory”, is the idea that giving money to businesses and the rich will improve the economy, because the money will be spent to expand business, which will lead to overall economic growth. Normally, this is done through tax cuts and deregulation, but it also includes limiting wage growth, reducing worker benefits, and corporate welfare.

Supply side economics was the center of Reagan’s economic policy. What is referred to as Reaganomics is the most massive experiment in supply side economics in modern US history. It involved:

  • Effectively halving the taxes paid by the wealthiest Americans
  • Reducing corporate taxes
  • Massive deregulation
  • Fighting minimum wage increases
  • Increasing corporate welfare
  • Massively increasing the national debt

Did it work? Reagan came to office during a massive recession, and his policies did help fight off the recession and stimulate short term growth, but over time, Reagan’s policies did more harm than good. Unemployment increased over the Reagan-Bush years, GDP growth slowed, nearly doubling our national debt. The standard of living of the average American stagnated or worsened in the Reagan years. Working class and poor Americans saw their income and overall standard of living decrease.

After twelve years of Reagan’s policies, Clinton increased taxes. By supply side economic theory, this should have hurt the economy, but all economic indicators improved throughout the nineties. Then Bush II took office and went back to a supply side economic policy. Again, unemployment increased, economic growth slowed, and the average American’s standard of living decreased.

By the end of the Bush years, the economy was a mess, due to a combination of supply side economic policy, war spending not offset by economic growth or new taxes, and a banking disaster precipitated by deregulation (a supply side economic policy).

Obama came in to office and brought recovery from the effects of supply side policies. Economic growth and unemployment improved. The economy was certainly not great under Obama, but it consistently improved, and a massive recession was avoided.

Once more, we now have a Republican President selling supply side economics. Trump’s budget proposal included tax cuts for the rich that would increase the national debt by two trillion dollars. The claim is that this will be paid for by economic growth, but history teaches us that this is a lie.

It is reasonable to believe that Reagan and his people believed supply side economics would improve the economy, but the experiment was done, and it failed. Independent analysis of supply side policies (those not done or funded by conservative and monied interests) consistently find supply side economics flawed.

If you do not want to trust studies, look up charts on economic growth, GDP, unemployment, and standard of living for the last four decades. The numbers speak for themselves. Conservative policies, at best, create short term growth at the cost of long term economic problems; and at worst, steal from the poor and middle class to line the pockets of the rich while selling-out America’s future.

A seldom-cited fact is that “fiscal conservatives” selling supply side economics have consistently increased the national debt. Reagan dramatically increased the national debt to pay for his tax cuts to the wealthy. This did not create economic growth to pay for the tax cuts. Bush II again dramatically increased the national debt. The last time we had a balanced budget was under Clinton, a Democrat.

Another important fact about these Republican supply side administrations: their manic attempts to deregulate consistently leads to massive financial scandals that, in turn, lead to huge tax payer bailouts and damage to the economy. Reagan’s policies lead to the S&L disaster, and Bush II’s policies lead to the sub-prime loan disaster.

While supply side economics may have started out as a valid experiment, it has been proven a failure twice now. There is no logical explanation for Republicans continuing to sell these policies as anything but lying manipulation. They are funded by the super-rich, and their policies are to sell America to the rich at the expense of the poor and middle class. The costs of this include America is becoming less competitive internationally and that our people are working harder to gain less.

The facts behind the lie of supply side economics are simple. If you give money to the rich, they invest it in ways that benefit themselves, not workers and not America. Much of their spending is done internationally, increasing their wealth, not ours. Much of the rest of their spending is more designed to avoid paying taxes than building economic growth. On the other hand, if you give money to the poor and middle class, they generally spend it. We have a consumer economy, and this spending leads to business growth, economic growth, and more jobs.

Republicans have spent thirty years convincing people that giving money to the rich will help them. It doesn’t. Poor and middle class people voting for Republicans to improve their standard of living are hurting themselves, hurting the economy, hurting us all, and stealing our children’s future.