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Does supply or demand side economics work better?

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Introduction

Does supply or demand side economics work better? All these bailouts and now Obama is going to cut taxes for the middle and lower classes. Politics aside, I wonder if cutting taxes for employers would stimulate the economy more than cutting taxes for employees. Supply side economics is a forward looking approach to economics. It's widely agreed that long-term growth in the economy comes only from the supply side. Demand side fiscal policy is disputable in terms of how much it will work. monetary policy works pretty well but in the end demand can only be controlled for so long. In the long run the economy returns to a long run equilibrium, which is entirely determined by long run supply. ...read more.

Middle

If people are paying less tax they will be more inclined to take jobs, perhaps at lower wages. But yes your logic is sound. In the current situation it has to be demand side economics. Wikipedia: "To the supply-side economist, reallocation away from consumption to private investment, and most especially from public investment to private investment, will always yield superior economic results." The problem with supply side economics is that the last thing the economy needs is more supply (investment). It is suffering due to a lack of demand, companies are going under as no-one is buying their products, the last thing they need is to produce more. They both have the problem that the MPC (marginal propensity to consume) ...read more.

Conclusion

this will typically result in the consumer being unhappy because they do not want to be denied care, or have delayed care. So demand side tends to work better by increasing co-payments and the like (although that's not to say the consumer likes higher co-payments). In terms of the over all economy, supply side economics in the form of reduced interest rates has been successful in the past to stimulate the economy. Right now there are a lot of behavioral factors affecting things. Banks are afraid to loan to other banks for fear they will fail, thus freezing the flow of credit and money (which our economy has become dependent on). Individual's are afraid to invest in the market, which can stifle growth. There is never a single option that will work best in all situations. Economics is not a hard science. ...read more.

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