Re: Partisan fiscal policy
related to this topic is the expected fiscal effect from tax reductions and increases I recommend: http://www.heritage.org/Research/Taxes/loader.cfm? url=/commonspot/security/getfile.cfmPageID=5369 (make sure it all fits into one line) - jacob braestrup Armchairs, As the US recession looms larger and longer, Bush and his folk are found in the uneasy position of trying some active fiscal policies... In a very simplistic macro view, raising public expenditures or lowering taxes (in the short run) were both considered expansionist fiscal policies--at least in the sense that both increase public sector deficits... they are equivalent policies. However, in real world policymaking, republicans prefer lower taxes and democrats would rather have more expenditures... as if they were different policies. Does this partisan/ideological asymmetry have any real effect? Is the equivalence for real... in the short run... in the long run? Do people perceive them as different too? More practically, what is easier to get, lower taxes or higher expenditures? Does this apply to the federal as well to the state level? any reactions? -JA -- NeoMail - Webmail
Re: Partisan fiscal policy
(does anyone in econ still talk about the old concept of aggregate supply and demand?), Judging by the best selling textbooks yes. Most certainly. I haven't looked in the last couple of years, but the last time I did there still wasn't a really good text book that presented undergraduate macro entirely in terms of OLG or RBC models that still dealt with standard concerns about stabilization policy. Most undergraduate instructors still think stabilization policy is important (and since it is a very large part of the discussion of economic events in the press they are probably right) and want to teach it. The IS-LM-AD-AS model is still the best way to explain those concepts. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Partisan fiscal policy
--- [EMAIL PROTECTED] wrote: In a very simplistic macro view, raising public expenditures or lowering taxes (in the short run) were both considered expansionist fiscal policies--at least in the sense that both increase public sector deficits... they are equivalent policies. The expansionist effect is reduced when the deficit is financed from domestic borrowing, which displaces private domestic consumption or investment. However, in real world policymaking, republicans prefer lower taxes and democrats would rather have more expenditures... as if they were different policies. Does this partisan/ideological asymmetry have any real effect? As such, no. But there are also supply-side effects from reducing taxes, which would provide a larger effect, and the long-run domestic effect depends on what the funds are spent for, i.e. military abroad versus domestic consumption or governmental investment. More practically, what is easier to get, lower taxes or higher expenditures? Higher expenditures are easier, since tax cuts require lengthy deliberations and are more difficult to reverse. Spending can be focused on local pork. Does this apply to the federal as well to the state level? I don't see why not. Fred Foldvary = [EMAIL PROTECTED]
Re: Partisan fiscal policy
In a message dated 8/20/02 7:58:33 AM, [EMAIL PROTECTED] writes: --- [EMAIL PROTECTED] wrote: In a very simplistic macro view, raising public expenditures or lowering taxes (in the short run) were both considered expansionist fiscal policies--at least in the sense that both increase public sector deficits... they are equivalent policies. The expansionist effect is reduced when the deficit is financed from domestic borrowing, which displaces private domestic consumption or investment. Agreed. And if financed by creating new money, it simply increases nominal aggregate demand, but not real aggregate demand (does anyone in econ still talk about the old concept of aggregate supply and demand?), creating a false expansion--inflation--followed by a bust. That policy characterizes the stagflation circa 1968-1982. However, in real world policymaking, republicans prefer lower taxes and democrats would rather have more expenditures... as if they were different policies. Does this partisan/ideological asymmetry have any real effect? As such, no. But there are also supply-side effects from reducing taxes, which would provide a larger effect, and the long-run domestic effect depends on what the funds are spent for, i.e. military abroad versus domestic consumption or governmental investment. If the tax reduction comes in the form of reducing marginal tax rates we'd get a supply-side increase in the rate of growth, but tax rebates a la Ford or Junior Bush simply shift the income back to the private section (where it may increase growth simply through an efficiency effect, which you'd also get with cuts in marginal tax rates). More practically, what is easier to get, lower taxes or higher expenditures? Higher expenditures are easier, since tax cuts require lengthy deliberations and are more difficult to reverse. Spending can be focused on local pork. Likewise targeted tax credits and other narrowly-focuses tax breaks. It's much hard to do what Reagan did--making sweeping across-the-board cuts in marginal individual income tax rates. Does this apply to the federal as well to the state level? I don't see why not. Fred Foldvary Agreed. David Levenstam
