Supply-Side Economics – A Welcome Return

We posted a commentary exactly one month ago today on June 4, 2025. Our topic was Business Development Companies (BDC) and how we see BDC’s taking huge market shares in the lending game away from heavily regulated and cost-laden banks. For Independence Day we choose to offer some long range views on the doings in Washington D.C. this week.

Congress passed the OBBB, better known as the “Big Beautiful Bill” on Thursday. This legislation provides potent economic elixir for the U.S. economy. It is pure Supply-Side economics which, in short, supports the producers in our system instead of artificially pumping up “demand” without an emphasis on encouraging ample “supplies” of products or services.

Supply Side Economics is not a new concept, but it’s importance and efficacy has been underemphasized by secular historians and the media for 37 years.

A quick history lesson is in order. After decades of failed Keynesian economic policies culminating in the disastrous inflation rates of the 1970’s, and economic stagnation, renowned professor Arthur Laffer and a few other true experts convinced Ronald Reagan to implement Supply-Side economic policies in 1981. The result was an astounding revitalization in America that proved all the naysayers and their hapless predictions of failure to be dead wrong.

Sadly, American leadership has gradually abandoned the supply side of the U.S. economy since George H.W. Bush took the oath of office in 1989. The tedious gradual erosion of common sense involved wave after wave of so-called “compromises” bringing back Keynesian demand-side stimulation policies that simply do not work.

More sadly, using Covid-19 as the excuse for even more radical Keynesian action, the haplessly named Inflation Reduction Act of 2022 delivered a return to the abyss. America has been suffering from both economic stagnation and hyper-inflation ever since the “Inflation Reduction Act” passed and resulted in precisely the opposite economic effect as the name of the legislation.

Legendary money manager Howard Marks teaches us the past does not ever repeat itself in identical fashion, but it does rhyme. The OBBB rhymes with the policies enacted in 1981. Simply put the incentives for producers built into OBBB will propel U.S. growth rates substantially.

This stunning new reality does not give us a free pass on stock selection, nor does it guarantee the added stock market propelling juice of lower interest rates. Rates are already very close to their historic averages. But for those who are proficient in identifying the very best companies over the next 7 – 10 years, many of the hurdles in the way of exceptional rates of return have been removed.

Happy Independence Day!