Supply Side Economics - Attack and Response

Jonathan Chait from The New Republic just published a book attacking supply side economics. A good deal of the book seems to be a series of Ad Hominem attacks on various economists. Larry Kudlow, of CNBC’s Kudlow and Company said that Mr. Chait “wrote a very nasty book, in my opinion bereft of logic…”

Art Laffer recently wrote an excellent paper responding to Mr. Chait’s emotional arguements with facts. It also has some very interesting data on income inequality and comparative standard of living improvements of different racial groups. Here is a link to Mr. Laffer's paper which I highly recommend reading.

http://www.nationalreview.com/kudlow/laffer_onslaught_partI_10-31-07.pdf

Steve Moore, writing for the editorial board of the Wall Street Journal, also conveyed insight highlighting the expansion of supply side economics around the world. Here is an excerpt.

"...What the critics have no plausible answer for is this: If the supply-side tax rate reduction model is truly so abhorrent, why are so many nations around the world latching on to it? What explains the Irish Miracle? Why are Germany, France and the U.K. slashing their corporate tax rates? Why are there 18 countries with flat taxes? Are their leaders deranged, or been bamboozled by crackpots? Perhaps a better explanation is that they know intuitively what a new National Bureau of Economic Research study has found: Nations with low tax rates on business have statistically significant higher rates of new business formation, investment and income.

History is clearly not on the side of the antisupply-side attack dogs, and they're losing the policy debate every day in political capitals around the world. Poland just announced it wants to implement a 15% flat tax by 2009. But the American left's obsession with the notion that tax rates don't matter tells us something important about the future. They are preparing the ground for massive tax increases if and when they capture control of the presidency...."