The main argument for economic stabilization during recessions would be that it is the government's obligation to stabilize the economy because that is in the interest of the people the government is supposed to protect. Recessions have human impacts—they put people out of work, lead to bankruptcies, and disrupt lives in many other ways. Many people argue that governments have a moral obligation to act in the face of economic downturns. Others argue that government intervention in recessions is ultimately harmful because the spending involved leads to deficits or, when combined with monetary policy, inflation. Some other people claim that government intervention reduces the "moral hazard" that goes along with economic decision-making. The question, "To what extent should the government be involved in the economy?" is among the most divisive issues in American politics. This has been the case since the 1950s, when conservatives began to challenge the assumptions behind the New Deal. In addition to the criticisms of intervention in economic downturns discussed above, others argued that excess regulations, pro-union legislation, and other restraints hampered the economy to such an extent that they amounted to a negative incentive for investment on the part of businessmen. They argued, in short, that government intervention not only ballooned deficits, it also restricted economic growth. As a result, the people that liberals hoped to protect through their economic policies were actually hurt.
https://www.econlib.org/library/Enc/FiscalPolicy.html
Sunday, February 10, 2019
Explain the main arguments in favor of economic stabilization during recessions. Explain why policy lags could make stabilization policies counterproductive. What are the justifications given in favor of more government involvement in the market economy? What are the reasons given in favor of less government involvement in the market economy? Should the government always balance its budget? If you think it should, what steps do you suggest that it should take to balance its budget? What is the relationship between budget deficits and national (public) debt? Why has the United States' national debt been increasing for decades?
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