Supply Side Economics
It should be known that at the beginning of a dynasty, taxation yields a large revenue from small assessments. At the end of the dynasty, taxation yields a small revenue from large assessments.
'Abd-ar-Rah.mân Abû Zayd ibn Khaldûn (1332-1406), The Muqaddimah, An Introduction to History, Franz Rosenthal translation, abridged and edited by N.J. Dawood, Bollingen Series, Princeton University Press, 1967, p.230, quoted by Ronald Reagan [note].
How could it be possible that there should now be bought and sold in France five or six times as many commodities as in the miserable reign of Charles VI?
Jean Baptiste Say, A Treatise on Political Economy, 1803
In France, John Baptist Say has the merit of producing a very superior work on the subject of Political Economy. His arrangement is luminous, ideas clear, style perspicuous, and the whole subject brought within half the volume of [Adam] Smith's work. Add to this considerable advances in correctness and extension of principles.
Thomas Jefferson, letter to Joseph Milligan, April 6, 1816
If any person had told the Parliament which met in perplexity and terror after the crash of 1720 that in 1830 the wealth of England would surpass all their wildest dreams,... that London would be twice as large... and that nevertheless the rate of mortality would have diminished to one-half,... that men would be in the habit of sailing without wind and would be beginning to ride without horses, our ancestors would have given as much credit... as they gave to Gulliver's Travels. Yet the prediction would have been true.
Thomas Babbington Macaulay, "Southey's Colloquies on Society," Edinburgh Review, January 1830.
Yet the fundamental point remains that the sustained increases in productivity of the Machine Age brought widespread benefits over time: average real wages in Britain rose between 15 and 25 percent in the years 1815-1850, and by an impressive 80 percent in the next half-century.
Paul Kennedy, The Rise and Fall of the Great Powers, Vintage Books, 1987, 1989, p.146-147
I am convinced that the larger incomes of the country would actually yield more revenue to the government if the basis of taxation were scientifically revised downward.
Calvin Coolidge, State of the Union message,
December 3, 1924
Nearly everything in this country is too high priced. The only thing that should be high priced in this country is the man that works. Wages must not come down, they must not even stay on their present level; they must go up. And even that is not sufficient of itself -- we must see to it that the increased wages are not taken away from the people by increased prices that do not represent increased values.
Henry Ford, New York Times, November 22, 1929 (5.0% unemployment)
1,028 Economists Ask Hoover
to Veto Pending Tariff Bill
New York Times headline, about the Smoot-Hawley Tariff, May 5, 1930 (6.8% unemployment)
In this enlightened age, large manufacturers...will maintain wages...as being the far-sighted and...the constructive thing to do.
Howard ("57 Varieties") Heinz, "Would Keep Scale of Present Wages," New York Times, August 7, 1930 (6.4% unemployment)
Our leading business concerns have sustained wages.... These measures have maintained higher degrees of consumption than would have otherwise been the case.... They have thus prevented a large measure of unemployment.
Herbert Hoover, Banker's Magazine, November 1930 (11.6% unemployment)
We didn't admit it at the time, but practically the whole New Deal was extrapolated from programs that Hoover started.
Rexford Guy Tugwell, Roosevelt Advisor
We will spend and spend, and tax and tax, and elect and elect.
Harry Hopkins (Roosevelt Advisor), Arthur Krock, "Win Back 10 States; Republicans Take Ohio, Wisconsin, Kansas and Massachusetts," The New York Times, November 9, 1938, p. 4 (17.7% unemployment)
We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong ... somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises.... I say after eight years of this Administration we have just as much unemployment as when we started.... And an enormous debt to boot!
Henry Morgenthau, Jr., Secretary of the Treasury, testimony to the House Ways and Means Committee, May 9, 1939 (19.9% unemployment)
[General Motors President William Knudsen] knew what historians have since learned: that FDR's vaunted New Deal, with its massive new government programs and antibusiness regulations, had done nothing to end the Great Depression. After six years of FDR, unemployment in 1939 still stood above 17%.
Arthur Herman, "The FDR Lesson Obama Should Follow," The Wall Street Journal, May 10, 2012, A15
Say emerged victoriously from his polemics with Malthus and Sismondi. He proved his case, while his adversaries could not prove theirs. Henceforth, during the whole rest of the nineteenth century, the acknowledgment of the truth contained in Say's Law was the distinctive mark of an economist.
Ludwig von Mises, "Lord Keynes and Say's Law," The Freeman, October 30, 1950
[Thomas] Malthus's assumption that human labour could be regarded as a more or less homogeneous factor of production (i.e., wage labour was all of the same kind, employed in agriculture, with the same tools and the same opportunities) was not far from the truth in the economic order that then existed (a theoretical two-factor economy). For Malthus, who was also one of the first discoverers of the law of decreasing returns, this must have indicated that every increase in the number of labourers would lead to a reduction of what is now called marginal productivity, and therefore of worker income...
This ceases to be true, however, under the changed conditions we have been discussing, wherein labour is not homogeneous but is diversified and specialised.
F.A. Hayek, The Fatal Conceit, The Errors of Socialism, 1988, The University of Chicago Press, 1989, 1991, p.122
The European Dream, with its emphasis on collective responsibility and global consciousness... represents humanity's best aspiriations for a better tomorrow.
Jeremy Rifkin, "The European Dream," 2004
Europe is an economic success, and that success shows that social democracy works.
Paul Krugman (Princeton), January 10, 2010
Let's write about something we know nothing about & be smug, overbearing & patronizing: after all, they're just wogs... Guess a Nobel [i.e. Paul Krugman's] in trade means you can pontificate on fiscal matters & declare my country a "wasteland." Must be a Princeton vs Columbia thing.
Toomas Hendrik Ilves, President of Estonia, a graduate of Columbia University, in response to a blog post by the Keynesian Paul Krugman about the "incomplete recovery" of Estonia from the European recession, June 6, 2012
Now, what we're doing, I want to be clear, we're not trying to push financial reform because we begrudge success that's fairly earned. I mean, I do think at a certain point you've made enough money.
Barack Obama, April 29, 2010, speaking in Quincy, Illinois
Mr. Obama was right to compare his administration to those of FDR and LBJ: Like them, he has driven the U.S. miles down the road toward the social democratic model he so admires. Then again, neither of his predecessors had such visible evidence of where social democracy ultimately leads. What's this president's excuse?
Bret Stephens, "2012: A U.S. Referendum on Europe," The Wall Street Journal, Tuesday, January 3, 2012
Economists agree that a large capital stock is a key ingredient for prosperity, as it expands our productive capacity and raises worker productivity, which in turns increases wages and consumer purchasing power. Our capital stock is comparatively much smaller today than it was before the Great Depression. The ratio of business-sector capital to output is about 30% smaller today than it was in 1929.
Thomas F. Cooley (NYU) and Lee E. Ohanian (UCLA), "The Bush Tax Cuts Never Went Far Enough," The Wall Street Journal, Wednesday, December 8, 2010
All economic problems are about removing impediments
to supply, not demand.
Arthur Laffer, "Why Americans Hate Economics," Stephen Moore, The Wall Street Journal, Friday, August 19, 2011
When you get right down to it, Keynesianism is just a convenient excuse for what the left wants to do anyway, spend more government money.
Don Boudreaux (George Mason University), Alfred S. Regnery, "Balancing Acts," The American Spectator, October 2011, p.6
What few know is that there is no meaningful theoretical or empirical support for the Keynesian position.
Robert J. Barro (Harvard), "Keynesian Economics vs. Regular Economics," The Wall Street Journal, Wednesday, August 24, 2011 (regarding the demand side "multiplier")
They've already pumped endless amounts of money into the economy... The results are dismal
Wolfgang Schäuble, Finance Minister of Germany, about "stimulus" spending in the United States, 2010 ("Europe's Phony Growth Debate," The Wall Street Journal, Wednesday, April 25, 2012, A14)
When we've got new teachers doing great work with our kids, then you know what, they go to a restaurant and spend that money. And so suddenly businesses are doing well, the economy is doing well, and we get into a virtuous cycle. And we go up...
We believe that when a CEO pays his auto workers enough to buy the cars that they build, the whole economy does better.
Barack Obama, first quote, 2 August 2012, Leesburg, Virginia; second quote, Democratic National Convention, acceptance speech, 6 September 2012 (8.1% unemployment); cf. Henry Ford--Herbert Hoover, above.
If cutting tax rates brings in more revenue, the rates weren't cut enough.
Milton Friedman (1912–2006)
Summary
The term "supply-side economics" is used in two different but related ways. Some use the term to refer to the fact that production (supply) underlies consumption and living standards. In the long run, our income levels reflect our ability to produce goods and services that people value... "Supply-side economics" is also used to describe how changes in marginal tax rates influence economic activity. Supply-side economists believe that high marginal tax rates strongly discourage income, output, and the efficiency of resource use. In recent years, this latter use of the term has become the more common of the two and is thus the focus of this article. ["Supply-Side Economics," James D. Gwartney, The Concise Encyclopedia of Economics, edited by David R. Henderson, Liberty Fund, Indianapolis, 1993, 2002, 2008, p.482]The focus of "supply-side economics" on tax policy is a grave and even dangerous restriction in the use of the concept, since many more public policy issues ride on a proper understanding of the matter in its generality.
Source:
Say's Law and Supply Side Economics
http://www.friesian.com/sayslaw.htm
