Supply-Side Economics

5 Key excerpts on "Supply-Side Economics"

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  Capitalism and Privatization (Concepts and Theories)

  • (Author)
  • 2014(Publication Date)
  • College Publishing House

    (Publisher)

  ____________________ WORLD TECHNOLOGIES ____________________ Chapter- 7 Supply-Side Economics Supply-Side Economics is a school of macroeconomic thought that argues that economic growth can be most effectively created by lowering barriers for people to produce (supply) goods and services, such as lowering income tax and capital gains tax rates, and by allowing greater flexibility by reducing regulation. According to the theory, consumers will then benefit from a greater supply of goods and services at lower prices. Typical policy recommendations of Supply-Side Economics are lower marginal tax rates and less regulation. Current Supply-Side Economics is primarily concerned with economic growth in general, and does not hold that decreasing taxes increases government revenue. It is true that many early proponents argued that the size of the economic growth would be significant enough that the increased government revenue from a faster growing economy would be sufficient to compensate completely for the short-term costs of a tax cut, and that tax cuts could, in fact, cause overall revenue to increase. A 2003 piece on page A4 of the Wall Street Journal commented on a Congressional Budget Office report which concluded that taxes cannot be reduced without losing revenue, and declared the debate ended. The term Supply-Side Economics was thought, for some time, to have been coined by journalist Jude Wanniski in 1975, but according to Robert D. Atkinson's Supply-Side Follies [p. 50], the term supply side (supply-side fiscalists) was first used by Herbert Stein, a former economic adviser to President Nixon, in 1976, and only later that year was this term repeated by Jude Wanniski. Its use connotes the ideas of economists Robert Mundell and Arthur Laffer. Today, Supply-Side Economics is viewed by critics as a form of trickle-down economics.

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  The Conservatives' Economic Policy (Routledge Revivals)

  • Grahame Thompson(Author)
  • 2014(Publication Date)
  • Taylor & Francis

    (Publisher)

  Chapter 4 THE SUPPLY-SIDE WITHIN A MACRO-FRAMEWORK 1. INTRODUCTION The previous chapters have concentrated upon the more macro, monetary and financial aspects of the Conservative Governments economic policy. In this and the following chapters the focus is upon the micro aspects and upon the ‘real’ sectors of the economy. This will involve a closer look at the issue of personal incentives, at ‘privatization’, de-nationalization and ‘liberalization’, at industrial policy and at conditions in the labour market and such like. The Conservatives' overall strategy is seen to have two dimensions. The first involves ‘monetarist macro-economies’ broadly speaking where the emphasis has been on controlling inflation via controlling (or trying to control) the money supply. The second aspect involves an attempt to re-kindle the output growth and the working of the industrial structure via a set of policies designed to increase competition and personal incentives and initiatives – the withdrawal of government intervention and regulation of detailed sectors of the economy, the reduction of taxation, de-nationalization, etc. This latter aspect is sometimes referred to as the ‘supply-side’ of the economy. Indeed there is a whole new school of predominantly American economists who have developed a distinct theoretical position around some of these issues. This is known as ‘Supply-Side Economics’ (SSE). 1 This position gained a great deal of credence because of its early influence on President Reagan's economic policy making. (David Stockman, former Director of the Office of Management and Budget, and a close adviser of President Reagan, is credited as being heavily influenced by SSE.) Reagan's first budget was seen as being in many ways a classic supply-side document – emphasising tax cuts and the withdrawal of government interference in the market economy

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  The American Dream vs. The Gospel of Wealth

  The Fight for a Productive Middle-Class Economy

  • Norton Garfinkle(Author)
  • 2008(Publication Date)
  • Yale University Press

    (Publisher)

  Chapter VIII The Current Debate: Supply-Side vs. Demand-Side Economics ince the s the dispute between demand-side and Supply-Side Economics has dominated the debate over U.S. tax policy. 1 Both sides acknowledge that tax cuts can stimulate the economy during a downturn, but the two sides view the problem, as it were, through opposite ends of the telescope. Demand-siders emphasize the centrality of aggregate de- mand in driving economic expansions and contractions. When demand-siders discuss the potential benefits of cutting taxes during a recession, they emphasize the need to put money into the hands of the vast mass of consumers. The point is to in- crease consumer spending, which in turn will stimulate increased production—resulting in greater employment, investment, and a continuing growth in Gross Domestic Product (GDP). De- mand-siders therefore favor tax cuts that are weighted toward the middle and lower ranks of earners, who will naturally tend to spend more of any money they receive from tax reductions. Supply-siders turn this approach on its head. As their name implies, supply-siders see production, or supply, rather than demand as the main engine of U.S. economic growth. Their emphasis is on increasing business investment: in the supply-siders’ view, higher rates of investment will lead to higher rates of growth in GDP. For supply-siders, a key feature of the tax code is its “incentive effects.” By changing individual eco- nomic incentives, they believe, they can change economic be- havior by encouraging more business investment by upper- income taxpayers (the investor class). Supply-siders speak of lowering marginal tax rates across the board to increase incentives to “work, save, and invest.” But the supply-siders’ emphasis (and the feature that makes their program controversial) is clearly on lowering the top marginal rate, and the reason is its presumed impact on U.S.

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  Studies in Economics and Policy Making

  Central and Eastern European Perspectives

  • William T. Bagatelas, Getnet Tamene, David Reichardt, Bruno Sergi, William T. Bagatelas, Getnet Tamene, David Reichardt, Bruno Sergi(Authors)
  • 2010(Publication Date)
  • Budrich UniPress

    (Publisher)

  Chapter 1 Supply-Side Economics: Primary Cause of the Global Economic Downturn William T. Bagatelas Abstract The following article is primarily concerned with assessing, analyzing, and understanding the primary current, historic, economic forces helping determine economic reality. In this specific context I have primarily offered the unique and highly accurate assessment ideas of economist Dr. Ravi Batra. I believe Professor Batra’s assessment methods are superior to traditional economic assessment. Keywords: Supply-Side Economics, supply side policy, wealth gap, debt, economic policy, global debt, demand and supply, falling demand Introduction Supply-Side Economics, or classical economics, an economic theory with little supporting evidence, states the following: If government reduces taxes primarily on highest incomes while raising taxes on middle class incomes, economic performance and living standards will then be higher for all throughout society. This has been practiced historically at different times, but mainly in the United States, especially in the 20 th century. The first major attempt by the US government during the 20 th century to practice supply-side economic policy was during the 1920’s. The results should be known by many or most but, sadly, this seems not to be the case. In other words, we may safely conclude when viewing the global business economy today, what economists and the public refer to as “Supply-Side” economics, is the dominant and vastly practiced economic force in our global business universe. As we speak, countries, markets, areas, regions, continents, basically the globe, have been racing since 1981 to dramatically lower specific tax rates as applied both to the very wealthiest incomes and highest corporate profits. This is happening in each and every corner of the 17 globe. The motive is basically a repeat of the “Supply-side” policies that overtook the global economy and business community eight decades ago during the 1920’s.

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  Supply-Side Tax Policy : Its Relevance to Developing Countries

  • Ved Gandhi, Liam Ebrill, Parthasarathi Shome, Luis Manas Anton, Jitendra Modi, Fernando Sanchez-Ugarte, and George Mackenzie(Authors)
  • 1987(Publication Date)
  • INTERNATIONAL MONETARY FUND

    (Publisher)

  P. Ebrill

  This chapter aims to summarize the available empirical estimates of the impact of a number of direct tax instruments on labor supply, investment, and savings in developing countries with a view to determining whether supply-side policies are relevant for such countries. Theoretical contributions are also discussed to the extent that they elucidate the empirical results.

  Given that the concern is over the applicability of supply-side tax policies to developing countries, some discussion of what is meant by the concept “supply-side policy” is appropriate. As the term has come to be used in the context of developed economies and, in particular, in the context of the United States, it has, in general, referred to certain changes in tax policy—particularly those pertaining to corporate and personal income taxes—that are viewed as likely to stimulate domestic savings, investment, and labor supply. It has also come to refer more specifically to the views of those who believe that the responses of the various relevant agents to relative price changes are so elastic that tax rates can be reduced without any loss in tax revenue (see Gandhi (Chapter I)). It should be noted, however, that the views of these elasticity optimists are not unanimously accepted (Blinder (1981) , Hausman (1981) ).

  Supply-side policies, as they apply to developing countries, must be defined more broadly. First, the role of government as an agent for savings and capital formation is more important in developing countries. How should the government perform this role? Second, there is some concern over the implications of changes in tax rates for tax revenue but this concern is overshadowed by the belief that the judicious use of tax policies (for example, tax incentives) will lead to an acceleration in growth rates. This emphasis on rates of economic growth immediately suggests that the applicability of supply-side concepts depends on income effects in addition to relative price effects. In particular, the availability of adequate savings in a developing country will depend not only on the interest elasticity of savings behavior but also on the marginal propensity to save.

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