Tax cuts put money in the pockets of those targeted. Spending goes up. Spending drives the economy.
Conservatives would argue that the extra money is spent on plant and equipment and hiring personnel... If the cuts were for the wealthy. The loss of tax revenue will add to our debt if not accompanied by government spending cuts.
Increased government spending also puts money into the economy. It's not known exactly how it will be spent and if it will create other than short terms jobs but as opposed to private sector spending, gov spending may result in an increase in public welfare through income redistribution and at the cost of putting us deeper in debt.
In the short term, either approach might seem attractive. In the long run we should come up with a tax system that should not be monkeyed with. A big part of an economy's strength come from rational expectations of future earnings. You can't do this with a Yo-Yo fiscal policy.
Will government action work this time? Who knows, we've never quite been in this situation.
Off Topic » in reply to I do not understand something about *this* recession...[big surprise]
Money
The whole thread (44 posts)
- I do not understand something about *this* recession...[big surprise]
- There was well over 200 billion worth of tax cuts in that stimulus package
- Once the markers were called...
- (targeted) government spending produces more jobs than tax cuts.
- re: I do not understand something about *this* recession
- Money
- Because this time, the tax cut came first.