"Mr. Geithner said the biggest challenge facing the economy right now was Washington paralysis. He urged Congress to take up the White House's recent proposals to give tax incentives to business and fund new infrastructure projects.
"If the government does nothing going forward, then the impact of policy in Washington will shift from supporting economic growth to hurting economic growth," Mr. Geithner said during an interview with The Wall Street Journal in his U.S. Treasury office, citing the example of countries who "shift too quickly to premature restraint" after a crisis, including the U.S. in the 1930s."
Where do we get funding for new infrastructure projects if we lower taxes for business companies? One needs further government spending, the other decreases the public saving. If we look at the GDP formula:
ReplyDeletePrivate saving= T-G
Tax is lowered
G is higher
Then according to the suggestion, we will have a giant deficit in private saving, don't we?
From my understanding, Government spending will rise, but the tax variable should increase as well. If the Bush tax cuts are renewed except for the top 2% of Americans, then Tax (T) should actually grow. Most people are paying the same as before, except the rich are paying more.
ReplyDelete