The Week

Senator Kennedy calls double-digit unemployment “a national tragedy and a national disgrace.” Takes one to know one.

One prime contention of supply-side economists and enthusiasts was that once even a small tax cut took effect, a boom in private savings would take place sufficient to make up for any “crowding out” by federal deficits. The savings effect is important; without it, the net effect of a tax cut is either to send more dollars after a fixed supply of goods (inflation) or to run up the deficit, send the federal treasury into the credit market, and drive up interest rates. Well, the major installment of the Reagan tax program took place a few months ago, and the numbers are looking good. In the fourth quarter of 1980, Americans were saving 5.5 per cent of their disposable income. By this August, the month after Phase II of the tax cuts, the private-savings rate had risen 50 per cent to 8.1 per cent of disposable income. Good news for the economy; good news for the supply-side; bad news for you-knowwho.

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Senator Kennedy calls double-digit unemployment “a national tragedy and a national disgrace.” Takes one to know one.

One prime contention of supply-side economists and enthusiasts was that once even a small tax cut took effect, a boom in private savings would take place sufficient to make up for any “crowding out” by federal deficits. The savings effect is important; without it, the net effect of a tax cut is either to send more dollars after a fixed supply of goods (inflation) or to run up the deficit, send the federal treasury into the credit market, and drive up interest rates. Well, the major installment of the Reagan tax program took place a few months ago, and the numbers are looking good. In the fourth quarter of 1980, Americans were saving 5.5 per cent of their disposable income. By this August, the month after Phase II of the tax cuts, the private-savings rate had risen 50 per cent to 8.1 per cent of disposable income. Good news for the economy; good news for the supply-side; bad news for you-knowwho.