http://worldcat.org/entity/work/id/10003015

Tax cuts, the business cycle, and economic growth a macroeconomic analysis

With reports of an economic downturn, support has been mounting for an additional tax cut this year to stimulate the economy. Regardless of the implications of tax levels and structure for equity, fairness, intergenerational debt burden, and the role and size of government, any tax reduction will affect the macroeconomy. In the short run, tax cuts that are funded through a reduced surplus increase aggregate demand and influence the business cycle if they are spent. If the economy is operating at full capacity, the boost in aggregate demand will quickly be dissipated through higher interest rates, inflation, and a larger trade deficit. If a tax cut is meant to prevent a recession by providing a short-term stimulus, its efficacy should be judged by how much spending (or dissaving) it generates. The efficacy of a tax cut that is meant to boost long-run growth should be judged by how much additional work, net saving, and investment it generates.

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