Supply side economics history and relevance

The bill was strongly opposed by Republicans, vigorously attacked by John Kasich and Minority Whip Newt Gingrich as destined to cause job losses and lower revenue. Prescott found that the elasticity of the long-run labor supply was substantially greater than in the short-run supply and that differences in tax rates between France and the United States explained nearly all of the 30 percent shortfall of labor inputs in France compared with the United States.

The results were striking. He doubled the national debt while he was in office. Each dollar cut returns 50 cents to revenue. More jobs were created during the Clinton era than the Reagan era in both relative and absolute terms and the rate of GDP growth was higher.

A critical tenet of this theory is that giving tax cuts to high-income people produces greater economic benefits than giving tax cuts to lower-income folks.

demand side economics

Critics claim that the tax cuts increased budget deficits while Reagan supporters credit them with helping the s economic expansion that eventually lowered the deficits and argued that the budget deficit would have decreased if not for massive increases in military spending.

He concluded: I find it remarkable that virtually all of the large difference in labor supply between France and the United States is due to differences in tax systems.

Supply side economics reaganomics

This shrinkage necessarily means that an increase in tax rates leads to a less than proportional increase in tax revenues. And although tax changes sometimes appear to produce large year-to-year variations in income, work by Goolsbee and others has shown that these variations mostly just reflect shifts in how income is reported. An income tax cut increases the dollars per hour worked. I expected institutional constraints on the operation of labor markets and the nature of the unemployment benefit system to be more important. History Proves the Supply-Siders Wrong The best place to start this empirical inquiry is to look at what actually happens when top tax rates change. An increase in marginal tax rates adversely affects the output of an economy in two ways. Even though tax rates would be lower, income would rise by so much, they claimed, that tax revenues would rise. Beyond Supply-Side All this empirical work carries at least three important lessons for policy-makers.
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Understanding Supply