Question

Describe supply-side economic ( austerity, neoliberal ) policy and how it is supposed to simulate economic growth . Include crowding-out in your answer.

( at least 150 words)

Answer 1

Supply-side theorists argue that corporate income tax reduction and loser regulation is the driving force of an economy. By freeing up more money at a corporate level, companies will invest in research, capital and human resources, which in turn should produce a greater number of goods and services. Supply-side economics is often referred to as trickle-down economics, where what is good for the corporate world will trickle down through the economy benefiting all.

In the 1980s, President Ronald Reagan used this theory to combat pricing issues that followed the recession in the early part of the decade. Reagan cut the top tax rate and the corporate tax rate. While the economy was dragged out of recession, national debt under Reagan surged.

President Donald Trump introduced a tax bill that, in principle, is based on supply-side economics. The bill plans to cut taxes, both income and corporate in the hope to stimulate growth. Proponents said the trickle-down would assist everyday Americans, despite evidence pointing that the majority of the tax relief will be seen by the upper class.

economic theory holding that bolstering an economy's ability to supply more goods is the most effective way to stimulate economic growth.  

when asked whether a "cut in federal income tax rates in the US right now would raise taxable income enough so that the annual total tax revenue would be higher within five years than without the tax cut", none of the economists surveyed by the University of Chicago agreed. 35% agreed with the statement "a cut in federal income tax rates in the US right now would lead to higher GDP within five years than without the tax cut.