With the recent passing of Jack Kemp, I was reminded of his exceptional effort in leading the charge to supply side economics in the early 80's. The man behind the thinking was Arthur Laffer, a truly gifted economist.
Laffer's newest Book, The End of Prosperity: How Higher Taxes Will Doom the Economy--If We Let It Happen chronicles the power of less government and less taxes. Many argued that the deficits of the 80's was a function of supply side economics - that low taxes drove debt. But the reality is, as well told in the book, revenues increased under Laffer plan. Congress however did not spend less. Part of the spending issue was good, investing in defense to weaken Russia. Other parts were bad. Is was not until the Republican congress in the late 90's that spending was brought under control and in conjunction with lower taxes, much of the reason for the boom in that time frame.
Some parts of the Laffer story are well, laughable. In the simplest form, the Laffer curve says as taxes reach 100%, revenue drops off to zero - meaning, why would someone work if they were paying 75%, 85%, or 100% of their wages to the government? They wouldn't. But when Laffer and team asked the congressional budget office for revenue estimates for various increased taxes, the CBO increased total revenue forecast, a mathmatically correct but economically improbable outcome.
Right and Left, people don't understand economics. Much of the fight in the 80's was Kemp trying to persuade Republicans to lower taxes. But Laffer points out, the reality is, when things like capital gains taxes are reduced, people invest more, generate more wealth, and net revenues increase at a faster rate than taxing people to death. California, New York and New Jersey represent the folks that don't get this. Emerging economies are the ones that do get it.
If you are seriously concerned about our economy and want to understand how to make the economy work, this is a great book to read, and you don't need to be an economist to get it.