[sammyg2]

cut and pasted from wki:
Supply-side economics is a school of macroeconomic thought that argues 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 can be contrasted with the 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. Supply-side economics is often conflated with trickle-down economics. The term was coined by journalist Jude Wanniski in 1975, and popularised the ideas of economists Robert Mundell and Arthur Laffer.

The typical policy recommendation of supply-side economics is the reduction of marginal tax rates, beneficial because of the proponents' view that increased private investment generally brings higher productivity, which increases economic growth, and lowers costs for consumers. This is controversial because cutting marginal tax rates is perceived to offer benefits primarily to the wealthy, which commentators such as Paul Krugman see as politically rather than economically motivated.

Many early proponents argued that the size of the economic growth would be significant enough that the increased government revenue from a faster growing economy would be sufficient to completely compensate for the short-term costs of a tax cut, and that tax cuts could, in fact, cause overall revenue to increase. Attempting to model this is known as dynamic scoring, and leads many supply-side proponents to accuse their political rivals of overstating the decline in revenue as a result of tax cuts. Official CBO estimates on the effects of tax changes generally do not include dynamic scoring, primarily because the magnitude of this effect is not widely agreed upon.

Reaganomics
In the United States commentators frequently equate supply-side economics with Reaganomics. The fiscal policies of Ronald Reagan were largely based on supply-side economics. During Reagan's 1980 presidential campaign, the key economic concern was double digit inflation, which Reagan described as "Too many dollars chasing too few goods", but rather than the usual dose of tight money, recession and layoffs, with their consequent loss of production and wealth, he promised a gradual and painless way to fight inflation by "producing our way out of it".
Switching from an earlier monetarist policy, Federal Reserve chair Paul Volcker, began a policy of tighter monetary policies such as lower money supply growth to break the inflationary psychology and squeeze inflationary expectations out of the economic system. Therefore, supply-side supporters argue that "Reaganomics" was only partially based on supply-side economics. However, under Reagan, Congress passed a plan that would slash taxes by $749 billion over five years. As a result, Jason Hymowitz cited Reagan — along with Jack Kemp — as a great advocate for supply-side economics in politics and repeatedly praised his leadership.

Ronald Reagan made supply-side economics a household phrase, and promised an "across the board" reduction in income tax rates and an even larger reduction in capital gains tax rates. When vying for the Republican party presidential nomination for the 1980 election, George H.W. Bush derided Reagan's supply-side policies as "voodoo economics". However, later he seemed to give lip service to these policies to secure the Republican nomination in 1988, and is speculated by some to have lost in his re-election bid in 1992 by allowing tax increases. (See: "Read my lips: No new taxes.")