Opinion | Supply-Side Economics Isn’t Just for Republicans Anymore – The New York Times

by | Aug 1, 2022 | Financial

Today’s intolerably high inflation is a result of too much money chasing too few goods. The harsh way to lower inflation is to deal with the “too much money” side of the equation by raising interest rates or taxes, which chokes off the public’s spending power. The infinitely better way to combat inflation, when possible, is to deal with the “too few goods” side by increasing the supply of things to buy.Supply-side economics has long been the province of Republicans, who have asserted that the only way government can help increase the supply of goods and services is to get out of the way — mainly by cutting taxes so companies will have a stronger profit motive to increase production.But Democrats have begun shaping their own version of supply-side economics, which gives the government a more active role. My colleague Ezra Klein identified this approach last year as “supply-side progressivism.” In January, Treasury Secretary Janet Yellen described the Biden administration’s Build Back Better agenda as “modern supply-side economics.”There will be stumbles along the way, but the potential is huge. In this newsletter I’ll consider several recent examples of this approach on the federal, state and county levels, and then look at the pros and cons of an extremely ambitious supply-side idea: a new federal agency called the National Investment Authority.An obvious place to start is with the Inflation Reduction Act, which Senator Joe Manchin, Democrat of West Virginia, agreed to support on Wednesday, after being assured by independent experts that it would curb inflation. Some of the inflation-fighting effect will come from the traditional demand-side approach of raising taxes, but some is also intended to come on the supply side, …

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