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To Starve or Not to Starve the Beast?, Michael Kumhof, Daniel Leigh, Douglas Laxton

For thirty years prominent voices have advocated a policy of starving the beast cutting taxes to force government spending cuts. This paper analyzes the macroeconomic and welfare consequences of this policy using a two-country general equilibrium model. Under several strong assumptions the policy, if fully implemented, produces domestic output and welfare gains accompanied by losses elsewhere. But negative effects can easily arise in the presence of longer policy implementation lags, utility-enhancing government spending, and productive government capital. Overall, the analysis finds no support for the idea that starving the beast is a foolproof way towards higher output and welfare
Table Of Contents
Cover Page; Title Page; Copyright Page; Contents; I. Introduction; II. The Model; A. Households; B. Firms; 1. Manufacturers; 2. Distributors; 3. Retailers; C. Government; 1. Fiscal Policy; 2. Starving-the-Beast; 3. Monetary Policy; III. Calibration; IV. Welfare; A. Benchmark Welfare: No Government Spending in Utility; B. Alternative Welfare: With Government Spending in Utility; V. Results; 1. Base Case; 2. Slower Expenditure Adjustment; 3. Government Investment Cut; 4. Capital Income Tax Cut; 5. Longer Planning Horizons; 6. Inelastic Labor Supply; 7. Undoing the Tax Cut
Literary Form
non fiction
"August 2010."
Physical Description
1 online resource (59 p.)
Specific Material Designation
Form Of Item

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