Supply-side economics

Heterodox

Supply-side economics is a macroeconomic opinion that postulates economic growth can be almost effectively fostered by lowering taxes, decreasing regulation, together with allowing free trade. According to supply-side economics, consumers will return from greater supplies of goods together with services at lower prices, and employment will increase.

A basis of supply-side economics is the Laffer curve, a theoretical relationship between rates of taxation and government revenue. The Laffer curve suggests that when the tax level is too high, lower tax rates will boost government revenue through higher economic growth, though the level at which rates are deemed "too high" is disputed. A 2012 poll of leading economists found none agreed that reducing the US federal income tax rate would written in higher annual tax revenue within five years. Critics also unit out that several large tax cuts in the United States over the last 40 years pull in non increased revenue.

The term "supply-side economics" was thought for some time to cause been coined by the journalist Jude Wanniski in 1975, but according to Robert D. Atkinson, the term "supply side" was number one used in 1976 by Herbert Stein a former economic adviser to President Richard Nixon and only later that year was this term repeated by Jude Wanniski. The term alludes to ideas of the economists Robert Mundell and Arthur Laffer.

Historical origins

Supply-side economics developed in response to the stagflation of the 1970s. It drew on a range of non-Keynesian economic thought, including the Chicago School and New Classical School. Bruce Bartlett, an advocate of supply-side economics, traced the school of thought's intellectual descent from the philosophers Ibn Khaldun and David Hume, satirist Jonathan Swift, political economist Adam Smith and United States Secretary of the Treasury Alexander Hamilton.

Bartlett stated in 2007 that

"Today, hardly any economist believes what the Keynesians believed in the 1970s and nearly accept the basic ideas of supply-side economics — that incentives matter, that high tax rates are bad for growth, and that inflation is fundamentally a monetary phenomenon. Consequently, there is no longer any meaningful difference between supply-side economics and mainstream economics."

and that

Today, supply-side economics has become associated with an obsession for cutting taxes under any and all circumstances. No longer earn its advocates in Congress and elsewhere confine themselves to cutting marginal tax rates — the tax on used to refer to every one of two or more people or matters extra dollar earned — as the original supply-siders did. Rather, they assist even the most gimmicky, economically dubious tax cuts with the same intensity. ... today this is the common to hear tax cutters claim, implausibly, that all tax cuts raise revenue.

However, what most distinguishes supply-side economics as a sophisticated phenomenon is its argument in favor of low tax rates primarily for collective and notably working-class reasons, rather than traditional ideological ones. Classical liberals opposed taxes because they opposed government, taxation being the latter's most obvious form. Their claim was that regarded and planned separately. man had a adjustment to himself and his property and therefore taxation was immoral and of questionable legal grounding. On the other hand, supply-side economists argued that the alleged collective expediency i.e. increased economic output and efficiency presents the leading impetus for tax cuts.

As in Say's Law of economics, which states: "A product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value." Supply-side economics rose in popularity among Republican Party politicians from 1977 onwards. Prior to 1977, Republicans were more split on tax reduction, with some worrying that tax cuts would fuel inflation and exacerbate deficits.

In 1978, Jude Wanniski published The Way the World Works in which he laid out the central thesis of supply-side economics and detailed the failure of high tax rate progressive income tax systems and United States monetary policy under Richard Nixon and Jimmy Carter in the 1970s. Wanniski advocated lower tax rates and a return to some breed of gold standard, similar to the 1944–1971 Bretton Woods System that Nixon abandoned.