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Supply Side and Demand Side

SupplySide and Demand Side

Thearticle “The Great: Stimulus- Supply Side or Demand Side” iswritten by Prof. Casey Mulligan and Prof. Menzie Chinn. They debateon the positive and negative impacts of provisions in the new tax lawto employers and employees. They mainly focus on the effects ofpayroll tax where Casey urges that it depends on Keynesian economicsthat describes the economy while Menzie urges that it has little orno effect on the economy. The authors use various models to analyzethe article.

First,the article is partitioned into two different sections. Prof. CaseyB. Mulligan, an economics professor writes the first section. Hestrongly agrees that tax cut increases employee earnings (Mulligan &ampChinn 1). The second section is written by Menzie Chinn, a publicAffairs and economic Professor and Robert M. Lafollette, a lecturerat University of Wisconsin, Madison. In the article, professor Menzieclaims that payroll taxes have little or no effect on output eitherin sticky price Keynesian or in the new Keynesian models.

Secondly,the authors use diagrams and tables to explain his points. Forinstance, Prof. Menzie uses figure one to elaborate on the policiesand their effect on increasing economic growth and employment in ashort term. From the diagram, he can easily explain how reducingpayroll tax is a fair method of stimulating the economy by assessingthe demand side. Similarly, from table 1 “The Tax Compromise: It’sComplicated, Macroeconomic Advisers” Menzie explains therelationship between high tax and EGTRRA/JGTRRA’s extensionprovision to households.

Lastly,the authors use actual facts to explain their points. Prof Menziestates that in 1983, employers and employees each contributed to 6.2percent of their payroll to the treasury in United States (Mulliganet al. 1). Additionally, he states that president Obama proposed thereduction of employees’ contribution rate from 6.2 to 4.2 percentin 2011. From his information, Prof. Menzine proofs that payroll taxcontributes sparsely to the economy.


MulliganCasey, &amp Chinn Menzine. The Great: Stimulus- Supply Side orDemand Side? Retrieved fromhttp://econintersect.com/wordpress/?p=3925