Re: Trickle-Down -Supply Side policies of Reagan
Supply-side economics was an attempt to increase aggregate supply to get rid of double digit inflation and unemployment. Traditional fiscal policy moves the AD curve but increasing it would have made inflation even worse. So - huge tax cuts were given to stimulate the economy, with the idea that rich people would be able to keep more of their money(marginal tax rates maxed out at 70%), therefore would work harder and some of this money would trickle down to poor people.
The $250 billion worth of tax cuts did stimulate the economy but beneficial supply shocks helped even more as oil dropped from $40 down to $10 per barrel and the world wide food shortage ended.
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