Focus on the effects of national output potential or supply through reduction of taxes and government regulation for businesses designed to increase productivity and economic growth.
A school of thought within the economics profession emphasizing that the main source of a country's economic growth is constant improvement in the
efficiency with which resources are allocated for production. While the policy recommendations of the rival Keynesian school tend to focus almost entirely on what government can do to stimulate or restrain
aggregate demand in the short-run so as to even out the
business cycle, supply-side policy analysts focus on barriers to higher productivity -- identifying ways in which the government can promote faster economic growth over the long haul by removing impediments to the supply of, and efficient use of, the
factors of production. Supply-siders believe that unwise provisions of the tax laws (and especially high marginal rates of personal and
corporate income
taxation) produce very damaging
incentives that lead people to work less and to invest less (and to do both less efficiently) than they otherwise would. Supply-side policy recommendations typically include deregulation of heavily regulated industries, promotion of greater
competition through lowering
protectionist barriers to international trade, and measures to repeal special subsidies and tax loopholes targeting particular industries in favor of lower and more uniform tax rates across the board. Supply-side economics became particularly well-known to the general public during the 1980s because of its advocacy by one influential faction of economic policy-makers in the Reagan administration, leading to the use of the term "Reaganomics" to denote many of the ideas of the supply-siders. Supply-siders played a much smaller role in economic policy-making under the Bush administration, as the focus of attention shifted toward controlling the size of the
budget deficit and away from the earlier "Reaganomics" preoccupation with accelerating the country's rate of economic growth.
