Wednesday, August 4, 2010

Tax Cuts vs. Unemployment Extensions

In an uncertain economy, extra money in the pockets of people with secure incomes will tend to go into savings – as a hedge against a further downturn.

Money given to the unemployed, or the working poor will go to groceries, rent, and other necessities, more rapidly benefitting the economy via the ‘multiplier effect’, passing through the hands of the butcher, the baker, the landlord, …

This is not only common sense, but is borne out empirically.  If you want to stimulate the economy, give money to those who need it most.  It'll make its way to the rich, but will benefit others in the process. 

No comments:

Post a Comment