Please explain supply-side economics to me...

I listen to conservative talk all day, and they keep lauding Reagan and supply-side economics and the free market. I did a little research and it just doesn't seem to jive with what they say.

For example, from 1950-1980 under Keynesian economics, wages went up, the middle class expanded, debt to gdp decreased, and the income gap was the smallest in history.

Then Reagan started supply-side economics and everything reversed. From 1980 till now wages have been flat, the middle class has shrank, debt to gdp has increased, and the income gap is larger now than before the great depression. The only thing I've found to support supply-side economics is if you're a ceo because your salary went from 35X the average worker to over 300X the average worker.

The market is freer now than ever before, and yet the people suffer more now.

I keep hearing how we need to de-regulate the market, but all the research I've done shows that's a bad thing. De-regulated business leads to corp abuse of the worker, such as lower wages and unsafe working conditions. Or as we have seen with Disney, firing American workers to import cheaper labor from overseas. De-regulated banks led to the great recession of '08.

So am I missing something?

How can supply-side economics be so good if its champion, Reagan, increased the debt 186% by himself after putting it into practice? Why has the debt to gdp gone up every year under it, when under the prior system it decreased? Why have wages decreased for the average worker, skyrocketed for the guys at the top, when "a rising tide lifts all boats"? Why has Kansas failed after Brownback implemented the most supply-side economy ever?

I have to be missing something, so please explain it to me.

Let Jesus explain supply-side economics to you.

It depends. What exactly do you think it is supposed to do?

a reply to: stormson

Because it's not good.

It's a load of crap that's almost ruined the economy several times before today, and certainly lowered the relative living-standards and general contentment of the poor and middle-class in this country.

I don't understand all the intricacies of supply-side economics, but I don't need to. Looking back at the past few decades under this system is enough proof for me this is beyond flawed.

Oh yeah, and one more thing: Reagan's all bark and no bite. They called him the "Great Communicator", but they should also have called him the "Terrible Ideologue".

a reply to: ketsuko

Well, I think it's supposed to do what all the conservative talking heads say it's supposed to do.

It's supposed to decrease the debt, increase incomes and standards of living, increase businesses so I have more of a choice as to where to shop, and increase jobs.

Yet it seems the exact opposite has happened.

I think much of the cry for deregulation is aimed at the small business. The continuous piling on of taxes, permits, regulations and God knows what else, is strangling the little guy and is no more than a bump in the economic road for the giants.
We also have the worlds highest corporate tax, which drives manufacturing over seas, where they can make the product, ship it back to us and still pay less than they would for making it here.

The U.S. total corporate tax rate at 39.1 percent is the highest corporate tax rate in the developed world, which reduces investment in the U.S. and costs American workers jobs and higher wages.

Since the govt gives big business so many tax breaks, that really doesn't make sense. Why not just lower the corporate tax to a competitive level, close all those loopholes and tax dodges and bring them back to the U.S. Make it profitable to have the "Made in the U.S.A." on the label. I don't see this happening for one good reason : Americans won't work 12 hour shifts for $2 a day.

a reply to: DAVID64

U.S. companies face the highest official corporate tax rate in the world. But there's a big difference between the rates set out by law and the cash that's actually collected.

Large, profitable U.S. corporations paid an average effective federal tax rate of 12.6% in 2010, the Government Accountability Office said Monday.

The federal corporate tax rate stands at 35%, and jumps to 39.2% when state rates are taken into account. But thanks to things like tax credits, exemptions and offshore tax havens, the actual tax burden of American companies is much lower.
money.cnn.com...

a reply to: stormson

Well no wonder you think it doesn't work!

It's supposed to allow the economy to grow which has nothing to do with Congressional spending. A healthy, growing economy generally increases opportunity affording more people the chance to prosper.

We haven't been living under actual supply side for a long time now; this is the antithesis of a supply side economy. And you cannot decrease the debt without a Congress that controls its spending. We've been under Keynesianism since the crash. This economy is pretty interventionalist.

a reply to: stormson
There's nothing to explain. Supply-side Economics is B.S. plain and simple.

Arthur Laffer is kind of the progenitor of it. Oh, and he's been advising Gov. Brownback of Kansas.

Take a look at Kansas to see how well it works.

a reply to: stormson

Yeah, I added an edit to include that. Makes No sense does it? Tax the heck out of them, on the surface at least, then give it all back with tax breaks, shelters, concessions ................................and they still take jobs away.

a reply to: ketsuko

Supply-side economics can only prosper in an environment of perpetual growth. Of course, that is impossible. It fails during recessions and depressions. The only inevitable outcome of supply-side economics is that more resources will end up in the hands of the few.

Supply side or trickle down economics ASSUMES lowering tax rates would increase the amount of money collected by taxes, by creating growth. In practice, the Reagan and Bush tax cuts decreased government revenue. The result is a choice between running deficits and cutting services to offset loss. Basically public education and social services for the most vulnerable take a haircut to pay for tax breaks for the rich.

Economics for dummies:
Your spending = my income
My spending = your income

Supply side economics is a political shtick.

The real free market phenomenon allows the most economic activity from a given amount of resources, so supply side works by increasing production and along with innovation (which is easier without regulation), lowers the price of everything. This is the real and true idea behind the shtick.

Nothing political is free however. Especially the market.

A politician in favor of a free market is impossible once the critical mass of governance is reached. A businessman has to use the government at that point or else his competition will. Only smaller government will reduce the abuse of government.

A free market is impossible with any government bigger than say 5% ( a guess) of GDP. Might need to be smaller than that.

NOTE GDP is based on a government run economy. I mean GDP only as a rough description of the total economic output.

a reply to: ketsuko

so are you saying that we have never been under supply side economics?

before the crash wages were stagnant, the middle class was shrinking, and debt to gdp was increasing (except under clinton after he raised taxes and created a surplus)

Supply side economics is just a conservative 1984 styled double speak catch phrase for speculation and corruption.

originally posted by: stormson
I listen to conservative talk all day, and they keep lauding Reagan and supply-side economics and the free market. I did a little research and it just doesn't seem to jive with what they say.

For example, from 1950-1980 under Keynesian economics, wages went up, the middle class expanded, debt to gdp decreased, and the income gap was the smallest in history.

Then Reagan started supply-side economics and everything reversed. From 1980 till now wages have been flat, the middle class has shrank, debt to gdp has increased, and the income gap is larger now than before the great depression. The only thing I've found to support supply-side economics is if you're a ceo because your salary went from 35X the average worker to over 300X the average worker.

The market is freer now than ever before, and yet the people suffer more now.

I keep hearing how we need to de-regulate the market, but all the research I've done shows that's a bad thing. De-regulated business leads to corp abuse of the worker, such as lower wages and unsafe working conditions. Or as we have seen with Disney, firing American workers to import cheaper labor from overseas. De-regulated banks led to the great recession of '08.

So am I missing something?

How can supply-side economics be so good if its champion, Reagan, increased the debt 186% by himself after putting it into practice? Why has the debt to gdp gone up every year under it, when under the prior system it decreased? Why have wages decreased for the average worker, skyrocketed for the guys at the top, when "a rising tide lifts all boats"? Why has Kansas failed after Brownback implemented the most supply-side economy ever?

I have to be missing something, so please explain it to me.

A lot of fallacies and misunderstandings in your post.

1) The 1950s boomed because the US was practically the only functioning economy after WWII. Remember, most of Europe was destroyed. Japan destroyed. Companies could and did pay more because there was little to no competition for labor. Competition drives down prices (as well as wages). WHen there is no competition, prices tend to be higher (wages).

2) As the economy moved into the 70s / 80s many companies began to expand into overseas markets both to sell product, but more importantly as a source of cheaper labor. Competition forced many companies to lower their prices which benefits consumers. However, it also forces companies to look for ways to contain costs and often times the biggest bang is cheaper labor. This is why lower skilled and lower middle class jobs are suffering. You are competing against workers around the world.

3) CEO wages have increased because their responsibilities have increased. Many are running global enterprises employing hundreds of thousands of workers. Their wages reflect this fact. Are the wages absurd? Yes. But so are the wages for major athletes, entertainers, and actors. But for every CEO who makes $50 million, there are thousands of small business owners who have mortgaged their house to the hilt to make payroll. The F500 CEOs make a lot because well, they are the 500 largest businesses in the world. Your complaint is like saying it is unfair that Will Smith makes $20 million a movie while some no name actor makes $500 for starring in a community play.

4) Debt increased because CONGRESS keeps spending. Democrats ran the house / senate under Reagan. Just as Republicans ran congress / senate under Clinton.

5) Regulation tends to stifle business and innovation. It usually hurts the small mom & pop companies moreso than the large megacorporation. In fact, many larger companies lobby for regulations to squash competition. There will always be a need of regulation, but government tends to grow unchecked and corrupt politiicans on both sides of the isle use things like regulation and the tax codes to dole out favors.

I'd suggest reading some of Thomas Sowell's work to get a good basic understanding of economics.

originally posted by: Passerby1996
a reply to: stormson

Because it's not good.

It's a load of crap that's almost ruined the economy

Supply side IIZZZ the economy.

Everything political almost ruins the economy at this very moment.

Consider -- stuff has to be made before it can be given away. Politics makes nothing but politics.

originally posted by: stormson
a reply to: DAVID64

U.S. companies face the highest official corporate tax rate in the world. But there's a big difference between the rates set out by law and the cash that's actually collected.

Large, profitable U.S. corporations paid an average effective federal tax rate of 12.6% in 2010, the Government Accountability Office said Monday.

The federal corporate tax rate stands at 35%, and jumps to 39.2% when state rates are taken into account. But thanks to things like tax credits, exemptions and offshore tax havens, the actual tax burden of American companies is much lower.
money.cnn.com...

Corporations don't pay taxes. Taxes are a cost that is passed on to the consumer.

Consumers pay all of the corporate taxes.

originally posted by: Greven
a reply to: stormson
There's nothing to explain. Supply-side Economics is B.S. plain and simple.

Arthur Laffer is kind of the progenitor of it. Oh, and he's been advising Gov. Brownback of Kansas.

Take a look at Kansas to see how well it works.

Laffer is about taxes, not prosperity.

The Industrial Revolution is a product of the free market. All of the prosperity that every one enjoys now is from the Industrial Revolution, which is a consequence of the free market.

a reply to: stormson

Then Reagan started supply-side economics and everything reversed.

Well at least you didn't blame Bush.