A decrease in transfer payments works like a tax hike because it reduces the level of disposable income.

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Transfer payments, such as social welfare programs, provide individuals with additional income that they can use for consumption or savings. A decrease in transfer payments means that individuals will have less disposable income, which would have a similar effect to a tax hike. Both decrease the amount of money that individuals have to spend or save.

A Decrease in Transfer Payments Works Like a Tax Hike