I think many need a reminder:
http://www.laffercenter.com/supply-side-economics/
Supply-Side Economics
Supply-side economics emphasizes economic growth achieved by tax and fiscal policy that creates incentives to produce goods and services. In particular, supply-side economics has focused primarily on lowering marginal tax rates with the purpose of increasing the after-tax rate of return from work and investment, which result in increases in supply.
The broader supply-side policy mix points to the importance of sound money; free trade; less regulation; low, flat-rate taxes; and spending restraint, as the keys to real economic growth. These ideas are grounded in a classical economic analysis that understands that people adjust their behavior when the incentives change. Accordingly, the lower the regulatory and trade barriers, and the lower and flatter the tax rate, the greater the incentive to produce.
The supply-side approach stands in sharp contrast to economic theories that held sway from the 1930s through the 1970s which were preoccupied with boosting demand, ideas most closely associated with economist John Maynard Keynes and his publication of The General Theory. These ideas enjoy a resurgence today as growth in spending, along with growing government involvement in the economy, has given new life to Keynesian ideas. Indeed, the idea of government spending as a stimulus to help boost demand and consumption, is rooted in quintessentially Keynesian ideas.
Yet in the roughly 30 years from the 1980s through the first decade of the new century, supply-side ideas contributed to the longest boom in United States history and an incredible transformation of the world economy. According to the National Bureau of Economic Research, 1982-1999 was one continuous mega-economic expansion. In fact, as it stretched into 2007, this 25 Year Boom saw a tripling in the net wealth of U.S. households and businesses from $20 trillion in 1981 to $60 trillion by 2007. When adjusted for inflation, more wealth was created in this 25 year boom than in the previous 200 years.
This sustained economic growth is not only impressive on its own, but even more astonishing as it compares to the period immediately preceding it. In the 10 years from 1972-1982, recessions were deep and recoveries were short. In fact, throughout American history, the nation’s economy has been in recession or depression roughly one-third of the time. But from 1981-2005, the annual growth rate of real gross domestic product (GDP) in the U.S. was 3.4 percent per year, and 3.8 percent per year during the 1983-1989 Reagan expansion alone.
Dent explains the chart above....
The Dent Research Employment Index, a propriety system developed to gauge the quality of government-issued employment statistics, highlights the poor quality of the jobs created last month. Of the 273,000 private sector jobs created, most were skewed to the lowest rungs on the income ladder, which won’t help the economy grow.
“By emphasizing quality as well as quantity, we get a much better picture of the overall employment situation,” said Rodney Johnson, creator of the index and co-founder of Dent Research. “Most people focus solely on the total number of jobs added each month, but one or even two numbers can’t tell the whole story. In fact, looking at employment through such a narrow lens can be very misleading. That’s why we developed the Dent Research Employment Index.”
Dent Research examines all the private sector jobs added during a given month across 84 different employment categories by wage. These are then grouped into 12 larger buckets. By measuring those additions against the existing spread of wages in the economy, the Dent Index provides great insight into the quality of U.S. monthly job growth. In short, are we dragging the overall income of America down, or lifting it up?
For the month of April, 2014, the non-farm payroll, excluding government positions, added 273,000 jobs. While this far exceeded even the highest expectations, the Dent Index reveals that nearly 55% of the newly-added jobs were below the median wage, and a full 43% fell into the lowest three tiers of income. (See graphic below.) These jobs contribute less to economic growth and, therefore, are less indicative of improvement in the overall employment situation.