Study: government spending better for economic growth than tax cut

Economist Dean Baker (Co-Director of the Center for Economic and Policy Research) has run the numbers on the relative payoff of two economic stimulus proposals: increased government spending, or a cut in taxes.

The result? $100 billion of additional government spending will lead to 1 million additional jobs, while a temporary cut in payroll taxes will generate 860,000 jobs. By contrast, a $100 billion cut in corporate taxes will lead to just 200,000 new jobs.

The paper also projects that a $100 billion increase in spending will cause the overall unemployment rate to drop by 0.5 percentage points. A reduction in the payroll tax of the same size will lead to a 0.4 percentage point drop in the unemployment rate, while the same cut in corporate taxes will cause the unemployment rate to fall by just 0.1 percent.

See the full brief here – 2 pages, an easy read.

  • Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

More To Read

May 19, 2025

A year of reflections, a path forward

Read EOI Executive Director's 2025 Changemaker Dinner speech

March 24, 2025

Remembering former Washington State House Speaker Frank Chopp

Rep. Chopp was Washington state’s longest-serving Speaker of the House

February 11, 2025

The rising cost of health care is unsustainable and out of control

We have solutions that put people over profits