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Supply Side Economics
A school of economics and thinking popularized by President Reagan in the 1980s
Supply Side Economics
A school of economics and thinking popularized by President Reagan in the 1980s
Term is widely used today
Supply Side Economics
A school of economics and thinking popularized by President Reagan in the 1980s
Term is widely used today Liberals disparage it by calling it ‘trickle
down’ economics
Supply Side Economics
A school of economics and thinking popularized by President Reagan in the 1980s
Term is widely used today Liberals disparage it by calling it ‘trickle
down’ economics Presidents Reagan and Bush (43) were
‘supply siders’
Supply Side Economics A school of economics and thinking
popularized by President Reagan in the 1980s
Term is widely used today Liberals disparage it by calling it ‘trickle
down’ economics Presidents Reagan and Bush (43) were
‘supply siders’ Is Dr. S??
Supply Side Economics
Presidents Clinton, Carter, Nixon and Obama were/are not. Bush (43) changed mid-stream and went to the dark side
What is a supply sider?
First: the belief that economic growth can be most effectively created by policies that incent people to produce (or supply) goods and services; hence the name
What is a supply sider?
First: the belief that economic growth can be most effectively created by policies that incent people to produce (or supply) goods and services; hence the name
The foundation of supply side: the government can stimulate growth and prosperity by lowering marginal tax rates
Supply Side
Supply siders believe that high marginal tax rates discourage income, output and the efficient use of SRTHAU
Supply Side
Supply siders believe that high marginal tax rates discourage income, output and the efficient use of SRTHAU
But what are marginal tax rates?
Supply Side
Supply siders believe that high marginal tax rates discourage income, output and the efficient use of SRTHAU
But what are marginal tax rates? MTR: refers to the tax rate on the ‘last
dollar’ earned
Supply Side Supply siders believe that high marginal
tax rates discourage income, output and the efficient use of SRTHAU
But what are marginal tax rates? MTR: refers to the tax rate on the ‘last
dollar’ earned In the “progressive” U.S. tax system,
taxes rise with income earned… you pay a higher tax rate on $500,000 income than on $50,000 income
Supply Side, redux
Therefore, as the marginal tax rate rises, you get to keep less of what you earn
Supply siders believe that high MTRs cause the highly productive to work less, invest less and thus create less supply and dampen growth
Supply Side, redux Therefore, as the marginal tax rate rises,
you get to keep less of what you earn Supply siders believe that high MTRs
cause the highly productive to work less, invest less and thus create less supply and dampen growth
High MRTs do two things: people are not incented to work harder/make more money and they seek ‘tax shelters’ for income, taking money out of efficient use
For Example….
During President Reagan’s eight years in office (1981-1989), the top marginal tax rate declined from 70% to 28%
For Example….
During President Reagan’s eight years in office (1981-1989), the top marginal tax rate declined from 70% to 28%
On eight of 10 economics measures, the economy performed better during Reagan than before or after
For Example….
During President Reagan’s eight years in office (1981-1989), the top marginal tax rate declined from 70% to 28%
On eight of 10 economics measures, the economy performed better during Reagan than before or after
Inflation plunged, employment rose, real income all grew
Laffer Curve
Named after economist Arthur Laffer Describes the trade-offs between tax
rates and tax revenues
Laffer Curve
Named after economist Arthur Laffer Describes the trade-offs between tax
rates and tax revenues Laffer contends there are two
consequences to tax rates: arithmetic and economic
Laffer Curve
Named after economist Arthur Laffer Describes the trade-offs between tax rates
and tax revenues Laffer contends there are two
consequences to tax rates: arithmetic and economic
Arithmetic: tax rates are lowered, tax revenues will be lowered by the decrease of the rate. Opposite is also true: higher taxes, more $
Laffer Curve
Economic effect recognizes the positive impact that lower tax rates have on work, output and employment. Raising tax rates has the opposite effect
Laffer Curve
Economic effect recognizes the positive impact that lower tax rates have on work, output and employment. Raising tax rates has the opposite effect
Laffer curve proponents contend that lowering tax rates can, in fact, increase tax revenues
To quote Laffer
“Over the past 100 years, there have been three major periods of tax-rate cuts in the U.S.: the Harding-Coolidge cuts of the mid-1920s; the Kennedy cuts of the mid-1960s; and the Reagan cuts of the early 1980s. Each of these periods of tax cuts was remarkably successful as measured by virtually any public policy metric.”
Laffer Sez
“Over the four years prior to 1983, federal income tax revenue declined at an average rate of 2.8 percent per year, and total government income tax revenue declined at an annual rate of 2.6 percent. Between 1983 and 1986, federal income tax revenue increased by 2.7 percent annually, and total government income tax revenue increased by 3.5 percent annually.”
Last Laffer
Also works with capital gains tax Reagan reduced capital gains from 28%
to 20% CG tax revenues leaped 50% from 1980
to 1983
J.M. Keynes (say ‘canes’)
British economics born 1883, died 1946 President Obama is a Keynesian We’ve taken a multi-trillion $ flyer on the
old boy’s’ theories so we’d best see whazup
J.M. Keynes (say ‘canes’)
British economist born 1883, died 1946 President Obama is a Keynesian We’ve taken a multi-trillion $ flyer on the
old boys’ theories so we’d best see whazup
Considered by some the most influential economist of the 20th and now 21st centuries
What is Keynesian theory? Foundation: an interventionist
government that uses fiscal and monetary policies to mitigate the negative effects of recessions, depressions and booms
What is Keynesian theory? Foundation: an interventionist
government that uses fiscal and monetary policies to mitigate the negative effects of recessions, depressions and booms
Became popular during the Great Depression that began worldwide in 1929
What is Keynesian theory? Foundation: an interventionist
government that uses fiscal and monetary policies to mitigate the negative effects of recessions, depressions and booms
Became popular during the Great Depression that began worldwide in 1929
Keynes contended that when people lost confidence, they slow down spending
What is Keynesian theory? When spending slows, it impacts others,
who in turn lose confidence, thus slowing their spending
What is Keynesian theory? When spending slows, it impacts others,
who in turn lose confidence, thus slowing their spending
The cure? The government should expand money supply (fire up the presses) and spend money. The bigger the downturn, the bigger the spending/printing
What is Keynesian theory? Keynesians claim that the Great
Depression was cured by government spending, in this case for WWII
What is Keynesian theory? Keynesians claim that the Great
Depression was cured by government spending, in this case for WWII
After WWII, Keynesian was all the rage worldwide
What is Keynesian theory? Keynesians claim that the Great
Depression was cured by government spending, in this case for WWII
After WWII, Keynesian was all the rage worldwide
And after falling out of favor during 70s-90s, he’s baaaaaaack
What is Keynesian theory? U.S. and other countries (China, EU,
Japan, India, etc.) tried to “spend their way” out of current recession
What is Keynesian theory? U.S. and other countries (China, EU,
Japan, India, etc.) tried to “spend their way” out of current recession
Obamanomics: Keynesians on steroids
So with all that spending, we must be more prosperous, right?
National unemployment rate: 9.6% Florida unemployment rate: 12%
Assignment for February 8
Next week we begin our next section of Basic Economics: “The National Economy”