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Showing posts from December, 2017

Will tax cuts favoring the wealthy cause an increase in economic growth?

Depending on the state of the economy, tax cuts that further concentrate income and wealth by primarily benefiting the affluent could either promote or inhibit an increase in economic activity. To determine which path is most likely to transpire, one would need to understand the answers to the following three questions. 1.  Is desired investment greater than actual investment?  In other words, is a lack of funding specifically preventing the private sector on aggregate from boosting capital expenditure to their desired levels? 2.  Will tax cuts for the (super) wealthy be funded via higher taxes or spending cuts that predominately fall on the middle class and poor or will they be funded by greater treasury issuance? 3.  Will monetary policy seek to offset the effects of fiscal expansion?  How would financial markets react in response to the Fed?