Economics for Dummies

Supply-side economics:

Kennedy explained his upcoming tax cuts in a 1962 address to the Economic Club of New York: "The final and best means of strengthening demand among consumers and business is to reduce the burden on private income and the deterrents to private initiative which are imposed by our present tax system, and this administration pledged itself last summer to an across-the-board, top-to-bottom cut in personal and corporate income taxes."

And the impact on the deficit if taxes are cut? "It is a paradoxical truth," said Kennedy, "that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now."

The purpose of the tax cuts was "not to incur a budget deficit," he said, "but to achieve the more prosperous, expanding economy which can bring a budget surplus."
The choice, Kennedy asserted, was "between two kinds of deficits: a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy, or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, increase tax revenues, and achieve, I believe -- and I believe this can be done -- a budget surplus. The first type of deficit is a sign of waste and weakness; the second reflects an investment in the future."