Supply-side Economics. Su economists a that attention to long onomic growth is more important than short-term manipulation of demand. Economic growth, which requires an expansion in the productive capacity of soci es. Inflation is reduced or ended altogether. services and thereby stan everyone's ard of living is improved with the availability of more and nomic growth even creases government revenues over the long run. supply side economists believe that the free market is than government to bring about lower prices and more supplies of what people nee and Government, they argue, is the problem, not the solution. Government taxing, spending, and monetary policies have promoted immediate consumption in stead of investment in the future. High taxes penalize hard work, creativity, invest should provide tax incentives to encourage in ment, vestment and savings; tax rates should be lowered to encourage work and enterprise overall government spending should be held in check, if possible, the governmenta ould be reduced over time. Government regulations should proportion of th be minimized to increase productivity and growth. Overall, the government should act to production and supply rather than demand and consumption Economic policy in the 1980s under President Reagan reflected these supply side views. According to Reagan, the most important cause of the nation's was the problems inflation, unemployment, low productivity, low investment the race of ent itself upon taking office Reagan administration (1) cut growth in federal domestic s (2) reduced income taxes and, lowered the top marginal tax rates, and (3) slowed the growth of government regulations. The economy registered strong growth during the Reagan years (see Figure 9-1). But the Reagan administration failed to cut government spending, on the contrary, govern ment spending continued to increase during the Reagan years, although the rate of growth was slowed. Tax cuts did not result in greatly increased revenues, as pre- dicted by some supply-side economists. Government spending was not slowed suf. ficiently to offset these lost revenues, and defense spending was The re sult was the largest series of federal budget deficits in bistory and a staggering explosion of the national debt from si to s4 trilion during the