fiscal policy and supply-side economics, aggregate demand and aggregate supply, stagflation and macroeconomic challenges, macroeconomic policy evaluation
It is believed that the Laffer curve was first drawn on a napkin in a Washington D.C. hotel in September 1974, during an economic period where stagflation and budget deficits were spreading globally, especially in the USA. This simple sketch changed economic thinking by suggesting that reducing taxes could potentially increase tax revenue, economic output and productivity. In other words, it illustrated that lower taxes might encourage people and businesses to work harder and invest more, which could lead to higher total revenue for the government. It would influence some of the most important decisions at critical economic periods in the middle and later part of the twentieth century, which affected prosperity, growth and employment for millions of people. Art Laffer’s early sketch and calculations became the cornerstone for supply side economics up to the present day.
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