Why supply-side economics work

Supply-side economics, described by Investopedia as…

“a theory that maintains that increasing the supply of goods and services is the engine for economic growth. It advocates tax cuts as a way to encourage job creation, business expansion, and entrepreneurial activity,”

…has resulted in more prosperity than any other form of economics in the history of the world. State-run economies, even to the smallest degrees, have never equaled the prosperity of people that comes from supply-side.

There is a reason for this that is not complicated to explain. In fact, it is far easier to grasp than other economic models due to how economies work throughout the world.

Economies are locally run, not by the state. The more interference in local markets by a given state, the worse an economy gets.

Under minimal taxes and regulations, less is being taken out of the local economies. This leaves people more to spend on goods and services at the local level. The local level with a strong economy is where employment rates are far better positioned for workers, which includes better pay and benefits for businesses to compete for employees.

Local businesses of all kinds have to keep supplies on hand, and that requires factories in other areas to have employees working to keep up with demand. Those factories also need to order goods to produce whatever is being manufactured, which also require employees.

Most goods coming to the local level needs truck drivers to deliver. Trucks go where trains are unable to go. Trucks need more than drivers to operate, who do have an invaluable role to play, they need goods and services for trucks and drivers, which can be found at truck stops with showers for drivers as one example.

Trucks, like other vehicles, require parts and maintenance. Both require people to differing degrees, and manufacturing facilities to produce the goods needed to keep trucks running.

Small businesses understand the supply chain owners rely on, the same as any other business. Interruptions in supply lines happen. An owner of a small business can find other suppliers quickly to make up for interruptions that do happen. Other manufacturers can meet the needs relatively quickly.

Reacting to change quickly is one of the biggest differences between supply-side and any state-run economy. State-run is a slow-moving bureaucracy that reacts to change slowly. By the time bureaucrats get around to reacting to interruptions, it is too late, if they react at all.

When a given state taxes and regulates a strong economy, it is felt first at the local level. With more being taken in taxes that cause an increase in the cost of goods, people have less to spend.

Decreased spending results in few goods being ordered. Employment is reduced to make up for the loss of business. A thriving local economy can quickly have a downward spiral that spreads across the supply chain.

With few orders at factories, employees are laid off to control overhead. Fewer trucks are needed to deliver fewer goods. Meaning fewer parts are needed for maintenance.

The local economy is the source of all economies. The more that is taken away by the state, the worse economies become.

Venezuela was a thriving nation until the state turned it into a failed economy that continues to this day. As long as the state runs things, that nation will never come back to the prosperity it used to have.

Bob Ryan is a writer who has an MBA. He is an American Christian Zionist who staunchly supports Israel's right to exist as a Jewish state. He has been a weekly blogger at the Times of Israel since 2019.

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