As the proponent of the “Peace → Prosperity → Security (P→P→S)” formula, I understand the economic implications of policies like eliminating income tax.
Here’s how this ties in with my formula:
- Impact on Economic Models: Removing income tax could unbalance models like the IS-LM and AD-AS, which are critical for understanding national income, interest rates, and overall economic stability.
- Fiscal Deficits: Without income tax, there’s a risk of fiscal deficits, affecting our government’s ability to fund crucial services.
- Economic Stability: Stability is essential for prosperity, which in turn is vital for societal peace and security.
My formula supports the idea that maintaining economic stability, which includes prudent fiscal policies like retaining income tax, is crucial for the well-being of our society.
In explaining how the elimination of income tax relates to the IS-LM and AD-AS models:
- IS-LM Model: This model illustrates the interaction between the real economy (investment-savings, IS) and the money market (liquidity preference-money supply, LM). Removing income tax could shift the IS curve due to changes in government spending and taxation, impacting national income and interest rates.
- AD-AS Model: The Aggregate Demand-Aggregate Supply model shows how total spending (aggregate demand) and total production (aggregate supply) interact. A sudden change in fiscal policy, like eliminating income tax, could shift the AD curve, potentially leading to inflation or economic contraction.
Both models indicate that abrupt fiscal changes can destabilize the economy, impacting the path from Prosperity to Peace and Security. For more in-depth information, you can visit my campaign website.