Anonymous
Anonymous asked in Social ScienceEconomics · 9 years ago

Which of the following is true of supply-side tax cuts?

A. They lead to budget surpluses.

B. The supply-side effects are immediate, while demand-side effects take time to manifest.

C. All these choices

D. They worsen income distribution because they tend to benefit wealthy households and businesses.

E. They have a negative effect on long-term economic growth.

2 Answers

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  • 9 years ago
    Favorite Answer

    D is clearly and directly true.

    If you believe that a country can't support an infinitely high public debt (and most economists and most others do believe that public debt should not be allowed to get too high) then E is also true.

    Since the tax cuts cause a loss of revenue and increased the deficit and hence the debt, the government is forced to to compensate, creating economic inefficiency and hence a negative effect on long-term economic growth.

    For example, it is clear that tax cuts are less effective as an economic stimulus than infrastructure spending, etc.

    http://www.house.gov/smbiz/hearings/hearing-07-24-...

    http://www.americanprogress.org/issues/2008/09/pdf...

    which means that for a given dollar value of deficit/debt, tax cuts lose.

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  • Linda
    Lv 4
    4 years ago

    Myth 9: BS. The economy grew, but the deficit reached 10.2 trillion by the end of his term (it doubled from 5.5 trillion when he took office). If you are going be in favor of an expensive war, as most rich Republicans were, you should also be willing to foot the bill, not get a tax cut. Myth 10: Also BS. The rich also get government subsidies, tax-exempt status in numerous industries, and the use of federal public lands (under Bush they did, anyway).

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