Question A Day

A blog post out there on the Interwebs asked what question you might ask in one of the Presidential debates. I’m going to try to post, uhm, one every day or so.

Question: One of the oft spoken assumptions about the current election is the major issue for the voters is the economy and employment. Can you identify the most important policy changes we need to push in order to put the US on the right track. Please identify just two, the most important item on which you believe you and your opponent are in agreement and the most important one on which you do not agree.

 

(edited for clarity slightly)

3 Responses to Question A Day

  1. Aggregate demand should be increased. That is a simple, small gov’t solution to the recession. All other economic problems cannot be addressed unless you’re running the economy at full employment.

  2. Boonton,
    Well, that was vague enough as to be meaningless. Let’s see, you are debating someone on the other side? What is the most important thing that you think we should do on which we agree? What is the one on which we disagree? Wasn’t that the question?

  3. It’s not at all vague, increasing aggregate demand simply means increasing spending. We could debate how that should be done. The most surefire direct way is direct gov’t spending since you know the spending will happen. Tax cuts and transfer payments are easier to scale up quickly but are less potent to increase spending since individuals may choose to save rather than spend the money they get. Monetary easing is the least effective policy since it is very easy for the financial system to channel even a huge amount of newly created money into paper rather than actually increasing demand.

    But as I mentioned to JA once, these policies are essentially costless in a recession so there’s no cost to an ineffective policy. If you extend the Bush tax cuts to the rich and that costs $100B and the rich save all that rather than spend it, the only bad thing is you could have got more recovery with another policy but that’s only if the political system is limiting the amount of stimulus you can do.

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