My Macroeconomic Policy as President of the U.S., Essay Example

If I were a President, my economic philosophy would be mostly influenced by principles of Keynesian economics. The economy is gradually recovering and even though unemployment rate has improved, there is still lot of work to do. I would encourage more government spending to reduce unemployment rate because the creation of jobs will also result in higher consumer spending which will help the economy recover from recession quicker. Once the public sees that job market has been improving, they will be encouraged to both increase their borrowing as well as spending. It’s an established economic fact that high future expectations of earnings encourage consumers to borrow more (Deaton & Muellbauer, 1980).

The Federal Reserve is independent in its policymaking but in my opinion, it should see if it may be possible to lower the federal funds rate in order to encourage businesses to borrow more. Cheaper access to borrowing will encourage businesses to expand their operations as well as hire more workers. I will also oppose raising taxes is because both businesses and consumers will be left with lower income levels and government priority should be to encourage spending and investment in order to support economic recovery. The Fed could also consider lowering the interest rates to encourage borrowing and spending in the economy. The greater spending by both the businesses and the consumers will also help raise the real GDP, even though it may be accompanied by some rise in the general price level also. The government should give confidence to the consumers that the economy will improve and not further deteriorate otherwise the pessimism may prompt more consumers to increase their savings and delay their spending plans.

I understand that my policy may increase budget deficit in the short term but scaling back government spending may have even higher price for the economy. One of the reasons President Roosevelt’s policies helped U.S. recover from the Great Depression was his willingness to increase government spending even though it also increased budget deficit. President Roosevelt had the courage to adopt a different policy than his predecessor who believed government should stay out of economic affairs (Miller Center, University of Virginia). I also disagree with the supply side economics that tax cuts actually increase the government receipts. This is because tax cuts result in higher number of jobs which expands government’s tax base, and hence, tax revenues (Miller Center, University of Virginia). I will propose eliminating tax cuts for the high-income groups as well as corporations because low income groups rather than high income groups spend a greater proportion of the savings generated by tax cuts. I will also oppose a differential treatment of investment income which is taxed at a lower rate. I find it strange that the investment income gets taxed at a lower rate even though it adds almost nothing to the nation’s productivity. I agree with Warren Buffet that everyone should make equal sacrifice in America because many successful people also owe their success to be in a country where they had freedom and opportunities.

I will communicate my economic ideals directly to the public in order to gather support. I will also encourage my party members to introduce bills that suggest new spending measures in order to improve employment rate and eliminate unproductive tax cuts. I will also hold regular discussions with the National Economic Council and Fed officials to have a better understanding of the nation’s economy and how the government and Fed can work together towards the common goals.

References

Deaton, Angus and John Muellbauer. Economics and Consumer Behavior. Cambridge University Press, 1980.

Miller Center, University of Virginia. Franklin Delano Roosevelt: Domestic Affairs. 20 April 2012 <http://millercenter.org/president/fdroosevelt/essays/biography/4>.

Ronald Wilson Reagan: Domestic Affairs. 20 April 2012 <http://millercenter.org/president/reagan/essays/biography/4>.