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Supply side vs. demand side economics

Updated April 17, 2017

Supply side and demand side economics are philosophies designed to stimulate the economy by using divergent theories. In theory, supply side economics will cause an influx of investments by the wealthy, prompting new growth. Demand side economics, on the other hand, focuses on stimulating the average consumer to spend more money.

History

Supply side economics was primarily adopted following the downturn of United States industry in the late 1970s. Prior to its implementation, government taxation policy dealt mostly with demand side economics.

Function

Both divergent economic theories deal primarily with the rate and purpose of taxation. Supply side generally focuses on cutting taxes on the wealthy to promote growth, while demand side pushes for tax cuts to the least wealthy.

Features

Supply side and demand side economics are used by Classical and Keynesian policies respectively. Supply side encourages enterprise, while demand-side focuses on consumption.

Significance

According to political tradition of the late 20th century and early 21st century, the Democratic Party generally adopts a platform of demand side economic theory. Inversely, the Republican Party focuses on supply side economics.

Considerations

The Economic Policy Institute released a report in 2006 addressing concerns of the long-term effects of supply side economics. While Democratic President Bill Clinton left office in 2000 with a surplus due to demand side policies, Republican Presidents since 1980 all left office with a deficit.

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About the Author

Jason Chavis has been a professional freelance writer since 1998. He is the author of four books, two movies and a play as well as numerous articles for "Scientific American," The History Channel, City Pages and "The Onion." In 1996, Chavis won the award for "best science fiction/fantasy" from the River Valley Writer’s Conference.