A new collection of essays and analysis from American Compass questions the efficacy of tax cuts as a strategy for generating broad-based economic growth. With top marginal income tax rates now roughly half of what they were at the start of the supply-side revolution in the 1980s, the evidence suggests that further tax cuts are unlikely to deliver the investment, productivity, and wage gains that Americans want and need.
The collection, titled A Walk on the Supply Side, includes three essays examining the history and limits of supply-side economics, as well as the potential for more targeted policies to address contemporary economic challenges. It also features new analysis of revised GDP and business investment data showing that the economic boosts promised from the Tax Cuts and Jobs Act of 2017 and Bush tax cuts of 2001/2003 failed to materialize.
- In “The Curse of Voodoo Economics,” executive director Oren Cass warns that reflexive tax cutting divorced from evidence has become a “zombie Reaganomics” that threatens conservative credibility. He argues that fiscal discipline should take priority, with tax cuts as the reward for limiting spending and deficits.
- In “The New Supply-Side Economics,” policy director Chris Griswold argues that while supply-side principles remain relevant, new approaches beyond tax cuts are needed to confront problems like globalization and financialization that discourage domestic investment.
- In “Learning the Lessons of Supply-Side Economics,” Aaron Hedlund, chief domestic economist for President Donald Trump’s Council of Economic Advisers, says conservatives should move beyond 1980s orthodoxy to craft pragmatic policies tailored to present circumstances and a realistic understanding of market failures.