Ch. 23 Reflection: 6 Debates Over Macroeconomic Policy

Ch. 23 Reflection: 6 Debates Over Macroeconomic Policy

            I really enjoyed this last chapter. I found the debate over whether the government should focus attention on spending or tax cuts to shorten and reduce the impact of a recession very interesting, and I see the benefits to both. Although, I believe the numbers that government spending leads to a “bigger bang for the buck” than tax cuts, as the Obama administration found out from a computer simulation that showed them that each dollar of tax cuts would increase GDP by $.99 but each dollar of government purchases would increase GDP by $1.59! One way that I changed my thinking is that if Americans realized the total impact of a presidential election, in who that president appoints to offices that we don’t elect, like the chairman of the Fed and the Supreme Court justices, then perhaps Americans would be less apathetic about voting and instead show up to the polls more often, because it’s their income, wealth, and retirement on the line.

            I found the debate on if the “Central Bank Should Aim for Zero Inflation” very interesting. I especially found the story about how a 2% inflationary target became so common to be surprising and a little unsettling. After finishing the chapter, I believe Janet Yellen’s argument that a 2% inflationary target is a good start and that this can help “grease the wheels” of the economy in a recession by keeping wages stagnant through the downturn which could lead to fewer layoffs and reduction of hours. I also wonder if a 3-4% target would potentially be better for the overall economy?  

          I found the debate on whether or not “The Government Should Balance Its Budget” interesting, but the Pros outweighed the Cons by a long shot. I believe that it is every American’s responsibility to reduce our deficit and maintain a budget that is either balanced or reducing the deficit unless we are experiencing war or severe economic distress like the Great Recession. This was my big take away from that argument, “when the government increases its debt, future generations are born into an economy with lower incomes and higher taxes”. I wouldn’t wish that on any future generation and it’s time that we rein in our spending and tax the wealthy and corporations their fair share.

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