Latest / The Fiscal Policy Podcast with Fexingo: Government Budgets, Stimulus, and Public Spending
How Fiscal Drag Slows Economic Growth
Lucas and Luna explore the concept of fiscal drag, a subtle but powerful force that siphons purchasing power from households as inflation pushes them into higher tax brackets. We break down how automatic adjustments in withholding tables can quietly reduce disposable income even when nominal wages rise, effectively acting as an unintended brake on consumer spending. By examining the mechanics of marginal tax rates and real wage stagnation, we reveal why some economists argue that current budget policies are inadvertently cooling demand. This episode connects abstract fiscal theory to the very…
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