Government spending boosts economy, while tax hikes hinder investment growth.
The study looked at how changes in government spending and taxes affect the economy in the US after World War II. They found that when the government spends more money, it usually boosts the economy, but when taxes go up, it tends to slow down economic growth. The impact of these changes on the economy is usually small. Surprisingly, both higher taxes and increased government spending have a negative effect on investment in the economy.