Article;
Barack Obama Warns of Risks over Budget Cut Uncertainty
Comment;
Fiscal policy to
cut through recession and liquidity trap in the US has very limited room left
to stimulate the economy because it is already serving too much. During the
worst recession since 1930s the government could not afford to pump money in
real activities that could create employment and demand. America is at
crossroads. At one hand it needs to spend on employment creation and at the
other it has to cut back on its expenses. At third, it can levy more taxes to
pay deficit/debt, actually when it has to cut down to boost aggregate demand,
fourth. Income tax rates in the US are high compared to INDIA. Keynes, as far
as I read books, advocated fiscal policy during a crisis. I do not think he would
be a man who would advise for fiscal policy during a non crisis period. Some
other may, because of Social Security if prices are high. Even Milton Friedman
said that every single penny the government spends will produce little
inflation. Both are conveying that we, actually, do not need fiscal policy
during normal times. We have exploited that situation too much; we have used
fiscal policy too much. And when we actually need to use it we are lacking
options. And, cutting back on expenditure will mean this time that when the
economy needs support we are actually withdrawing it. It will only hurt
aggregate demand and consumer spending. We need more income, not less.
Everybody needs it…
No comments:
Post a Comment