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Letters: Giving back to the poor

Business Standard  |  New Delhi 

Abheek Barua’s column “What Obama means for the markets” (World Money, November 12) provides a very lucid analysis of the positive effects of Obama’s re-election on the world economy. It is, however, difficult to agree with its analysis of the looming US fiscal cliff.

The already-mandated end of tax cuts on those earning above $250,000 per year and the US government spending cuts (possibly of wasteful defence expenditure), may take away roughly $600 billion, i.e. above four per cent of the US GDP (Gross Domestic Product), from the US public by end-January 2013 — but that amount will accrue to the US Treasury. There is no reason why most or all of this money cannot be spent to the weaker sections of the US public. The advantage of giving money to the weaker sections is that it gets spent quickly, and results in a much higher Keynesian multiplier effect on GDP growth than money in the hands of the rich. Republicans may be reluctant to acknowledge this — but if they oppose it beyond a point, the Republican Party may head into oblivion.

Alok Sarkar Kolkata

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First Published: Tue, November 13 2012. 00:03 IST