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Gerald Ford's administration was in trouble. The country was experiencing stagflation, where prices were going up but employment was going down. What could he do? He announced his desire to lower taxes. This proposal was met with opposition by... Ronald Reagan. Reagan was worried that these cuts would increase the national debt. Then, just a few years later, Reagan changed his mind.
Two major things happened. One was the invention of supply-side economics (also called trickle-down economics) and the other was the tax revolt of the 1970s.
Supply-side economics was invented by an economist named Arthur Laffer. His ideas were based on an old concept but with a new twist. Laffer and his friends published their ideas in The Wall Street Journal and shared them with people like Dick Cheney.
Author and historian Rick Perlstein joins us for this episode. His books are The Invisible Bridge and Reaganland.
Sources:
The Invisible Bridge and Reaganland by Rick Perlstein
NPR story about Laffer's napkin legend
International Inequalities Institute study of supply-side economics
Investopedia article comparing inflation rates
Reagan's "Restore America" speech
Ford Library's documents about Reagan's inaccuracies in his speech
Federal Reserve article about inflation. Here's another
History of COVID stimulus payments
Investopedia article on Keynes
Zombie Economics by John Quiggin
Historical tax bracket rates
Proposition 13 article
Discussion Questions:
What is supply-side economics?
How does it compare to Keynes' ideas?
Does the Bible specify a tax policy?
Where did you first hear about trickle-down economics? Who benefits from it the most?
Rick Perlstein, former President George HW Bush, John Quiggin, and many others say that supply-side economics is bogus. What do you think?
Why might supply-side economics appeal to some evangelicals? To people of the 1970s?
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