wbutterfield@mult
istate.com To: [EMAIL PROTECTED]
Sent by: cc: [EMAIL PROTECTED],
[EMAIL PROTECTED]
owner-ARMCHAIR@gm Subject: News Coverage and bad
economics
u.edu
01/08/03 10:09 AM
Please respond to
ARMCHAIR
William M. Butterfield wrote:
"I saw ABC World News
Tonight's "Business and Economics" correspondent get up there and interview
two families. She asked them what they planned to do with their share of
the tax cut. Both families claimed they planned to save it (Heaven
Forfend!). The conclusion was then reached by Peter Jennings that the
policy was doomed to failure. As if saving and investment doesn't lead to
production and growth!!"
But a tax cut does not necessarily increase investment even if saved. In
fact, it would probably have to be saved in order to keep investment from
falling. After all, if government spending remains constant, the
government's demand for loanable funds will increase by a corresponding
amount.
I do share your frustration with the Stimulus chatter. The fact is that
fiscal policy can probably do nothing to create a short-term stimulus
beyond the incentive effects from changes in marginal rates, and these are
likely rather small, especially for modest changes in rates such as those
passed in 2001.
Marc Poitras
