Spending has fallen and unemployment is rising. The government has room for one main budget measure this year. Compare the options.
Spend more on infrastructure
- Construction workers: New projects create jobs quickly once started.
- Economy: Better transport raises productivity for years.
- Timing: Large projects take time to plan, so help may come late.
Infrastructure spending raises total demand and long-run capacity, but can be slow.
Cut income tax
- Working households: More disposable income to spend.
- Low earners: Those who pay little tax gain little.
- Government: Lower revenue widens the budget deficit.
A tax cut raises demand quickly, but households may save part of it.
Give cash payments to low-income households
- Low-income households: Direct help when they need it most.
- Economy: Low-income households spend most of what they receive, boosting demand.
- Government: Adds to the deficit and needs targeting to reach the right people.
Targeted transfers raise demand and reduce hardship, but cost money and need careful design.