Tax Cuts to Revive the Economy - Essay Example

Using the economic terms tackled in class, ways in which tax cuts could help revive the U.S. economy will be thoroughly explained.
Economic Terms that Explains How Tax Cuts could revive the U.S. Economy
The concept of aggregate supply and demand allows us to have a better understanding of the macroeconomic conditions and the impact of implementing government decisions through fiscal policy. Specifically, under the supply-side of economics, it is believed that implementing a significant increase in taxes could affect the entire economy by reducing the possible trading practices among the economic participants within a nation. Because of the sudden increase in government tax collection, the local people will be left with little money to spend on basic consumer goods. As a result of decreased trading practices between people and businesses, potential investors are discouraged from investing more money. Therefore, reviving the U.S. economy through an increase in government tax collection is not possible.

In times of serious economic crisis, implementing a temporary tax cut through the use of a fiscal policy will empower the people to have more money to spend on basic commodities. This particular economic strategy is effective in terms of increasing the aggregate demand for locally made goods and services. Even though the country is going through a serious economic condition, the fact that people are encouraged to continuously spend their savings to purchase locally made goods and services will somehow improve the overall economic situation.

Rather than borrowing large amounts of money from international sources, implementing tax cuts is not a bad choice since the government will still be able to collect huge amounts of tax collection from the business sectors. Basically, the tax multiplier effects of implementing tax cuts are the key to enabling a country to revive a slow-growth economic condition. In the long run, there is a stronger possibility that the economic condition of a country will gradually recover from a poor economic condition since the country will be free from facing the economic consequences of having to pay a huge amount of budget deficits caused by international debts (Papadimitriou & Wray, 2001).

Conclusion
The implementation of tax cuts is a good economic strategy in terms of reviving the economy. Instead of borrowing money from foreign sources to stimulate economic growth, taking advantage of tax cuts will give us better long-term results. Not only would it encourage the people to use their savings to purchase locally-made goods and services but also open new business opportunities for the private and government sectors. Eventually, improvements in local trading will enable the government to collect a sufficient amount of taxes to be used in the improvements of public infrastructures.