Gladstonian Finance in Modern Light: Fiscal Constitutionalism or Supply-Side Economics?

Two new schools of thought have recently emerged in public finance: fiscal constitutionalism, founded on the theory of Leviathan government, and supplyside economics, popularly perceived in terms of the Laffer curve. Comments by several writers have raised the possibility of conflicts betweens the tax principles of the two schools. In particular, both Brunner (1982) and Reynolds (1982) criticized supply-siders for emphasizing tax cuts to increase public revenues and ignoring the importance of placing limits on governmental growth. In addition, McKenzie's description of “constitutional economics” as an intellectual movement that “promises far more radical reforms of government than those ever attempted by Keynesian and supply-side economics” (1984, p. 1) indicates that “constitutional” and supply-side economics are different. Yet, his discussion of the Laffer curve and supply-side tax cuts from a constitutional economist's perspective leaves the distinct impression that the two schools are in agreement on tax policy positions.