A Walk on the Supply Side

Overview

In recent decades, conservatives have pursued lower taxation for two important but very different reasons: first, a commitment to limited government and a goal of advancing the common good while imposing the lowest possible burden on taxpayers; second, a belief that reducing tax rates would encourage work and investment, thus boosting economic growth. While the commitment to limited government is a vital conservative principle, faith in tax cuts as the universal formula for growth is not. Tax cuts that neither reduce spending nor boost growth do nothing to limit government; to the contrary, they create greater appetite for government and fuel deficits that taxpayers must eventually repay with interest.

With top marginal tax rates roughly half what they were at the outset of the supply-side revolution more than 40 years ago, recent rounds of cuts have not generated the broad-based economic gains that the United States needs. As in President Ronald Reagan’s era, the nation faces serious economic challenges that reside primarily on the supply side. But just as Reagan looked beyond the orthodox but ineffective policies of the 1970s to tackle that decade’s stagflation, conservative policymakers today need to look beyond their traditional focus on tax cuts and write a new chapter in the American playbook for growth and prosperity.