Discussion 3 macroeconimics

Stephanie Doud posted Nov 12, 2020 1:12 AM

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During the time period of 2001-2003, the US government made tax cuts and reduced taxes for married couples, capital gains, gifts, and increased child tax credit. This gain for the consumer stimulated the economy because people had more money to spend. Yet, this negatively affected the GDP with an estimated revenue loss of 0.4%, 1.1% in 2002, and 1.6% in 2003. (everycrsreport.com, 2008) During this time period, government spending went up, and taxes were being cut. These cuts did benefit in the short term but had no real benefit in the long run. Yet, this cut did stimulate the aggregate spending for the economy and was the short term multiplier. In looking at this for the big picture, this type of practice of cutting taxes for the short term, there has to be an increase in taxes or a cut in spending in the long term to make up for this tax cut that was made from 2001-2003. Shortly after these tax cuts were implemented, the US went into a profound recession. This recession took longer than expected to get out of a decline in employment and a decline in hours worked. Had these tax cuts not have happened, the recession was still inevitable, but there may have been a different outcome. 

-Stephanie

What Effects Did the 2001 to 2003 Tax Cuts Have on the Economy? (2008, January 16). Retrieved November 12, 2020, from  http://www.everycrsreport.com/reports/RL32502.html

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