Larry Kudlow told a whopper the other day — claiming that the exploding Federal deficit is actually “coming down rapidly”. That’s supposedly owing to the Trumpite/GOP tax cut and the tsunami of economic growth and Federal revenues it will generate:
The economy under President Donald Trump, Kudlow said on June 29, “is throwing out enormous amounts of new tax revenues. As the economy gears up, more people working, better jobs and careers — those revenues come rolling in, and the deficit, which is one of the other criticisms (of Trump’s economic policy), is coming down, and it’s coming down rapidly.Growth solves a lot of problems.”
We do not mean to be churlish about Larry’s preposterous untruth—since we did bring him into the Reagan White House way back in January 1981. And if truth be told, we actually do still embrace the supply-side gospel that we jointly helped craft, and which was at the heart of the Gipper’s effort to unleash capitalist prosperity in America.
But the real supply side gospel is just a modern version of Say’s Law, which is about the driving force of the economy— not a magical theory of government finance scribbled on a napkin by a self-promoting charlatan named Art Laffer.
Accordingly, true supply side is rooted in the economic truth that investment and production come first; and that the income so generated is the only sustainable source of “demand” and household consumption spending.