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In reply to the discussion: Tax holiday expiration hitting low-income Americans hard [View all]jmowreader
(50,557 posts)Historical data actually shows that the best way to boost an economy in a meaningful fashion is government spending, not tax cuts of any sort.
Here's why.
Government spending has two important features: it's done in the private sector, and they spend large amounts of money in one place.
If we were to take $10 billion and spread it out among the people who filed the approximately 144 million tax returns submitted in 2012, each taxpayer would receive about $70. You can't do anything really interesting with seventy bucks. And I will admit, it will look great in the paper: "Spending goes up by $10 billion in 2Q2013!!!" Until you realize half the money was spent paying credit card bills and the other half went to about five million different stores...
This would be like punching you in the face with 100 foot-pounds of thrust, but doing it in thousands of two-ounce taps. Eventually the person punching you will get bored and leave.
The government, OTOH, has no problem with figuring out ways to spend the $10 billion in two or three different places even if they didn't give it to the Navy. If HHS was given $10 billion to spend on new cars they won't go to every car store in America and buy two at each, they'll go to Ford and tell 'em, "we want $10 billion worth of Tauruses delivered in the next six months." Ford will then have to add another shift at the Taurus factory to fill the order in the time allowed...which means jobs at the Taurus factory, jobs at a tire plant, jobs at the paint factory, jobs with the trucking companies that haul windshields and seats...
This is like punching you in the face with the same amount of thrust, but doing it with the end of a half-inch dowel. You'd probably leave a hole doing it like that.