Week 3 - Discussion Forum 1
.docx
School
Ashford University**We aren't endorsed by this school
Course
BUS 626
Subject
Economics
Date
Dec 19, 2024
Pages
3
Uploaded by DrMoonFerret47
Prior to beginning work on this discussion forum,●Review Chapters 9, 11 and 12 of Macroeconomics: Private and Public Choice.●Research one real-life example of a fiscal policy.●Review the Fiscal Policy Key Conceptsinteractive.There are two parts to this discussion.Part 1Explain the pros and cons of your selected fiscal policy. Include supply-side economics in your explanation. As you think through your answer, remember that government may exercise expansionary or restrictive fiscal policies.Part 2Using your selected example of fiscal policy, explain its overall impact on the economy. In your example, discuss any political influences. When possible, select a different example than those already posted by a fellow classmate.Part 1The supply side economics was seen in the United States through the signing of Tax Cuts and Jobs Act (TCJA) of 2017 (Gale & Haldeman, 2021). The intention of the TCJA was to boost growth in the economy through reducing the taxes on individuals and companies. Critics have argued that these cuts would actually lower spending in the long term as it would stimulate business investment. They also suggested that after-tax profits increased further investments in equipment, research & development and employment (Martin, 2023). It would in the long-run increase efficiency and increase the rate of economic growth. Similarly, the supporters of the supply side tax cuts argued that cuts would lead to employment and savings. More take home pay can translate to longer hours of work or looking for other jobs while low capital gains taxes increases saving and investment.The unemployment rate and GDP was enhanced after signing the TCJA. However, critics have observed that the benefits only for the needs of the rich business people. Predictions included an investment, which was minimum, and stock buyback which makes the shareholders happy (Beyer et al., 2023). Additionally, the TCJA resulted in a huge federal budget deficit that was a concern for future interest rate increase and potential barriers to growth. However, they could notpinpoint if the TCJA has been useful or not to the economic growth in the long run.Part 2
When the TCJA was signed into law in 2017, questions about its effects on the US economy arose. Reduced individual income tax may have resulted into improvement of income levels that boosted spending. Also, easier business expensing could have helped capital investment. This increase in demand could have led the GDP growth rate to go up in 2018 from the previous year (O’Connell, 2021). However, the long-term effects of the impact are not yet known. The supporters of lower taxes argues that this led to investment and economic activity pointing to several models that indicate that 1.7% GDP increase (Gwartney et al., 2022). However, critics point out that growth has been inconsistent and the 2019 slow down indicates that the short-term move did not show a sustainable trend.A limitation of the TCJA is its impact on the federal budget deficit. The act also brought concerns towards fiscal stability because it decreased the federal revenue by reducing significant tax cuts (Staff, 2024). They said that with more economic growth, more taxes would be obtained to pay for the cuts, which has not been case so far. This clearly shows that Republicans and Democrats have different economic interests because this legislation was passed along party lines (Kessler, 2023). The Republicans who were in control of the Congress and Presidency at the time claimed the TCJA would benefit the economy and for all citizens. The Democrats were against it, stating that only the rich thrive while inequality increases and debts passed to future citizens. This also shows that political ideology is among the factors that are used in the setting of taxes.References:Beyer, B. D., Downes, J. F., Mathis, M. E., & Rapley, E. T. (2023). U.S. Multinational Companies’ Payout and Investment Decisions in Response to International Tax Provisions of theTax Cuts and Jobs Act of 2017. Journal of the American Taxation Association, 45(1), 35–61. https://doi.org/10.2308/JATA-2020-037Gale, W. G., & Haldeman, C. (2021). The Tax Cuts and Jobs Act: Searching for Supply-Side Effects. National Tax Journal, 74(4), 895–914. https://doi.org/10.1086/717132Gwartney, J. A., Stroup, R. L., Sobel, R. L., & Macpherson, D. A. (2022). Macroeconomics: Private and public choice(17th ed.). Cengage Learning.Kessler, G. (2023, May 16). And the president most to blame for the national debt problem is. The Washington Post. https://link.gale.com/apps/doc/A749435285/GBIB?u=ashford&sid=bookmark-GBIB&xid=0c3dd4d1Martin, C. (2023, February 23). Cantor: National debt and inflation: Tough road ahead. Long Island Business News. https://www.proquest.com/trade-journals/cantor-national-debt-inflation-tough-road-ahead/docview/2780611878/se-2
O’Connell, B. (2021, May 28). What is fiscal policy?Forbes Advisor. https://www.forbes.com/advisor/investing/what-is-fiscal-policy/Staff, T. N. (2024, April 17). Growing deficit and the future of U.S. fiscal policy. Forbes. https://www.forbes.com/sites/taxnotes/2024/04/16/growing-deficit-and-the-future-of-us-fiscal-policy/