ECON 214: Analyzing Mandatory Government Spending via WSJ Article

This report provides an analysis of an article from The Wall Street Journal concerning mandatory government spending, as part of an ECON 214 assignment. The author examines the article's claim that government spending discourages work, referencing the potential impact of increased infrastructure spending on tax rates and labor hours. The analysis incorporates economic theories, comparing the US tax system with those of European nations and considering the effects of higher taxes on disposable income and productivity. The report concludes that increased government spending could negatively affect workers' sentiment and the overall economy, referencing the potential for reduced growth due to infrastructural investment programs.

Running head: MANDATORY GOVERNMENT SPENDING
Lazear, E. (2018). Government Spending Discourages Work. The Wall Street Journal. Retrieved
from https://www.wsj.com/articles/government-spending-discourages-work-1519689547
MANDATORY GOVERNMENT SPENDING
Name of the student:
Name of the university:
Author note

1MANDATORY GOVERNMENT SPENDING
Author’s purpose for writing the article:
Federal tax rate in US is acknowledged as the lowest one among all the G-7 nations that
has aided the country to have sustainable growth (Mishel et al., 2016). According to the article,
lower tax rate of the country has aided it to have long working hours and high growth rate
(Lazear, 2018). It has been observed that lower tax rate has been proved to be good for the
economic development as well has provided better standard of living to the US citizen compared
to its G7 peers, however it has caused high federal deficit. European countries on the other hand
have failed to manage their growth with comparatively higher tax rate and the article points out if
US brings itself into the same trap, then it too will lose its skyrocketing growth rate due to loss in
labour hours (Yamakawa et al., 2015). Main issue that has been highlighted by the article is that,
recently it has been announced by the present US government that they are going to add 500
billion USD into its infrastructural bill and it will subsequently enhance the tax rate of the
country (Kapur, 2018). The article considers the economic relation between higher
infrastructural bill and its consequences on the economy and it has influenced the author to write
the same.
Interpretation of the article with economic theories:
According to the economic theories, there is a strong relationship between the economic
growth and tax rate (Ostry et al., 2014). With aim to invest higher amount of fund into the
infrastructural bill, US government has to collect more tax, which will inherently cause lower
disposable income for the workers. In that condition, workers will prefer to have leisure than
working and it will cause in loss of labour hour (Stebbins, 2017). Reduced labour hour will lead
to loss in productivity and it will not only hamper the economy, in addition it will lead to fall in
the standard of living for the US citizens. From the comparative analysis of the tax rate of US

2MANDATORY GOVERNMENT SPENDING
and EU nations, it can be seen that countries like France, Italy pays 44% to 43% of its GDP as
tax that has caused reduced growth rate for the country due to their infrastructural investment
program (Lazear, 2018). Considering this, it can be stated that, US new enhanced infrastructural
investment program is going to hurt the workers’ sentiment as well as will lead the economy to a
worse condition.

3MANDATORY GOVERNMENT SPENDING
Reference:
Kapur, M. (2018). Trump Says He’ll Spend More Than $500 Billion on
Infrastructure. Bloomberg.com. Retrieved 29 March 2018, from
https://www.bloomberg.com/news/articles/2016-08-02/trump-says-he-ll-spend-more-
than-half-trillion-dollars-on-infrastructure
Lazear, E. (2018). Government Spending Discourages Work. The Wall Street Journal. Retrieved
from https://www.wsj.com/articles/government-spending-discourages-work-1519689547
Mishel, L., Bernstein, J., & Schmitt, J. (2016). The state of working America: 1996-97.
Routledge.
Ostry, M. J. D., Berg, M. A., & Tsangarides, M. C. G. (2014). Redistribution, inequality, and
growth. International Monetary Fund.
Stebbins, R. A. (2017). Between work and leisure: The common ground of two separate worlds.
Routledge.
Yamakawa, Y., Peng, M. W., & Deeds, D. L. (2015). Rising from the ashes: Cognitive
determinants of venture growth after entrepreneurial failure. Entrepreneurship Theory
and Practice, 39(2), 209-236.