In the most recent issue of the American Economic Review, Ms. Romer (and her husband David H. Romer) conclude that "tax increases are highly contractionary . . . tax cuts have very large and persistent positive output effects."
This paper is very provocative given the position of Ms Romer as the former head of the CEA. The conclusion is clear. Tax policy matters and will have a negative effect on growth. So as we head to the end of the year when the Bush tax cuts are reversed we will have strong head winds against the US economy.
This paper is very provocative given the position of Ms Romer as the former head of the CEA. The conclusion is clear. Tax policy matters and will have a negative effect on growth. So as we head to the end of the year when the Bush tax cuts are reversed we will have strong head winds against the US economy.
It is still amazing that the impact of tax cuts are still unclear and subject to the problems of political views. Democrats do not like them and Republicans do. Economic policy should be independent of the politics.
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