The Tax cut... why should it work now

[Almighty Colin]

Vick,

The government is spending more money AND cutting taxes so there's not truly an offset. Now, THAT'S stimulus. ;-)

No one knows the answer to that question though. Big debate even among the nobel prize winning laureates as to what kind of tax cuts and spending increases best increase the GDP and hopefully the employment numbers and other economic numbers. I've noticed that some of the debate is academic (How would this best increase GDP overall? How would this decrease unemployment overall?) and some of it is philosophical (what kind of world do we wish to live in? What distribution of income would we like to result from this tax cut, etc?).

Many of the economists that signed the statement against Bush's stimulus plan are on record elswhere as having said they do agree that a tax cut is a good idea but disagree as to the size of the tax cut, the distribution of the tax cut, and the permanence of the tax cut. Some of these questions are academic and some philosophical.

Some of the economists that signed the statement in favor of Bush's stimulus plan said so for philosophical reasons (Nobel prize-winner Milton Friedman said that reduced taxes in turn force lesser expenditures and hence a smaller government). Others thought that tax cuts are always a good idea regardless of where they occured.

The big unknown in a formula is the multiplier on spending. Every dollar you spend gets spent again and again. How many times? Where would one best input money into the economy to get the fastest GDP growth? My gut feeling is to get into the hands of lower class people as they have lower savings rate. This of course ignores the philosophical debate (who deserves the tax break more?).

Wasn't a non-permanent tax-cut decided on anyway which is what a majority of Democratics wanted in the first place?