President G. W. Bush's tax cut plan: Will it help revive the economy?

[echarcha]

Just yesterday, President George W. Bush announced his plans to have a retro-active tax cut across the board. He urged the Congress to support this inititiave as this would allow customer spending to increase; and in turn the economy would start improving.

Well, I am no economics guru, so could you please enlighten me and other eCharchans on this topic?

[echarcha]

??

[smellyfinger]

Echarcha,

What Dubya is trying to do is to resurrect the economy by inducing people to spend more by giving them tax cuts and hence more money in their hands.

There is a long standing financial theory "The Paradox of Thrift", which in essence states that people not spending is the worst thing that can happen to an economy. When people start to save money, instead of spending it, all businesses start to suffer. Thrift is a mental state of the consumer except in case of extreme recession / depression. Even when the economy is booming, if the consumers stop spending, the economy can slow down tremendously.

There are many ways that govt can try and counter this. 2 examples are :

1. Lower interest rates - This helps people and businesses get loans at lower interest rates, so they spend more.
2. Give tax cuts / breaks. This actually has more to do with the mental state of consumers. They suddenly think they are going to have that little extra money, so they spend it more freely.


Here is a link where you can check how Dubya's proposed plan will affect you if it comes to fruition.

http://www.cnn.com/2001/ALLPOLITICS/....03/index.html

Click on the "How will Bush' proposal effect your tax bracket" link under the Interactive section.

[viking]

Assuming that these tax cuts will induce confidence in investors.Will we see the revival of dot coms?.Maybe dot coms with better revenue generating models?

... to ask congress to give a tax break to working Americans.

The money will go to consumers and will find its way into the economy via spending. That will certainly help the ailing retail sector as consumer confidence is very low these days.

But the effects of tax relief are not likely to come soon, let alone if congress ever passes it and in what amounts.

The dot coms will take time to come back and some may never come back at all. A lot of companies which tried to cash in on VC financing followed by an IPO will not be able to repeat that.

[gandesh]

see my thread about regan... dubya is doing the same crap all over again... ... i don't think it will help but then it doesn't matter to me now so...

ever, surpassing even Kennedy and Lincoln (and of course comedians' favorite Bill Clinton).

The Reagan-Bush ticket won the highest number of popular votes ever in a presidential election. There was a documentary recently on CNN "The Reagan Years" that showed about his 8 years in the oval office.