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Unformatted text preview: But the Ricardian view of the budget deficit takes a much less negative position on this issue. Supporters of this view believe that a budget deficit represents trading taxes in the future for taxes today. That is, if the government spends more than it taxes today, then it must tax more than it spends tomorrow. Given that the public intrinsically understands this, a questionable premise, then the public will spend and save accordingly. Since the public is adjusting its spending and savings schedules to account for the necessary future increases in taxes, the budget deficit should have little long- term effect on economic growth. The third position, a bit on the fringe, claims that the budget deficit is not a reasonable measure of fiscal policy. While these economists do believe that the government can affect spending, savings, and investment, they also believe that the budget deficit is...
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This note was uploaded on 12/13/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.
- Fall '10