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The minimum wage reduces inequality, particularly among the lowest earners (Engelhardt & Purcell, 2021; [90] Autor & Smith, 2016 [91]). In February 2014, the Congressional Budget Office (CBO) analyzed the impacts on employment and family income of two options (the $10.10 option and the $9.00 option) for increasing the federal minimum wage.
The budget deficit increased from $665 billion in 2017 to $779 billion in 2018, an increase of $114 billion or 17%. The budget deficit increased from 3.5% GDP in 2017 to 3.9% GDP in 2018. Compared to the budget deficit of $487 billion forecast for 2018 by CBO just prior to Trump's inauguration, the actual budget deficit was up $292 billion or 60%.
Two-person welfare maximization at the tangency of the highest Welfare function curve on the Possibility function is analogous to tangency of the highest indifference curve on the budget constraint. Kenneth Arrow 's 1963 book demonstrated the problems with such an approach, though he would not immediately realize this.
Income inequality has fluctuated considerably since measurements began around 1915, declining between peaks in the 1920s and 2007 (CBO data [2]) or 2012 (Piketty, Saez, Zucman data [15]). Inequality steadily increased from around 1979 to 2007, with a small reduction through 2016, [2] [16] [17] followed by an increase from 2016 to 2018. [18]
The concept of a fiscal straitjacket is a general economic principle that suggests strict constraints on government spending and public sector borrowing, to limit or regulate the budget deficit over a time period. Most US states have balanced budget rules that prevent them from running a deficit.
Kraja, Lirëza and Morelli [72] have concluded that while a progressive tax framework may be more effective in achieving policy objectives like reducing income inequality and boosting government tax revenue, policymakers must carefully weigh its impact on investment and entrepreneurship and implement strong tax administration and enforcement ...
Federal taxes also reduce income inequality, because the taxes paid by higher-income households are larger relative to their before-tax income than are the taxes paid by lower-income households. The equalizing effects of government transfers were significantly larger than the equalizing effects of federal taxes from 1979 to 2011. [112]
75) ("An imbalance between rich and poor is the oldest and most fatal ailment of all republics"), and even the father of the free market, Adam Smith (who warned of "great inequality" where "civil government" is "instituted for the defence of the rich against the poor") (p. 82).