Save or spend
For a long time now this country has been faced with a rather large deficit. Whether you believe the deficit was caused by the Bush Administration, global problems, or even the banking issues, the point still remains that we have a serious crisis that needs to be dealt with. Obama is moving forward with his plan to instill confidence in the consumer and provide hard money to business in an attempt to help the country. There are a few different methods to help boost the economy, as we have seen with what Bush tried to do and now Obama. I come from a firm belief that the economy should, in time of need, be helped out by the government when things turn bad. This is obviously straight from Keynesian Economics, which is what is being used today, in some form. This is just my belief, as many theorists have pointed out, there is not one way to balance the budget, and the success of the theory depends on a lot of different things occurring in the country. Furthermore, I believe that the government should not just spend or cut in order to balance the budget. I believe that the budget should have both occurring simultaneously, meaning that some programs will need to be cut, while others should get more money. What do you guys think?
· Which theory do you prefer?
· Do you believe that the government has no place in the economy and that things will eventually work themselves out?
· Would you take a spending or cutting approach in order to balance the economy, or both?
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I agree that the government should help to stimulate the economy when things turn bad; however I believe there should be some level of control involved. A wait and see attitude would not be beneficial but there comes a time when you wonder whether we are throwing good money after bad.
ReplyDeleteIronically, right now is a great time to have this course discussion in light of the President’s budget that was released today. Specifically, if you follow the money trail from the federal to state level the proposal would allocate additional stimulus funding to state governments that balanced their current budgets to some degree with the previous stimulus. This process exacerbates the spending or cutting dilemma at both levels of government that are discussed by both Wildavsky and Ruben. Whether Democrat or Republican it seems most politicians take the approach of robbing Peter to pay Paul rather than providing a clear description of where cuts will be made to offset decreased revenues that result from tax cuts. Or why programs cannot be cut rather than increasing taxes.
While not completely to blame, I have to wonder about the long term benefit another federal stimulus will provide to state governments that are struggling to balance their budgets. Is another stimulus necessary or should they be forced to make some tough decisions based on the revenue streams available without more federal money?
As an armchair quarterback that has never held an elected office, at this point in time I would have to think long and hard about what can be cut before spending more.
I also agree that there are most certainly times where the government does need to get involved and help to stimulate the economy. So i guess I'm in favor of spending, but there has to be some kind of a plan for where that spending money is going to come from eventually.
ReplyDeleteI honestly don't know what to think about the budgeting gimmicks and as Phil put it "robbing Peter to pay Paul." Rubin discusses it like its not that big of a deal that some years they include things that aren't meant to be and other years things that should technically be included are not. How does anyone ever actually know what the deficit is? I supposed that question really sums up why they do it,(You can't get blamed for something if no one knows how big the problem REALLY is.)
I think that most agree there must be some kind of spending to bring about change during recessions and depressions. Look to history for examples, most historians agree that The New Deal didn't necessarily have its intended effect. Most would suggest that WWII is what actually ended the Depression. I don't think that the jury is in on Keynesian economics. Stimulus packages have not always worked well just as they failed in Japan several times in the 1990's. I don't look at this as a liberal or conservative argument, because President Bush used a stimulus package to try and push the economy out of recession. Arguably, the stimulus during his first term worked well as the economy stayed strong until the end of his Presidency. Ed you suggested that there could have been several motivating factors that caused the economy to fizzle at the end of Bush's Presidency. Personally, I think that it was the banking crisis. Not only did it have the economic effect, but it also had the psychological effect on the American consumer who began to have less faith in the Dollar. President Bush's next idea for a stimulus came at the end of his Presidency, and was passed on the President Obama. The debt is approaching 10 trillion and has no sign of slowing. I think that as Phil stated, we need to take a wait and see attitude toward our current spending. I am thinking about what would happen if the spending does not serve it's intended purpose and we are stuck with a massive debt to pay off over the next 50 years. Would that crash the dollar? Would we be able to actually pay the debt down with a mediocre economy? Then again if we don't act now and quickly with a massive spending package, will those same things happen?
ReplyDeleteMulti more remarkable creativity continued
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