“Roosevelt ran on a platform that accused Herbert Hoover of being a profligate spendthrift and promised to balance the budget in both his first and second election campaigns. It is somewhat ironic that Ronald Reagan ran his campaigns on quotations from Roosevelt’s speeches in support of balanced budgets.” (Kregel 2009: 662).However, despite the political rhetoric, Reagan’s economic policy after 1982 was Keynesianism, albeit a peculiar conservative version of it. Such are paradoxes of political history. James K. Galbraith sums up the nature of the enigmatic supply-siders, who ran Reagan’s economic policy after 1982:
“Yet none of the special supply-side effects which they had predicted came to pass, then or later. There was no surge of personal savings, none of work effort, nor any of productivity. Every bit of the macroeconomic effect of the tax cuts can be explained purely in Keynesian terms and by the Verdoorn law. And we are left with a $150 billion shortfall of national savings, made up these days entirely by foreign central banks, for which the supply-siders did not prepare us in 1981. This is the harsh verdict which must lie against supply-side economics.BIBLIOGRAPHY
Yet, it does not follow that the supply-siders have failed. To the contrary: as custodians of policy since 1982, they have not done at all badly. On fiscal matters supply-siders have behaved, more than not, much as pragmatic Keynesians would have done. They covet political survival, as the stance of monetary policy since October 19, 1987, shows. On currency stabilization they are in practice usefully resistant to the authority of the Germans, and despite ritual fealty to the gold standard they are not so stupid as to try it. They have opposed Gramm-Rudman-Hollings and the Balanced Budget Amendment, fiscal overkill in both cases.” (Galbraith 1988: 571).
Galbraith, James K. 1988. “Paradox Among the Paradigms: A Comment on Eichner, Meltzer, Bowles and Co-Workers, and Miles,” Journal of Post Keynesian Economics 10.4: 567–571.
Kregel, Jan. 2009. “Why Don’t the Bailouts Work? Design of a New Financial System versus a Return to Normalcy,” Cambridge Journal of Economics 33: 653–663.