supply-side economics

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supply-side economics,

economic theory that concentrates on influencing the supply of labor and goods as a path to economic health, rather than approaching the issue through such macroeconomic concerns as gross national product. In the United States during the 1980s, supply-side economics was associated with conservative proponents of the free-market system. Such measures as tax cuts and benefit cuts to the unemployed are basic supply-side tactics, with the intention of increasing the incentive to work and produce goods and services. The theory holds that high marginal tax rates and government regulation discourage private investment in areas that fuel economic expansion, and that more capital in the hands of the private sector will "trickle down" to the rest of the population. The theory gained popularity during the late 1970s, with a tax revolt in California and economic hardship during the CarterCarter, Jimmy
(James Earl Carter, Jr.), 1924–, 39th President of the United States (1977–81), b. Plains, Ga, grad. Annapolis, 1946.

Carter served in the navy, where he worked with Admiral Hyman G. Rickover in developing the nuclear submarine program.
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 administration (1977–81). Arthur Laffer and his "Laffer curve" doctrine became the heart of the economic programs of Ronald ReaganReagan, Ronald Wilson
, 1911–2004, 40th president of the United States (1981–89), b. Tampico, Ill. In 1932, after graduation from Eureka College, he became a radio announcer and sportscaster.
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's presidency, during which tax rates were cut substantially. Although supply siders maintain that the tax cuts of the 1980s were responsible for the decade's economic growth, critics argue that such policies caused massive federal deficits, penalized the poor and middle class, and induced excessive speculation that severely damaged America's economy. The subsequent tax increases under Presidents George H. W. Bush and Bill Clinton and the concurrent corporate investment, economic growth, and drop in unemployment during the 1990s further undercut supply-side suppositions.


See V. Canto, Foundations of Supply-Side Economics (1983); R. L. Bartley, The Seven Fat Years (1992).

References in periodicals archive ?
The long-run growth projections reported in table 6 are based on a growth model which allows for TFP growth in the leader (United States) and a component based on scope for catch-up by other countries and how well this scope will be exploited which depends on supply-side policy settings and institutions.
Despite attaining laughing-stock status in Punch-and-Judy politics, 'post-neoclassical endogenous growth theory' offers important insights into the way supply-side policy can be designed to promote productivity growth.
After the election of the Thatcher government, the stance of supply-side policy changed markedly.
Given these ambitions to improve key areas of supply-side policy, what has happened in key areas?
Three areas of policy deserve some critical scrutiny, namely, the approach to fiscal consolidation, the re-thinking of industrial policy in the context of re-balancing the economy, and the institutional framework within which supply-side policy is designed and monitored.
From the perspective of supply-side policy towards growth, this raises the key issue of the composition of the fiscal adjustment, given its size, with regard to the balance between expenditure and tax, capital and current expenditure, direct and indirect taxes etc.
The distinctive feature of supply-side policy under the Coalition compared with the recent past is the pursuit of an 'industrial strategy' which aims to promote growth through boosting eleven selected sectors and to stimulate the advance and commercialisation of eight selected technologies with the underlying objective of re-balancing the economy (Rhodes, 2014).