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Home Publications Blogs Beat the Press The Earth Orbits the Sun and Gingrich's Supply Side Economics Doesn't Work

The Earth Orbits the Sun and Gingrich's Supply Side Economics Doesn't Work

Friday, 27 January 2012 07:48

The Post devoted a business section article to Newt Gingrich's supply side economics. It would have been useful to note the findings of the research on this topic, for example this Congressional Budget Office study. It found that even in a best case scenario the additional growth sparked by a tax cut could replace less than a third of the lost tax revenue. Even this effect would be temporary, with slower growth in later years implying larger deficits.

The Post should not just throw Gingrich's assertions out to readers as though they might be true. There is extensive research on this topic which the Post's business reporters should be familiar with - its readers almost certainly are not.

Comments (5)Add Comment
Tethered to investment
written by David B. Schuster, January 27, 2012 7:05
As Ha-Joon Chang says in his book, supply side tax cuts would only work if there was a stipulation to invest them in growing the economy.
Idiots: Multipliers Have Higher Values on the Moon Due to Less Gravity
written by izzatzo, January 27, 2012 7:06
Stupid liberals.
written by skeptonomist, January 27, 2012 8:34
Interest-rate cuts are also supply-side economics. Businessmen are supposed to calculate how much more money they will make if they pay less on borrowed money, and then invest and hire more. In the real world this calculation does not happen because businessmen just don't see sufficient demand to justify expansion at all. In the real world, demand is paramount; only if it is considered to be sufficient will considerations of interest rate, inflation or tax rates come into play.

In this post, Dean opposes supply-side economics. In a succeeding one, he will likely argue in favor of supply-side economics in claiming that the Fed can make a difference by changing the inflation target, reducing long-term rates slightly or other action.
Interest Rate Cuts ARE NOT Strictly Supply-Side
written by PAUL, January 27, 2012 9:57
To state the obvious, if I can borrow money at a lower rate, I can afford to buy a car, boat, vacation, whatever and thereby increase aggregate demand. OTOH, tax cuts, especially for the rich as Gingrich proposes, do not add to consumption demand - Romney makes $20 million/yr; cutting his taxes to zero as Gingrich proposes will not cause him to spend the extra $3 million in his pocket.
the Low-information Primaries
written by Union Member, January 27, 2012 11:14
Gingrich needs a landslide among low-information voters. In the piece the Washington Post increases low-information voters in numbers, while lowering information levels.
The general election will contest low-information against di-information voters.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.