Essay on The Economic Theory Of The National Debt

1376 Words Nov 17th, 2016 6 Pages
Throughout the last few decades, the national debt has become an issue of dissent for politicians. Conservatives have continuously pushed for a balanced budget. With a stance of lowering taxes, opponents dispute how fiscal conservatives can actually balance the budget, as it is difficult to balance the budget while also lowering taxes. The loss of tax revenue, without economic growth, puts more pressure on the government to fund programs and expands the debt required to fund current government spending. However, according to the economic theory – the Laffer Curve – proposed by Chicago economist, Arthur Laffer, it is possible that a decrease in taxes for businesses and citizens could theoretically cause a reaction of business entrepreneurship and investment that would cause an increase in tax revenue, even though the tax rates would decrease. This is due to the increase in technologies and productivity with the additional capital from increased net earnings According to the theory, there is a maximum revenue point where the tax rate is at an optimal level where workers have an incentive to earn more without the believe that their increased earnings will not go straight to taxes. However, opponents continue to argue that a decrease in taxes would result in increased deficit spending; and rather, call for an increase in income taxes on the upper class to supplement deficit spending. An increase in tax revenue by taxing the upper class could be done in a couple of ways: by…

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