There are several different philosophies on this issue, but I am in the camp of giving the template the economy or simply have more money to spend on things that they want. Consumer spending is good especially since the US was inn recession. Yes, based on supply-side economics. The idea is to deregulate government and offer tax cuts and corporate tax reductions with the intent of improving production and economic growth. In 2001, I believe that a tax cut was good way to stimulate the economy and to get us out of the recession.
I don't think anyone could have foreseen the war and this caused the surplus to evaporate in conjunction with the reduction of revenue from the tax cuts. Does it matter that the benefits flow disproportionately to the highest income earners? No, the wealthy are already paying disproportionately more than the middle and lower class in taxes. They are also the ones that are investing in new business, helping to reduce unemployment that in turn helps to stimulate the economy. I think there has to be a balance.
I do understand that the deficit could be greatly reduced if the taxes for the wealthy were increased back to the Clinton era. * Do different voters have fundamentally different interest here? Yes, democrats for the most part believe in more government involvement- Geiger taxes and the republicans believe in lower taxes so that there is more money that can be used to stimulate the economy by small businesses and increased consumption. 3. Did the 2001-2003 tax cuts work and in what way? * For a very short time consumer spending increased (in the quarter following the rebate).
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In 2002 the US started experiencing a deficit and it has increased every year since the tax cut. According to Exhibit 7 in the reading, the Real GAP growth rate (percent), increased every year from 2001 until 2004. It is hard to say what would have happened without the tax cut because we entered a war and the amount of pending on defense increased as well as an increase in unemployment. 4. What options were available to Obama with respect to fiscal policy when he took office? * He had the option to increase government spending by asking for another stimulus through the Economy Recovery Plan.
He hoped this would create or save 2. 5 million Jobs over two years. His plan also involved making all the government building more energy-efficient. This would reduce spending. The purpose of this stimulus was also to increase Jobs through investing in new highway infrastructure. And most importantly, the economic recovery plan was to modernize the health care yester and would save billions of dollars through electronic medical records. Or, he could have chosen not to have increase government spending which in turn increased our deficit even more.
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