Supply-side economics, theory of economic management that focuses on stimulating production through tax reduction, which is intended to inspire increased investment in business, leading to higher employment. The theory also calls for a cutback in government spending to achieve a balanced and much smaller budget, thus eliminating deficit spending, which causes inflation and drains funds from the private sector. Inspired by laissez-faire economic thought, the leading theorists of supply-side thinking include Milton Friedman, Arthur B. Lafter, Jack Kemp, and David Stockman. Supply-side economics dominated President Ronald Reagan's economic policies (1981–89).
See also: Economics.