Supply-Side

Surprise, Surprise...based on a new study by the Center for American Progress and the Economic Policy Institute, it appears that supply-side economic theory doesn't work so well in practice. The authors compared the supply-side periods of 1981-1993 and 2001-now, with the period 1993-2001 when we had a respite from supply-side economics. Some of the things they found:

• Real investment growth after the tax increases of 1993 was much higher than after the tax cuts of 1981 and 2001
• Economic growth as measured by real U.S. gross domestic product was stronger following the tax increases of 1993 than in the two supply-side eras.
• Average annual real median household income growth was greatest after the 1993 tax increases
• Wage levels also did better after 1993.
• Employment growth was weaker during the supply-side eras than during the post-1993 era.
• Federal budget deficits and national debt increased during supply-side periods and decreased following the 1993 tax increases.

And, guess what? Some of the major tenets of supply-side theory: tax breaks for corporations and the wealthy, cuts in the corporate tax rate, and reductions in tax on dividends and capital gains are in McCain's economic plan (PDF).

The full report from CAP/EPI is here (PDF).