Professor Roach is deceiving himself and the nation by promulgating the "household analogy" for federal financing. It is a macroeconomic basic principle that growth = spending - expenses.

The fiscal deficit is spending beyond the tax take by the federal government. This is a budget deficit in the annual accounts. So reducing tax does raise the deficit, but unless the economy is in a boom[and it is far away today] the increased deficit is a welcome lift for the economy. The problem comes because the tax break is not aimed at lifting aggregate demand, but at the already wealthy corporations and individuals. The boon to them will have little effect on aggregate demand. Rather it will go into the finance sector by preference. It will have at best a marginal benefit for employment and almost none in the high street. As for improving competitiveness that is easily trumped by incentives and subsidies by competitors.



At least the tax will not have to reduce federal spending on welfare and education etc. Taxes do not serve as revenue for the Federal government. It spends new every single time, and being monetary sovereign cannot be limited in its ability to spend, or, better, to buy whatever is for sale at any given time, thanks to the Constitution.