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Fiscal Policy For the Coming Recession: Large Tax Cuts are Needed to Prevent a Hard Landing

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  • Dimitri B. Papadimitriou
  • L. Randall Wray

Abstract

Growing government surpluses, a ballooning trade deficit, and the resulting growth in private sector debt have placed the U.S. economy in a precarious position. Papadimitriou and Wray agree with President George W. Bush that fiscal stimulus is necessary to reinvigorate the economy; in the current economic environment, monetary policy will not work. However, a tax cut that would adequately stave off a downturn needs to be substantially larger than that proposed by the president. Therefore, in addition to the president's proposal to cut marginal income tax rates, the authors include among their recommends a payroll tax reduction and an expansion of the EITC.

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Paper provided by Levy Economics Institute in its series Economics Policy Note Archive with number 01-2.

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Handle: RePEc:lev:levypn:01-2

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  1. Dimitri B. Papadimitriou & L. Randall Wray, . "What to Do with the Surplus: Fiscal Policy and the Coming Recession," Economics Policy Note Archive 98-6, Levy Economics Institute.
  2. L. Randall Wray, . "The Emperor Has No Clothes: President Clinton's Proposed Social Security Reform," Economics Policy Note Archive 99-2, Levy Economics Institute.
  3. Wynne Godley & L. Randall Wray, . "Can Goldilocks Survive?," Economics Policy Note Archive 99-4, Levy Economics Institute.
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Cited by:
  1. Dimitri B. Papadimitriou & L. Randall Wray, . "Are We All Keynesians (Again)?," Economics Policy Note Archive 01-10, Levy Economics Institute.
  2. Wynne Godley & Alex Izurieta, 2001. "As The Implosion Begins . . .? Prospects and Policies for the U.S. Economy: A Strategic View," Economics Strategic Analysis Archive 01-7, Levy Economics Institute.
  3. Alex Izurieta, 2001. "Can Countries under A Common Currency Conduct Their Own Fiscal Policies?," Macroeconomics 0108008, EconWPA.
  4. Greg Hannsgen & Dimitri B. Papadimitriou, 2009. "Fiscal Stimulus, Job Creation, and the Economy: What Are the Lessons of the New Deal?," Economics Policy Note Archive 09-10, Levy Economics Institute.

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