Thursday, February 21, 2008

Are we better off using supply side economy theory?

Because of our recent U.S. economy doldrums, perhaps the FED and policy makers should take another look at using supply-side economics, a school of macroeconomic thought that economic growth can be most effectively created using incentives for people to produce (supply) goods and services, such as adjusting income tax and capital gains tax rates. This is in contrast with classic Keynesian economics (or "demand side economics"), which argues that growth can be most effectively managed by controlling total demand for goods and services, typically by adjusting the level of government spending. The typical policy recommendation of supply-side economics is the reduction of marginal tax rates, beneficial because of increased private investment generally brings higher productivity, which increases economic growth, and lowers costs for consumers.
Posted by Harrison K. Long, Explore Properties Group, Feb. 21, 2008

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