Tuesday, August 3, 2010

Explaining Tax Cuts

A few days ago, Bryan Caplan at the Library of Economics and Liberty offered a logical explanation for providing cash to consumers as a method of fiscal stimulus.

The standard argument is you can't depend on consumers to spend it. (That's also often a reason that "government" can do it better.) But Bryan's analysis is worth looking at. Even if you think stimulating demand has problems (so does he); his idea of a cushion or comfort zone that needs to be rebuilt before effective demand kicks in is an interesting one.

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