Congress recently passed a tax cut package. Depending on who one might ask, the tax cut will turbocharge the economy or it will lead to massive deficits in the years to come. The article that is summarized in this brief report looks at a take and summary from the New York Times. The verdict, in short, is that “time will tell” as to whether or not the tax cut will achieve the desired result. The article first points to a few claims that President Trump made during his recent State of the Union address. One of those claims, of course, related to the tax cut package that was passed and how it was the “biggest” in the history of the country. The article’s authors, James Stewart, admits straight away that the current form and function of the economy is very strong. However, Stewart is also quick to point out that only a month has passed since the tax cut package passed and more than thirty years have passed since the Reagan tax cuts passed. When it comes to the latter, there are still people that debate whether those tax cuts in the 1980’s had the effect that is often...
A professor from UC Berkeley, he notes that making a single change in a laboratory experiment and testing the results is one thing. However, this is impossible to do in a national economy, or even a city or state one. Indeed, he refers to the fact that even if the economy responds post-tax cut the way that the economy seemingly did after the Reagan tax cut package, this does not mean that the tax cut packages are the reason. At the very least, it might not be the only reason and/or it may actually be a drag on the economy as compared to what else is going on. Put another way, there are so many things going on in a national economy even if no tax changes are being made to the tax code or the budget. As such, one can make reasonable guesses as to what caused a national trend to occur. However, there are always outliers and exceptions and proving causality is a lot harder to…
