The core of Obama’s economic plan is (a) more government spending: $65 billion a year for universal health insurance, $15 billion a year on alternative energy, $20 billion to help homeowners, $60 billion to bolster the nation’s infrastructure, $10 billion annually to give students college tuition in exchange for public service, and on and on; and (b) ending the Bush tax cuts on families making more than $250,000 and raising payroll taxes on those same higher-income earners. He would increase the 15 percent capital gains tax rate—probably to 25 percent—raise the tax on dividends, and close $1.3 trillion in “corporate tax loopholes.”
Explain the potential supply-side effects of the various components of Obama’s economic plan. How might these policies change potential GDP and its growth rate?