Thursday, March 24, 2011

Multipliers

In the short term the net impact on the economy of reducing taxes on rich people, or failing to boost them, in exchange for cutting government worker jobs and services and income transfers to poor people is going to be negative. State governments don't really have to balance their budgets as they can borrow to do things like build roads and other capital projects. And if you're turning down capital projects that are largely federally funded, then you're just turning down free money. Sure that federal money will likely be redistributed elsewhere, but not necessarily very quickly.