Supply-side economics

Supply-side economics is a macroeconomic theory that postulates economic growth can be most effectively fostered by lowering taxes, decreasing regulation, and allowing free trade.[1][2] According to supply-side economics, consumers will benefit from greater supplies of goods and services at lower prices, and employment will increase.[3] Demand-side economics is often placed as a contrasting theory.

A basis of supply-side economics is the Laffer curve, a theoretical relationship between rates of taxation and government revenue.[4][5][6][7] 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.[8][9][10] A 2012 poll of leading economists found none agreed that reducing the US federal income tax rate would result in higher annual tax revenue within five years.[11] Critics also point out that several large tax cuts in the United States over the last 40 years have not increased revenue.[12][13]

The term "supply-side economics" was thought for some time to have been coined by the journalist Jude Wanniski in 1975, but according to Robert D. Atkinson, the term "supply side" was first 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.[14] The term alludes to ideas of the economists Robert Mundell and Arthur Laffer.