Posts Tagged ‘Tax Cuts’

Stabilizing the Economy: Government Fiscal Policy

Sunday, February 14th, 2010


Rather than merely hiring the unemployed to do work of little value. For example, tax cuts increase consumer spending, which stimulates many industries. Also, the effects of government spending (such as on a public works project) will spread, via the multiplier effect, through the economy, increasing consumer spending, too. Also, by generating a more favorable economic climate, these efforts by the government can result in increased business investment spending. Thus, the effects of budget deficits designed to stimulate employment will be felt all through the economy, from the toy industry to the construction industry – not merely in the hiring of the unemployed by the government.

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A Note on Creating Jobs

Saturday, September 5th, 2009


Often, when the economy is sluggish and unemployment is high, much attention is given to government efforts to “create jobs.” Many people believe that this simply means direct government hiring of unemployed people, often for “make-work” programs (“digging holes and filling them up again”).

In fact, “creating jobs” is a much more positive concept than this – it refers to government efforts to stimulate the whole economy (through budget deficits), rather than merely hiring the unemployed to do work of little value. For example, tax cuts increase consumer spending, which stimulates many industries. Also, the effects of government spending (such as on a public works project) will spread, via the multiplier effect, through the economy, increasing consumer spending, too. Also, by generating a more favorable economic climate, these efforts by the government can result in increased business investment spending. Thus, the effects of budget deficits designed to stimulate employment will be felt all through the economy, from the toy industry to the construction industry – not merely in the hiring of the unemployed by the government.

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Reduction in Taxes

Monday, August 24th, 2009



 Reduction in Taxes

While traditional theory would insist that taxes be increased in order to balance the increases in government spending referred to above, Keynesian theory argues that tax increases would only depress spending by consumers and businesses, worsening the recession.
Thus, taxes should not be increased during a recession; indeed, if anything, they should be reduced, so as to help raise the level of aggregate demand. The most popular policy of this type is the personal income tax cut, intended to increase personal disposable income and consumer spending, although temporary sales tax cuts have also been used for this purpose. To promote higher levels of business investment spending, various types of tax reductions may be used, including cuts in corporate income (profits) taxes and increased capital cost allowances, which permit businesses to depreciate assets more quickly, thus reducing their taxable income an

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 Reduction in Taxes

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