Unrelated, but...
I wrote this for school and I wondered what the harm was in exposing it to the terrible light of day...

Mr. President, Have Pity on Working Man
The Failure of Supply Side Economics

Ronald Reagan practiced “supply-side economics” even though George Bush, his own vice-president described the theory as “voodoo economics” and Reagan’s budget director, David Stockman confessed that it “was always a Trojan horse to bring down the top [tax] rate” for the richest Americans. Supply siders fall short of their lofty promises, their only achievement is having shoveled money to those who were already wealthy at the expense of the rest of the country.
Supply side economics was a poorly thought out theory and failure. It is a fringe theory peddled by cranks and has never been accepted by the vast majority of economists. The early 1980’s only 12 out of the 18,000 members of the bipartisan American Economics Association identified themselves as supply siders. There is no major college economics department that is considered supply side and there is no supply side economist in any major department. Arthur Laffer was a very notable supply sider. He was one of the supply side movement’s few academics, but he was not a member of the economic mainstream. While he frequently gave lectures and wrote for popular periodicals, he contributed very little to peer-reviewed journals.
The fact that supply side economics was rejected by most economists, including prominent conservative economists and supported largely by members on the economic fringe or non-economists like publisher Irving Kristol, did not prevent opportunistic politicians from embracing the theory. The Republicans found it a convenient justification for cutting taxes. One of the first politicians to be converted to the supply side school was congressman Jack Kemp and by the start his presidential California Governor Ronald Reagan was under the spell of “voodoo economics”.
Its not hard to blame the Republicans for falling in love with supply side economics, it is a very attractive theory. While traditional conservative economics dictated austerity and “caster-oil” treatment for an ailing economy, supply side offered a fat free hot fudge sundae.
To understand supply side economics, it is important to be aware of the economic situation it was conceived in. In the 1970’s the United States economy was experiencing from serious inflation, sometimes as high as 13% a year. Inflation is caused by the inability of the supply of goods to meet consumer demand; such was the case in the 1970’s. At the same time the economy was sluggish. When this happens, the economy suffers from stagflation, a condition where prices rise, but the economy fails to grow. In stagflation slow growth and inflation feed off of each other. Attempts to expand the economy through traditional stimulus, such as increased spending fail, business owners have an “inflation mentality”, which means they expect wages and prices to rise, so they raise their prices accordingly, because of the inflation mentality, the stimulus is simply absorbed by the price increases without actually invigorating the economy.
According to supply side theory inflation could be beaten back without an increase in unemployment. The theory also maintained that it is possible to greatly reduce taxes without having to cut spending or run budget deficits, because the tax cuts will spur enough economic growth to significantly boost tax revenues. All of these great things could be done without any cost because the tax cuts would spur investment and savings among the upper class. The investments would boost productivity, causing the supply side of the economy of the economy to grow. The growing supply side would keep satisfy demand and thereby beating inflation. More investment would also create jobs as businesses flushed with cash expanded and hired more workers. Using this as its rationale, the Reagan administration enacted a series of tax cuts that reduced the top marginal rate from 70 to 28%.
When put to the acid test of reality during the Reagan administration, the supply side theory proved to be as weak as straw. It is true that the administration cut inflation off at the knees, but that was largely through the actions of Federal Reserve Chairman, Paul Volcker. He employed harsh, demand curbing, interest rate cuts. These cuts triggered the recession of 1982. The downturn of 1982 was the most severe recession since the great depression. During the 1982 recession unemployment jumped as high as 10%. Inflation was defeated, but by boosting the supply side of the economy, but rather by painfully restricting demand with a deliberate recession.
The end of Reagan’s presidency shattered the optimistic predictions about balancing the budget and reducing taxes at the same time. The national debt nearly skyrocketed in the 1980’s, by 1988 it was equal to 54% the Gross Domestic Product, compared to 34% just eight years earlier. The Annual budget deficit ballooned by more than a hundred billion during the Reagan years and still haunted the country into the 90’s, when it was beaten by Bill Clinton and his 1993 upper-income tax hike.
The promise of record economic growth also proved to be hollow. While the stock market rallied during the “7 fat years” of the Reagan presidency, the economy did not grow much faster than in the 1970’s. In the 1970’s the average per capita GNP growth was 1.7%, while in the Reagan 80’s it was 1.9%. Nor was this growth spread evenly, it accumulated at the top of the income ladder and stayed there. Poverty rates proved to be immune to the rising economy, the real after-tax income of the poorest 10% of Americans declined by 11%, the second poorest 10% saw a similar decline, and the middle class just about broke even. The Richest 1% of Americans, however, enjoyed a bonanza, seeing their income rise by 53%. While the very rich became even richer, the poor lost ground and the middle class treaded water.
Given the disastrous results of Reagan’s economic policy, we can only conclude that supply side economics is a failure. It is a nice theory, offering painless inflation reduction and budget balancing, but has as many holes as Swiss cheese and disintegrates on contact with the real world. To prevent such impractical theories from becoming the basis of our countries economic policy again, I recommend that people understand better acquaint themselves with economics, an educated voter is a good voter, but perhaps the best advice is to remember what your mother told you, “if its too good to be true, it probably is”.