Supply-side Economics

Supply-side economics is a school of macroeconomic thought that argues that economic growth can be most effectively created by lowering barriers for people to produce (supply) goods and services, such as lowering income tax and capital gains tax rates, and by allowing greater flexibility by reducing regulation. According to supply-side economics, consumers will then benefit from a greater supply of goods and services at lower prices. Typical policy recommendations of supply-side economists are lower marginal tax rates and less regulation.

The Laffer curve embodies a tenet of supply side economics: that government tax revenues are the same at 100% tax rates as at 0% tax rates. The tax rate that achieves highest government revenues is somewhere in between. Whether it is worth the corresponding decrease in economic growth that is often assumed by supply-side economists to accompany such a rate increase is a policy question.

The term "supply-side economics" was thought, for some time, to have been coined by journalist Jude Wanniski in 1975, but according to Robert D. Atkinson's Supply-Side Follies, the term "supply side" ("supply-side fiscalists") was first used by Herbert Stein, a former economic adviser to President Nixon, in 1976, and only later that year was this term repeated by Jude Wanniski. Its use connotes the ideas of economists Robert Mundell and Arthur Laffer. Today, supply-side economics is likened by agreeable critics to "trickle-down economics".. Supply-side economics is often used and referred to as overall term for "trickle-down economics" as it is not targeting specific tax cuts but is instead targeting general tax cuts and encouraging deregulation.

Read more about Supply-side Economics:  Historical Origins, Fiscal Policy Theory, Effect On Tax Revenues, U.S. Monetary and Fiscal Experience, Criticisms

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