To believe Bartley, it was exactly such tax-law changes, enacted in 1981, that led to the Seven Fat Years between the end of the last recession, in November 1982, and the most recent downturn, in 1990. Time, however, has not been kind to the supply-siders. The drop in corporate income and capitalgains-tax rates, for example, was supposed to unleash an investment boom. But that boom can’t be found in government statistics on investment in plant and equipment; the supply-siders have been reduced to arguing that the statistics must be missing something.
In fact, the Seven Fat Years weren’t all that fat; on average, the economy grew as fast under Jimmy Carter as under Ronald Reagan. The Reagan years brought an unprecedented trade deficit, too, as a high dollar rendered entire industries uncompetitive overnight.
From Bartley’s seat on Wall Street, that massive dislocation was just one of those necessary events. But the millions of workers who were dislocated might not agree with Bartley’s recollection that “during those years, the pot was fuller for all.”
Bartley devotes ample space to attacking such critics as Reagan economic adviser Martin Feldstein and Sen. George Mitchell (who, as Bartley’s Journal readers know, singlehandedly brought on the 1990-91 recession by blocking a capital-gains-tax cut). Unfortunately, Bartley makes no similar critique of the theory he’s peddled for 15 years. Supply-side economics might yet have something to offer, if its proponents could learn from their own mistakes.
