IDEAS home Printed from https://ideas.repec.org/p/cwl/cwldpp/1301.html
   My bibliography  Save this paper

Fiscal Policy: Its Macroeconomics in Perspective

Author

Abstract

President George W. Bush is preparing a drastic permanent reduction in federal income and estate taxes. He cites as precedents tax cuts by Kennedy-Johnson 1962-64 and Reagan 1981. In those cases, however, the economy was operating well below full employment and needed a "demand-side" stimulus (even though Reagan advertised his tax reduction as "supply-side"). In 2001, however, the economy is very close to full employment, and if it needs a stimulus at all, it is a quick modest temporary one instead of the large permanent one proposed. And why can't monetary policy do the job of stabilization, as it did successfully in the 1990s? A policy mix that assigns short run demand stabilization to the central bank is for several reasons preferable to a tight-money-easy-fiscal mix. In the case of Reagan and Bush the younger, federal tax cuts are advocated on philosophical and ideological grounds, diminution of the size and scope of government. But formulation of the issue as government versus people is a misunderstanding of democracy and of the reciprocities between public and private sectors.

Suggested Citation

  • James Tobin, 2001. "Fiscal Policy: Its Macroeconomics in Perspective," Cowles Foundation Discussion Papers 1301, Cowles Foundation for Research in Economics, Yale University.
  • Handle: RePEc:cwl:cwldpp:1301
    as

    Download full text from publisher

    File URL: http://cowles.yale.edu/sites/default/files/files/pub/d13/d1301.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Canale, Rosaria Rita, 2008. "Central bank reaction to public deficit and sound public finance: the case of the European Monetary Union," MPRA Paper 8789, University Library of Munich, Germany.

    More about this item

    Keywords

    Fiscal policy; tax reduction; monetary policy; interest rates; policy mix;

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cwl:cwldpp:1301. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Matthew Regan). General contact details of provider: http://edirc.repec.org/data/cowleus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.