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UNDERSTANDING THE SUPPLY SIDE (TRICKLE DOWN) ECONOMICS (Vol. 90)

You must Save and Invest, if you want to Grow and Prosper

You have probably heard the term Supply Side Economics, but few really understand this term and what it means. I am not an economist, but this is how I see it. And once you ‘get it’, you will see that it is mostly common sense solutions to growth and prosperity.

Supply Side Economics is focused on Production - growing the output of goods and services. What does that mean for economic policy and what is the impact on economic growth, and a better standard of living for all? ‘Supply Side’ policy means developing economic policy which facilitates the expansion of output. It is actually that simple. These policies would increase capital in the private sector, so they have the ability to invest in the means of production and are incentivized to do so. INCENTIVES MATTER. If entrepreneurs have the capital available and taxes are modest, the profit motive will drive them to invest in making more products, better products, or inventing new products or services. That grows the output of the economy. If the policies limit the capital in the private sector or punitive taxation disincentivizes growth, they will not invest and grow the economy. It also includes policies that limit excessive regulation, which will hinder growth (or make products more expensive). See Facts, No Spin #61 on the Regulatory state, as well as free trade which facilitates growth by utilizing resources more efficiently. All of this together means making more products available at the lowest possible prices. And it will greatly increase the employment possibilities for the expanded economy. Increasing supply of goods and services, all other things equal, means that the supply curve moves in a way to lower prices as well as expanding the economy. That is because the supply has increased, and the demand curve is constant, therefore the new equilibrium price will be lower (if you are not familiar with Supply and Demand curves, please take a few minutes to read Chapter 3 of our book, "Why You Should Give a Damn About Economics." The book is available free on our website). The policies that accomplish this focus on lowering taxes, limiting government and reducing unnecessary regulations, and leaving more capital in the private sector. When coupled with sound monetary policy, you have a recipe for economic growth. Then the private sector will invest efficiently in growing output and more goods are available in the marketplace at cheaper prices for consumption - the economy is growing. Everyone is better off. In Facts, No Spin #16, The Formula for Economic Progress, we explain that in more detail. Understanding Supply and Demand curves is essential to ‘getting this’, so invest a little time to understand them if you do not have a good grasp of them. . This is a really important concept that will influence your thinking. If you are a citizen, concerned about the future of this great Country, just do it - learn some basic economics if you have not had a chance to learn about it in the past. BOTTOM LINE If you want a more rapidly growing economy and lower inflation, we need policies which focus on growing the private sector, not the public sector. This means lower taxes, smaller government and more output. This is the Formula for Growth which made us the richest, most powerful Country in the world. Don’t abandon what has worked so well in the past. LEARN ECONOMICS, THEN VOTE SMART

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