If the idea behind the tax cut/”refund” is that money in the hands of the public will do more to stimulate the economy than that same money in the hands of the government, does it make any difference whether it’s going to folks who (would have) paid that money in taxes or not?
(Note: I’m not convinced that such pump priming is actually a good idea, especially to the extent that it deepens the deficit and threatens to push up interest rates … but if it is a good idea, then it should be a good idea regardless. Or, conversely, just give all $350 billion to me, and I’ll find things to spend it on ….)
41 view(s)
“Pump priming” is another way of saying “demand side economics.” There’s not much evidence it works as a means of producing significant economic stimulus, but lefties love it because putting more money in the hands of low income workers is so much more palatable to them than reducing the tax burden on higher income workers.
Still, it doesn’t hurt to give a tax cut to lower income workers. But that’s not what this is – this is a government handout pure and simple and as such, will have to be funded from other sources of revenue. That means higher taxes for somebody (most likely business, which means higher prices and fewer jobs for all of us). Or increasing the federal debt. Or both. The costs could easily swamp the tiny economic effect 3.5 billion can have on a 10 trillion dollar economy. Ergo, it is highly unlikely that, in the long run, this form of “pump priming” will have a measurable net benefit.
Hmmmm. Okay …
It would seem the only difference between the “pump priming” of original Bush tax cut (get money into the hands of taxpayers) and the extension that the Senate passed (also get money into the hands of those who wouldn’t be paying taxes) is that the former are taxpayers, and the latter are not. In both cases, you’re putting money in people’s hands. In both cases, you’re pushing further into deficit spending (since we are not currently in a surplus). Which means higher taxes, etc.
(There’s also the soft benefit of folks feeling they are being treated fairly, though some other folks might disagree. It’s difficult to quantify, however.)
On the other hand, I didn’t do well in macro-ec in college, so …
Simplest answer: did the last tax-cut help? Nope.
Neither will this one. Folks used them to pay bills.
Well, there is something to be said for folks paying bills …