akuma587 said:
Extremely valid point. This is why something like a payroll tax cut wouldn't be as effective as an increase in government spending. When the government spends money on something, at least 80-90% of that initial spending will go directly to domestic spending (assuming its not being used for something like waging a war abroad). Now some of that money they spend may turn around and be sent overseas when the people who receive that money the goverment spends (i.e. employees of a construction firm or teachers working for a school) go to Wal-Mart, but that dollar has already been spent once in the economy and has had more of an effect than if you had given that money directly to that person who went to Wal-Mart. If you just cut payroll taxes, people would go to Wal-Mart and spend that money which would get shipped overseas with out as much of a domestic boost. That dollar would ripple through the domestic economy a less than in the previous example and have a smaller multiplier effect. This was why any economic stimulus plan that revolved solely around tax cuts was foolish and less helpful to the economy than a plan that used predominantly spending and tax cuts as a secondary stimulus measure.
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That I agree with. Not even sure why we had a tax cut... I guess to balance negative feelings of spending so much. Not that it's helped much.
Not sure enough of it is going to stuff that will actually stay in the country.
