Arthur Laffer and supply-side economics

In the 1980s, the ideas of Arthur Laffer  were embraced by Ronald Reagan and became the guiding theory behind conservative economic policy. Now, according to Stateline, Laffer’s supply-side economics is staging a comeback in state politics.

The Laffer CurveWe might review the “Laffer curve” if it’s back in fashion. The basic argument is that current tax rates are too high and that cutting back taxes would encourage people to work harder and invest more. The resulting increase in productivity would mean that the government would be taking in more revenue even though it was taxing at a lower rate. This theory is often referred to as “supply-side” economics because it increases the incentives for producers (suppliers) of goods rather than demand-side (consumers).

Of course, this is controversial. Fortunately for Laffer and his supply-side friends, tax cuts are pretty easy to sell.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: