Free Republic

Washington’s addiction to deficit spending — a rare bipartisan habit — is unlikely to change, no matter the electoral outcome in November. A deep conviction exists on both sides of the political divide that fiscal consolidation, whether achieved through less spending or higher taxes, reduces growth. What this political consensus misses, however, are situations in which the classic trade-off is suspended — when smaller deficits can counterintuitively deliver more growth. Today’s macroeconomic environment is ripe for such an approach. Compared to the years before the pandemic, fiscal policy — government spending and taxation — has kept a foot on the...

Executive Summary ... This report finds that these higher marginal tax rates result in a smaller economy, fewer jobs, less investment, and lower wages. Specifically, this report finds that the higher tax rates will have significant adverse economic effects in the long-run: lowering output, employment, investment, the capital stock, and real after-tax wages when the resulting revenue is used to finance additional government spending. Long-run macroeconomic impact of increasing tax rates on high-income taxpayers in 2013 Through lower after-tax rewards to work, the higher tax rates on wages reduce work effort and labor force participation. The higher tax rates on...

What Is It? Macroeconomics is the study of the behavior of the economy as a whole. Macroeconomic analysis broadly focuses on three things: national output (measured by gross domestic product (GDP)), unemployment and inflation. (For background reading, see The Importance Of Inflation And GDP.) National Output: GDP Output, the most important concept of macroeconomics, refers to the total amount of goods and services a country produces, commonly known as the gross domestic product. The figure is like a snapshot of the economy at a certain point in time. When referring to GDP, macroeconomists tend to use real GDP, which takes...