Lectur3-page45 - revenues If tax revenues decrease more than the decrease in social program spending unemployment compensation and other spending

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Well, the affect on the federal deficit or surplus is pretty tricky and depends on quite a few unknowns and educated guesses. Economics is certainly not an exact science. It will depend on how much that tax cut stimulates the economy. If the tax cuts are imposed on an economy with high unemployment and under utilized production capacity, then future tax revenues may be larger. As people go back to work, spending on social programs and unemployment compensation start to decrease. People bringing home paychecks are paying taxes. Therefore, tax revenues may increase The deficit could actually decrease or the surplus increase increase. The deficit could actually decrease, or the surplus increase. On the other hand, if the economy is humming along fairly well with low unemployment and fully utilized capacity, a tax cut may result in lower tax
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Unformatted text preview: revenues. If tax revenues decrease more than the decrease in social program spending, unemployment compensation and other spending due to the low unemployment rates, then the deficit could actually increase, or surplus decrease. As of August 1998 the government reported a budget surplus As of September As of August, 1998, the government reported a budget surplus. As of September, 2000, the surplus was increasing due to significant increases in tax revenues. Unemployment is low. Some economists feel that productivity has improved much more than our current statistical measures are indicating because of computer technology. People generally feel the economy is in good shape as evidenced by the Consumer Confidence Index. People are earning money and spending it. Tax revenues are rolling in. 45...
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This note was uploaded on 12/29/2011 for the course ECO 210 taught by Professor Malls during the Fall '10 term at SUNY Stony Brook.

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