It Has Been Argued That, "A Tax Cut Must Be

Multiple Choice

It has been argued that, "A tax cut must be followed later by a tax increase to pay for the resulting deficit" is the self-fulfilling prophecy of those who use it to predict that an income windfall from a tax reduction must be temporary. The argument can be supported by

A) appealing to forward-looking consumption theory, which predicts that a temporary increase in income produces only a small increase in consumption.
B) noting that small consumption increases produce very little economic stimulus.
C) recalling that larger than expected gaps between actual and potential GDP mean larger deficits spawned by enlarged transfer programs and reduced tax revenues.
D) all of the above.
E) none of the above.