Supply-Side Economics Fails Every Objective Test! Part One

by Merl Moore (MerlMoore@mail.com)

 “Once you realize that trickle-down economics does not work, you will see the excessive tax cuts for the rich as what they are – a simple upward redistribution of income, rather than a way to make all of us richer, as we were told.” Ha-Joon Chang, Faculty of Economics, University of Cambridge   
 
 Science is, well, at the risk of being redundant: an exact science. There's a very specific way things are done known as “The Scientific Method”: noun, a method of research in which a problem is identified, relevant data are gathered, a hypothesis is formulated from these data, and the hypothesis is empirically tested. Pretty straight-forward.   
  
  And the reason science things are done in this very specific way: “The scientific method is the best way yet discovered for winnowing the truth from lies and delusion.” (source: physics.ucr.edu). I guess the vast majority all for that.     
  
  So, if someone came up with a new, unproven, untested yet relatively reasonable sounding economic-philosophy/theory (I use “theory” in the common-usage sense here – i.e.: not the strict scientific definition) we might want to test it out with a number of relatively small, low-risk experiments – Hey, I know! Let's use the scientific-method! – before shoving it down everybody's collective throat. How's that sound?     
  
  Of course that isn't what happened with “Supply-Side Economics Philosophy.”     
  
 So let's go back a bit to the birth of supply-side economics and probably it's single most persuasive and well-known argument, “The Laffer Curve”: “...(P)opularized in the United States with policymakers following an afternoon meeting with Gerald Ford Administration officials Dick Cheney and Donald Rumsfeld (anybody surprised to see those 2 names involved in this approaching economic dumpster-fire?) in 1974 in which (Professor Arthur Laffer) reportedly sketched the curve on a napkin to illustrate his argument.”     
  
 The Laffer Curve is a theory developed by supply-side economist Arthur Laffer to show the relationship between tax rates and the amount of tax revenue collected by governments. The argument being that you increase tax-revenue (actual amounts collected) by lowering taxes because lowering taxes – especially on the rich, companies and corporations (i.e.: The so-called Job Creators), the “Supply-Side” as opposed to the consumer/demand side – will supercharge the entire economy so as to increase revenue even though initially you cut governments' revenue-collection formula (i.e.: the rich, companies and corporations paying a smaller percentage on their profits and income in taxes but, because of incredible growth, paying more in actual amounts collected, therefore more absolute revenue). Typical recommendations of supply-side economists are lower marginal tax rates and less government regulation.   
  
 I'm not going to go too deep into the weeds here; if you're interested in learning more: https://en.wikipedia.org/wiki/Laffer_curve – feel free.   
  
  Needless to say, if you want rich & powerful people to take your hypothesis very, very, very seriously, no matter how insane, counter-intuitive or silly your hypothesis may be; just make sure that in the end, acting on your hypothesis will make them richer & more powerful regardless of what else may happen. Believe me, they will all get “on-board the project!” whether there is any empirical evidence to support it or not! And that's exactly what they – i.e.: the rich and powerful – all did!     
  
  In 1980, only 6 years after that fateful Cheney/Rumsfeld/Laffer lunch, Ronald Reagan came to power as president preaching the economic-philosophy that any and all economic woes in America stemmed from over-taxing the rich, businesses and corporations, i.e.: “punishing” the “Job Creators.” And the Reagan administration proposed to set America on a new path: Supply-Side Economics.       
  
  I should point out that “The Laffer Curve” makes some sense. If it was completely insane it probably never could have been sold to the American people (as stupid as they may seem as a group sometimes) in the first place. And, in all fairness to Arthur Laffer, he never did propose the entirety of what became Supply-Side (that horrible crime lays at the feet of Milton Friedman and the University of Chicago, known as the Chicago School of Economics: https://en.wikipedia.org/wiki/Chicago_school_of_economics).  Lafffer's main point was that if you tax an individual, a company or a corporation 100% they are going to quit working (i.e.: making money), which means they will have no income to tax, which means tax-revenue goes down, which seems entirely reasonable to me. (I have no idea who was proposing that the rich, business, companies and corporations be taxed at 100%, but let's move on.)      
  
  Moreover, Supply-Side goes on to suggest the reverse is true: if you only tax the exact right amount (percentage), the lower the better, and not a penny more, even though you've lowed taxes as a percentage overall, you will increase tax-revenue because the rich, businesses and  corporations will invest in more businesses, factories and worker's-salaries and create an enormous number of new well-paying jobs and the tax-base will grow exponentially.     
  
  The second part of this “equation,” the part about investing and increasing worker's pay, I question very seriously as this part of the equation, unfortunately, is simply in no way inevitably so; Just because you cut the taxes of the rich, businesses and corporations doesn't necessarily mean they will use that tax-break-money to create more jobs or increase the wages of the average worker. The fact of the matter is that there are no stipulations in Supply-Side Economics Philosophy requiring any such thing and if those at the top making the decisions either decide they can't sell more product or, if they can sell more, all they need to do is just make their existing workforce work harder and/or become more efficient, thus becoming more productive (as has happened in the U.S.) then hiring more people becomes entirely superfluous. And then there are no new jobs or raises. And that's just good business.   
  
  Moreover, corporations are currently rolling in money with the almost highest profits ever recorded up to now and yet, workers' wages are entirely stagnant and have been stagnant for many profitable years. Again, the scientific-method: we've tested your theory Professor Laffer and it f-cking doesn't work.     
  
  Interestingly, the Supply-Side Philosophy – a supposed “business-centric” economic-philosophy – does not address in any way this giant hole in the hypothesis. Neither did patron-saint of the Supply-Siders, Ayn Rand, by the way, merely positing that because it is not in business's best long-term interests to do so, business will never do anything to hurt business. We all saw how well that worked out in 2007-8.   
  
  Also of interest: They never mention the abject failure of Supply-Side under Reagan, Bush Jr. or in Kansas, that's understandable of course, but what's most important is that they never mention an example of where Supply-Side actually succeeded. What does that tell you?     
  
  So greed, causing a huge, gaping abyss that entirely explains the current economic inequality issues we're facing today. Simply put: those at the top and their stock-holders are not creating jobs or paying fair/higher wages, as the “theory” suggests they would do; they're just making their workers work harder and pocketing the f—king tax-break-money – and why not!?! Ain't no law against it!  
  
  
  End of Part One