When it comes to deciding which has the biggest bang for the buck -- a tax revamp or infrastructure spending -- it all comes down to the details, and to a certain extent the political affiliation of the economist making the call.
Economists generally agree that both can boost growth if they’re designed and timed well. They disagree, though, over which can have the most and longest-lasting economic impact, with Republicans generally favoring lower taxes and Democrats backing higher outlays on roads and infrastructure.
For now, President Donald Trump is siding with his fellow Republicans and is pushing for an overhaul of the tax code, at least temporarily shelving his campaign call for increased infrastructure expenditure. Although many of details still need to be filled in by Congress, the Trump proposal would slash taxes for companies and simplify the tax code for households.
“We can breathe new life into struggling industries and forgotten towns,” Trump said on Wednesday, touting his tax proposal in a speech in Harrisburg, Pennsylvania, to a group of truck drivers.
Economic history is replete with examples of tax and spending changes that didn’t accomplish what was intended. Japan has spent trillions of yen building roads, bridges and airports in recent decades but has little to show for it except a massive increase in government debt. Many of the projects were in less-populated parts of the country and were designed more to curry favor with key political constituencies than to boost growth.
Economists generally agree that both can boost growth if they’re designed and timed well. They disagree, though, over which can have the most and longest-lasting economic impact, with Republicans generally favoring lower taxes and Democrats backing higher outlays on roads and infrastructure.
For now, President Donald Trump is siding with his fellow Republicans and is pushing for an overhaul of the tax code, at least temporarily shelving his campaign call for increased infrastructure expenditure. Although many of details still need to be filled in by Congress, the Trump proposal would slash taxes for companies and simplify the tax code for households.
“We can breathe new life into struggling industries and forgotten towns,” Trump said on Wednesday, touting his tax proposal in a speech in Harrisburg, Pennsylvania, to a group of truck drivers.
Economic history is replete with examples of tax and spending changes that didn’t accomplish what was intended. Japan has spent trillions of yen building roads, bridges and airports in recent decades but has little to show for it except a massive increase in government debt. Many of the projects were in less-populated parts of the country and were designed more to curry favor with key political constituencies than to boost growth.