David R. Henderson  

Bruce Bartlett on Supply-Side Economics

Virtual Federalism... Murphy's Law...

Bruce Bartlett's The New American Economy is currently my "Starbuck's book," i.e., the book I keep in my car and read a few pages of every time I'm in line at Starbuck's. I'm almost through and it's really quite good. I'm especially learning from his chapter 5, "The Rise and Fall of Supply-Side Economics," which I'm halfway through. I'm still on the "rise" part. There's a lot in there that I knew and a lot that I didn't. Bruce was a careful observer and a participant in the rise of supply-side economics in the late 1970s and early 1980s. I'd forgotten, until his book reminded me, how many former Keynesians, even in the political world, had made a partial switch from Keynesian to supply-side.

One of the likely-permanent effects of the supply-side revolution is the focus on the deadweight loss from high marginal tax rates. He writes (p. 132):

The welfare or deadweight cost of the U.S. tax system--the burden of taxation over and above the revenue collected due to reduced output--is now generally considered to be very high. In the 1960s, this cost was not considered a problem by economists; a common estimate of the welfare burden was just 2.5 percent of revenue.
There are other such highlights, which I'll discuss in a future post. I'll also connect it up with an article I wrote about the supply-side revolution in the late 1980s. The book is heavily footnoted, which is definitely a plus.

I'm still not clear where he's going with the "fall" of supply-side economics, but I'll know the next time I'm in line at Starbuck's.

Comments and Sharing

COMMENTS (3 to date)
Bruce Bartlett writes:

Your Starbucks gift certificate is in the mail.

David R. Henderson writes:

Gee. Thanks, Bruce. :-)

Mark writes:

Thank you for your blog posts. I am interested in reading about the fall of supply-side economics(reading about you reading about it). I don't know much about economics but it is my suspicion that supply-siders are held in low regard these days in academe. Unfortunate, because I like tax cuts! The individual tax breaks states give to companies to move there seems to be the one part of the revolution that took hold. Uugh.

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