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 ?
Thus far, this review of supply-side policies since 2010 suggests a strong element of continuity from the previous government in terms both of strengths (competition and regulation) and weaknesses (innovation and infrastructure).
It might also be asked to benchmark supply-side policies against international best practice and be expected to provide a regular strategic assessment and evidence papers.
Supply-side policies refer to policies that aim to rationalize and reduce labor supply, including policies on education, job training, migration, and population control.
Supply-side policies aim to rationalize and reduce labor supply, which include expanding secondary and higher education, providing job-training programs, limiting massive peasant migration, and lowering labor force participation rate.
There is little doubt that the supply-side policies of the government had some effect but the importance of these may well have been overstated.
Nevertheless, OECD (2013) is optimistic about the future of structural reforms, as it stresses that the crisis has seen a significant increase in the responsiveness of governments to OECD proposals for actions to improve supply-side policies.
Bartley even takes pains to distinguish supply-side policies from Reagan-omics, perhaps because Reagan eventually signed onto tax hikes that, among other things, actually increased taxes on capital.
We first evaluate the performance of the programme in terms of some of the macro variables which are easily quantifiable and then discuss the implementation of supply-side policies.
Some of this thinking is reflected in the writings of the 'In the Black Labour' group, who are relatively supportive of market-based supply-side policies (Cooke et al.
This outcome is socially suboptimal for the currency zone and we argue that a similar logic applies to supply-side policies.