Quote:
Originally posted by Tipsy
Tax cuts - one of the last resorts for a goverment who badly needs to buy back some popularity. Sad thing is that the majority of the voting public are dumb enough to fall for it.
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The Keynesian response to a slow (or shrinking) economy is to cut taxes and/or raise government expenditures. This is the tried and true stimulus combination used since the depression . What else COULD one do? The opposite will obviously shrink the GDP right away.
During the depression the exact opposite was done. The economic paradigm at the time was to balance the budget so as incomes shrunk the government had to keep raising taxes. This
prolonged and deepened the depression.
We learned our lesson. Now we cut taxes and raise expenditures.