One person's spending is another's income

CAROLINE BAUM

Gloom about US growth persists, but the cycle seems to be taking a favourable turn

Doom-laden stories about the death of the US expansion persist. "The same people who said four months ago that the Bush tax cut would be saved or used to pay down debt, and who were 100% wrong, now argue there will be no multiplier effect," says Bob Barbera, chief economist at ITG/Hoenig. "There will certainly be more bang than a one-time effect." The Bush tax cuts were designed to work not through short-term spending but long-term incentives to work and invest. The desired response to these so-called supply-side tax cuts gets lost in the model of spend what you get. Not so fast, the naysa...