Bush Tax Cuts

Topics: Macroeconomics, Public finance, Tax Pages: 4 (1119 words) Published: October 10, 2012
Fiscal Policy: “Barak Obama and the Bush Tax Cuts A and B”

1. The Tax Cut of 2008:
* As a business person, would you have wanted your congressman to vote for the tax cut of 2008.
As a business owner I would have wanted the tax cut of 2008. At this time the economy was stalling, we were still at war, and consumer spending was starting to slow. With the uncertainty of the future with a new president, I would have wanted the tax cut. After reading and learning about the impact that the 2008 tax cut had on revenues and the minimal impact that it had on consumption, I would reconsider my thoughts, based on what I am learning in this class.

* Will these tax rebates be spent?
Yes, they will be spent in the first couple of months to either buy something or to pay down debt. Studies show that one-time rebates are not a cost-effective way to increase economic activity. Revenue decrease from the tax rebates, but there seems to be little impact on personal consumption expenditures.

* Is this a business cycle that should be smoothed.
One could say that the temporary increase in income was used to smooth consumption spending during that time.

2. The Tax Cut of 2001
* In the lead up to the 2000 presidential election, would you have supported the Bush tax cut proposal.
I would be a supporter of the tax cuts for 2001 because they were being proposed for 10 years and would be long term and not temporary.

* What was the difference between this tax cut and the tax cut of 2008. Several things were different. In 2001 the US had a surplus and in 2008 we were heading into the housing crisis and had a growing deficit.

* Are deficits good or bad and when?
It depends on whom you are talking to…an economist that believes in the Keynes approach or the Feldstein approach. Some believe that running a deficit in order to stimulate spending is good thing; leaving the deficit to be paid off when the economy begins...

References: Chan, S. (2010, August 7). Greenspan Calls for Repeal of All the Bush Tax Cuts. The New York Times. Retrieved August 9, 2012, from http://www.nytimes.com/2010/08/07/business/economy/07greenspan.
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