It is that time again. The Political Parties are gearing up for the presidential election. I thought it would be an excellent opportunity to discuss the influences each party brings to government spending. Usually, it appears as if each party is far apart, and yet sometimes it seems that their philosophies are similar. So, let’s see how each party would handle a downturn in the economy. But first, let’s see the views of each party.
The Democrats prefer government spending instead of cutting taxes to influence the economy. They believe in providing more services to the people by taxing the wealthiest Americans. In fact, they believe in putting higher taxes on investments, large business and high-income families. In addition, they also prefer higher taxes on capital gains and dividends. These Democrat’s policies will benefit low-income and middle-income families. They believe that low-income families will spend any extra available money on food, shelter, and medicine. They believe the right to an education, decent housing and health care. Generally, the Democrats will spend less on the military.
Now let’s see the views of the Republican party.
Whereas the Democrats focused on the people the Republican views focus on what’s good for businesses and investors. They believe that as companies increase in wealth that they will increase the economic growth for everyone. In addition, they believe that the best way to increase growth is by reducing business, trade and investment costs. In theory, they believe that business owners will invest in their companies and hire additional workers. These workers will spend their wages which drives the economy. Republicans believe that Americans should be able to seek prosperity without the interference of the government.
Now let’s see how each party reacts when a recession hits the economy.
A Downturn in the Economy.
Democrats believe that during times of economic downturns that they should increase deficit spending to stimulate the economy. They will continue the deficit spending until private business prospects improve. However, for the last three decades, both parties have continued deficit spending. Also, Democrats might enhance and extend welfare programs to help those individuals that have lost their jobs or are more in need due to the downturn in the economy.
Now let’s see how the Republicans would handle the same situation.
Whereas the Democratic would try to stimulate the economy by increasing government spending the Republicans typically will try to stimulate the economy by lowering interest rates. This, in turn, generates more investment opportunities. Thus, more Americans will spend money which helps stimulate the economy. As a result, more businesses will need to produce more products or provide more services. These businesses will order more raw materials to produce the products the consumers are seeking. Another benefit, it that businesses will need more manpower in order to produce these products and services resulting in an increase in labor.
Next, we will see if it really is as simple as I have explained it.
This is a simple explanation, but in real life, the lines between the Political Parties techniques to regulating the economy often cross paths. The U.S. has had a budget deficit for over three decades. The result is that spending has continued whether the economy is experiencing good times or bad times.
Yes, each political opponent, whether Democratic or Republican, will have personal differences in how they would manage the economy. However, knowing how their party affiliation would handle the situation is a good indicator of the approach the opponent would take to stimulate the economy.
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