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 ?
Kemp, said one participant, attacked Gingrich and Lott for not doing more to pursue the supply-side agenda they had vigorously supported in the past.
It is becoming increasingly apparent that China is facing a supply-side crisis, with both structural and temporary factors pushing supply below prior year levels in 1H 2013 with credible reports of a 6% contraction.
The falling price of such assets, because it reflects the deterioration of return on capital, is a sure sign that the supply-side reform that should be happening is not in fact happening.
By dismissing the views as "silly" and "crank," he saves himself the trouble of telling his readers what is wrong with supply-side economics.
Those 11 periods are the key to testing the supply-side theory.
After praising the supply-side tax revolution that Ronald Reagan exported around the world in the 1980s, Adams ends his book with this prescient question: "As the 1990s unfold, will the tax reductions of the 1980s hold, or will these reforms be a short moment of smartness in a harsh century of dumb taxation?
But if supply-side measures are postponed and any incipient upswing is met by renewed taxes, kiss Japan good-bye.
And few of them still adhere to the hard-line supply-side position that budget deficits do not matter.
His own lack of formal economics training did not hinder him from winning a Pulitzer in 1980 for his supply-side commentary.
There is even some supply-side Bible analysis in Bartley's book: He suggests that the "seven fat years" originally described in Genesis ended because Joseph, who had prophesied them, shook down all of Egypt for most of its money and goods.