Towson University’s Outreach Blog

Daraius

Many people mock the two-armed economists, especially as these economists pontificate on the effectiveness of the most recent fiscal and monetary policy solutions to the great contraction. However, this economist firmly believes that the fiscal policy solutions proffered by both parties can and should coexist as they address two fundamentally different problems in our economy—contracting short-term economic growth and sustaining long-term economic growth.

The first and most immediate problem was present when President Obama took office in February 2009; the economy was heading south rapidly. The only indicators which were rising were foreclosures and unemployment.  Our nation was in an economic death spiral. Something needed to be done quickly to stimulate the economy; please note the choice of word: “stimulate,” not “sustain.” I argue, “go big or go home” in regard to the stimulus. (Obviously, my opinion was not sought on this question.) This situation is analogous to discovering your car battery has died. You call AAA to jump start your car. This is a short-term solution as you will buy a new battery rather than continually hope for the timely availability of AAA to jump start your car each time you decide to drive.

At the core of the Republican economic policy, corporations—which believe they have a God-given right to pollute, pay their workers what they want, ship jobs overseas, and pay no taxes, yet they expect subsidies for bringing low-paying jobs to a region, demand a highly educated workforce, and expect that their industry receives federal subsidies for their product—are calling for smaller government, lower taxes, and less regulation. While I agree with these core principles for the most part, I do have qualms about getting rid of regulations. There are numerous anecdotal stories about how government regulations stifled businesses, but we are currently experiencing what happens when there is too little government regulation—mortgage crisis, Deepwater horizon, Bernie Madoff, and Enron, just to name a few.

Photo credit: Renjith Krishnan

My editorializing notwithstanding, the Republican economic platform makes perfect sense to sustain our economy over the long haul. Less is more. The role of the government is to ensure that property rights are safeguarded, laws are passed and obeyed, individuals can engage in commerce freely, and tax policy does not discourage individuals from working harder. On the other hand, the Democratic platform of spending like drunken sailors on leave makes perfect sense to stimulate the economy. Both policies can coexist and should be implemented.

What is stifling a speedy economic recovery vis-à-vis fiscal policy is the uncertainty of government action. When Congress cannot pass a budget until the very last minute with threat of a government shutdown looming or are willing to allow the U.S. to be downgraded, a great deal of uncertainty is created. And while uncertainty makes for exciting movies, novel endings, and thrill rides, it is completely inappropriate for long-term business planning. This is the environment in which we are currently, and until both parties realize that their policies can coexist and that acceptance of one or the other does not imply that they are violating their core political beliefs, the economy will continue to limp along.