Econ HW 8- w/answers

Therefore the tax increases at least on the surface

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Unformatted text preview: decade. Therefore, the tax increases, at least on the surface, did not appear to be particularly harmful for the economy in contrast with what some supply -side economists predicted when the tax rates were increases. More recently, the Bush tax cuts in 2001 were followed by a period of modest growth in output and employment. Some have note d, however, that this growth has come at too high a cost (specifically, that the administration fell far short of the policy’s predicted impact on employment levels). See the Center on Budget and Policy Priorities paper here: http://www.cbpp.org/files/4-23-04tax.pdf For example, CBPP states, “When the tax cuts do kick in after 2010, the impact on the economy would initially be positive, but these positive effects would be short lived. As Gale and Orszag state: “Over time…the adverse effects from deficitfinanced tax cuts build and so the economic cost of exten ding the tax cuts would gradually rise after 2010. Thus, relative to not extending the tax cuts, extension may have exerted a modest positive effect on the economy for a short period after 2010, before the negative consequences from the larger defic its rise and eventually dominate the overall effect.” William G. Gale...
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This document was uploaded on 02/26/2014 for the course ECON 100 at DePauw.

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