Wednesday, August 31, 2011

Sitmulating The Economy With A Balanced Budget

link here to article

The standard approach to stimulating an economy in recession is for the government to run budget deficits. This article suggests that the government can stimulate the economy with a balanced budget. The basic idea is to raise taxes and increase government spending by an equal amount. Essentially, this redistributes income to those who are likely to spend it.

While this is an interesting idea, there is little reason to believe that the GOP would be interested in reducing budget deficits by raising taxes on the rich and redistributing income. Moreover, one would not expect the White House to propose any remedy that would upset the GOP and appear to be partisan.

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