Politics and the Economy
As we have written previously, the economy is a complex beast that is hard to predict, and our government takes a role in trying to make things more predictable for us, the American people. However, the two major political parties have differing opinions on how involved the government should be in the economy, which is what we will cover here.
The Democratic Party is generally described as anywhere between “economically liberal” to “economically progressive.” Simply put, they are generally the “pro-intervention” camp when it comes to the economy.
Overall, Democrats are in favor of ensuring that the economy is equitable for all Americans, particularly the middle class and marginalized communities. Their argument is that when the economy works for everyone, it makes the economy work even better. This means Democrats are more in line with policies that seek to redistribute wealth to help the most amount of people. This includes public assistance programs such as food stamps, public services like public education and housing, and programs such as Social Security, Medicare, and Medicaid. They are also in favor of better representation for average workers through labor unions.
Democrats generally also favor government regulation of industries to to make sure the market remains competitive, goods and services don’t harm their consumers, workers aren’t abused by their employers, and social benefits are actually used to benefit consumers.
Of course, in order to pay for such programs and regulations, Democratic governments often have to spend more money to implement such programs. Normally, Democratic legislators advocate for higher taxes on wealthy individuals and corporations to “make them pay their fair share”, rather than cut into government programs. This “progressive tax” system has been consistently mentioned in Democratic campaigns. However, due to various mitigating factors (ie tax evasion and tax loopholes), these tend not to work, and force Democratic governments to rely on budget deficits, where the government spends more money than it takes in within a specified timeframe, adding to the National Debt.
As for the Republican Party, they are more of the beliefe that government regualtions hurt the economy, thinking that things are better with a “hands off” approach, allowing companies to regulate themselves.
This idea relies on Reaganomics, a school of thought popularized by President Ronald Reagan. The concept relied mainly on the notion of “supply-side economics,” where suppliers that make goods were the source of economic activity and prosperity. This contrasts with “demand-side economics,” which talks about how the driving factor of economic activity comes from consumers, rather than suppliers. Using the idea of supply-side economics called for government policies that made production more efficient; in other words, with less hurdles or government intervention.
This gives way to the modern Republican views on the economy, where taxes are low and regulations are not all that intrusive. This also means there is opposition to welfare programs, as some in the party believe that such programs makes people “lazy” and disincentivizes work, while also putting a strain on government finances. This translates to a “hands-off” approach to the US economy, whereby Republican governments tend to introduce tax cuts and deregulation programs to make conducting business easier. This was most recently realized by the Trump administration’s Tax Cut and Jobs Act of 2017, which introduced a corporate tax cut from 35% to 21%; furthermore, the administration had made various moves to deregulate the US economy, especially in terms of environmental regulations.
The economy is not an easy thing to understand, and to try and melt down the concept into one of two entries would be absurd. So we will keep talking about the intricacies of the economy and why there isn’t really one right answer, but a plethora or things that make the national and global economy thrive.
