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 ?
Indeed, it would be possible to be more bullish if policy reform sped up since there is considerable scope for improvement in supply-side policy in many European countries if political obstacles could be overcome (Barnes et al.
The new productivity paradox is not explained by new failures of supply-side policy, but successful reform would help to ensure that slow growth is not the "new normal".
First, in this analysis we have used four indicator variables, to capture the effects of both domestic supply-side policy reforms and international market potential.
t], supply-side policy variables used in the analysis can depict the influence of non-policy factors along with domestic policy.
Political self-serving by the Republican establishment aided and abetted the Keynesian misinterpretation of Reagan's supply-side policy.
I estimate two sets of models: the first using macropolicy indicators and political variables, and the second using these indicators as well as a variety of supply-side policy indicators.
In this article I argue that financial market influences on governments of developed democracies are "somewhat strong but somewhat narrow": financial market participants are most concerned about macropolicy outputs and least concerned about supply-side policy decisions.
Then, quantitative indicators of key components of supply-side policy are reviewed.
Although there was a change in government in 1997, there was no radical revision of supply-side policy which exhibited a high degree of continuity under the 'post-Thatcher consensus'.
Furthermore, in the supply-side policy simulation, the authors assume that wholesale prices will rise at a faster rate for wheat, rice, and maize.
This was a far cry from the so-called Golden Age of the early postwar years and for most countries was a period of falling behind rather than catching up with the United States even though it appeared that, on the whole, supply-side policy had improved.
16) This suggests that optimism about supply-side policy based on early responses to the crisis should not be overdone.