Intro: Growth tends to be stronger if government has less control over a country’s resources beyond the provision of goods and services that the free market cannot produce. The less government control of resources and lthe lower the level of income redistribution, the more land, labour, and capital that entrepreneurs can use to generate productivity…
Intro: Tax cuts in the absence of spending cuts tend to lead to an increase in GDP in nominal terms but not in real terms as additional bond issuence/money printing needed to finance the deficit leads to higher inflation. Additionally, the the deficits thar result can undermine economic health as they result in rising levels…
Intro: Typical opposition to fiscal deficits centers on the symptoms of fiscal deficits and not the causes. Deficits are bad for the economy because they tend to reflect too much government spending relative to what is optimal, undermining productivity, and they discourage savings in the aggregate, weakening the potential for investment. It seems intuitive that…
Intro: Conventional economic thought, with its narrow focus on spending, argues that if a government cuts taxes without lowering spending, then real GDP growth will benefit as there will be more overall spending in the economy. While more spending will likely result, this spending will be in nominal and not in real terms, reflecting higher…
Intro: Loose fiscal policy tends to be a major cause of inflation as it increases government spending without increasing real output or reducing the spending of the private sector. Even if governments issue bonds rather than printing money directly to pay for the deficits, the inflationary impact remains largely the same. When the government spends…