Supply-Side Economics: Panacea or Handout for the Rich?

Beset by inflation and rising taxes, people look for simplistic formulas—”Proposition 13,” the Kemp-Roth 30-percent income-tax cut. Another such “magic” formula has been successfully peddled by business economists and quickly picked up by the media: supply-side economics (SSE). This cruel hoax deserves a look.

It starts with three assumptions: (1) that steady economic growth is essential to the smooth functioning of a democratic society; (2) that our economy is prevented from growing because of unfilled investment needs that are caused by insufficient capital formation; (3) that this insufficiency could and should be remedied by tax cuts designed to stimulate saving over spending, complemented by both a s...