Washington: Cutting taxes on business investment is an effective form of economic stimulus that could go a long way toward mending the damage from the financial crisis and Great Recession, a top Federal Reserve official said yesterday.
In prepared remarks that did not touch on monetary policy, Minneapolis Federal Reserve Bank President Narayana Kocherlakota told a National Bureau of Economic Research conference that even apparently permanent damage to the economy can be reversed if policymakers are willing to take appropriate steps. He said: “The future course of the US economy is not predetermined by the events of the past seven years,” Kocherlakota said at the meeting.
As long as policymakers are willing to make tradeoffs, including accepting a drop in consumer spending, they can use a reduction in the tax rate on physical investments to effectively reverse the decline in business investment and boost overall growth. Reuters
