Intended Effect of Economic Measures
Many of our contacts report particular difficulty in hiring and retaining lower-skilled workers (who earn wages in a range of 12 to 15 dollars per hour), as well as finding and retaining more skilled workers, who typically require some level of advanced specialized training.
The analysis of tax cuts financed by reductions in government purchases is subject to an important caveat. The models assume that government purchases either represent resources that are destroyed or that government purchases enter utility in a separable fashion from private consumption. For some purposes, like national defense, the latter assumption might be appropriate. In those cases, the cut in spending would reduce households’ utility and thus impose welfare costs but would not affect choices at the margin. However, in all of the analyses, it is assumed that there is no investment component of the government purchases – so the analysis would not be representative of the effects of cuts in, for example, education, research and development, or infrastructure investment.
Feldstein, Martin, and Douglas W. Elmendorf. 1989. “Budget Deficits, Tax Incentives, and Inflation: A Surprising Lesson
from the 1983-1984 Recovery.” Edited by Lawrence H. Summers. Tax Policy and the Economy (3). Cambridge: National Bureau of Economic Research.
Foertsch, Tracy. 2004. “Macroeconomic Impacts of Stylized Tax Cuts in an Intertemporal Computable General Equilibrium Model.” Washington, D.C: Congressional Budget Office.
Gale, William G., and Peter R. Orszag. 2004a. “Budget Deficits, National Saving, and Interest Rates.” Brookings Papers on Economic Activity 2004 (2): 101-187.
National Commission on Fiscal Responsibility and Reform. 2010. “The Moment of Truth.” Washington, D.C: The White House