August 3, 2012
Friday Food for Thought: Supply side economics
Survey (of the evidence) says…
Students in the Class of 2012 at Labor School learned a lot. In professor Diane Thomas-Holladay’s class on Why Unions Still Matter, we learned about the history of the labor movement in the United States. The conditions for its birth, rise, and decline are closely related to the accepted economic theory of the day, as Diane illustrated with charts and graphs about income distribution, unemployment, and union membership.
At the risk of oversimplifying, today, there are two dominant economic theories – “supply-side” economics and “demand-side” economics.
The constantly recurring boom-and-bust cycles created by laissez-faire (“hands off”) economics prompted workers to organize in the late 19th century. Government intervention in the economy to combat the devastating effects of the Great Depression allowed unions to grow – and the middle class grew along with them.
Deregulation in the 1980s and the abandonment of the social contract – that workers’ wages and standards of living should improve as our productivity improves – and huge tax cuts in the 2000s, which predominantly benefited the wealthy, have been devastating to unions and the middle class.
In the 30+ years since the shift back to supply-side economics began, pausing only briefly in the 1990s before roaring back with full force in the last decade, we have had time-enough to draw some conclusions based on empirical evidence. That’s exactly what Michael Ettlinger and Michael Linden at the Center for American Progress have attempted to do, and the data they surveyed makes clear: Supply-side economics have been a failure.
Supply-side economics doesn’t work!
Check out the seven graphs below which show why Mr. Ettlinger and Mr. Linden reached their conclusion that supply-side economics doesn’t work as advertised. Try to see these graphs for what they are – illustrations of economic data.
As Joe Friday, the detective on the popular 1950s T.V. show, Dragnet, would say, “All we know are the facts, ma’am.” Well here are the facts about supply-side economics, presented in chart form: