[jwalsh07]

Supply side economics holds that increased taxation steadily reduces economic trade between economic participants within a nation. Taxes act as a type of trade barrier that causes economic participants to revert to less efficient means of satisfying their needs. As such higher taxation leads to lower economic efficiency.

"Tax cuts that increase incentives to produce and that eliminate distortions in the price system -- supply-side tax cuts -- give a double whammy. They restrain government spending and increase future income and current wealth. Permanent tax cuts are much to be preferred to temporary cuts. They are a stronger restraint on spending and do not need to be repeated." Milton Friedman

In other words while tax cuts may in the short run increase deficitits, in the long run they have affect a restraint on government spending, deficits.

Ronald Reagans fiscal policies were supply side while his monetary policy was based in Friedmans monetarism. I believ Mr Firedman moderated his views on monetarism in the last several years but I am unsure how or when. I am interested though now that we've had this discussion.

[Nanodik]

If that is the sum of "supply-side" economics, then one could go home right after their 10th grade lesson on supply and demand. As such, I don't see supply-side as being a true school of thought, it is simply affirming the laws of supply and demand. I will take issue with the good Dr. Friedman in that low taxes restrain govt spending. In my time, I have seen little evidence that deficits cause restraint on politicians. When I was in school, Dr. Friedman was very much a hero, and the particular school I attended was one that heavily favored monetarism and the Rational-Expectations model, so I have always thought of Friedman as being a monetarist.