Two Questions
So there are a couple of things that keep coming up in my class and I wanted outside input. The first one is that my teachers are all very insistent that the tax cuts did not increase tax revenues, but made the budget deficit worse. This assertion is contradictory to all the other sources I’ve seen on the subject, but they are more pro-Republican than anything else. I tend to disagree with my teachers, because the statistics I’ve seen all show tax revenues growing significantly during a tax cut, but the spending grows even faster. But if anyone else has seen something different, I’d like to know about it.
The second one concerns one of the models that keeps coming up in another class: the export base model. It states that in order for growth to happen, you need to export more than you import (more or less), and then a multiplier effect occurs that causes growth. Personally, I think it stinks. I sat for two days on one person’s version of the math behind it and found two math errors (Defining two different terms with the same symbol then subtracting them to zero as well as essentially dividing by zero to get growth to occur) surrounded by a bunch of useless and unnecessary math. It conceptually doesn’t make sense, because as one book pointed out, given the global exports are zero, growth would be impossible. It also showed no actually linkage to why exports would cause GDP to increase and ignored monetary phenomena. Furthermore, it is not empirically shown to be true at all. But once again, I wanted to know if I’m just completely missing the boat on this theory, if there is something to it. It is the model that I really railed on in class, but it is also the main model for class. So for the purposes of class, I kinda pushed the “I believe!” button and roll with it for now.
