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					Part-III
           Contemporary Economic and
                 Political Issues


Taxes             Economic        Economic
                   Growth           Logic
Deficits
                    Wealth
Government                       Macroeconomic
                  Distribution
 Spending                         Philosophy

                  Health Care
    “New                               Obama
  Democrats”

                    Polls
       Contemporary Economic and
             Political Issues




Developmental part of the course is over
              Issues Course



   This is the first lecture for Part-III
Macro-Economic
  Philosophy
Two Different Philosophies

   Supply-Side Economics     Keynesian Economics
             Two basic economic forces




            Suppliers                  Buyers




1/18/2007        (C) Copyright Sean Wilson. 2007.   6
                         The Basic Idea




 Investment                                               Basic idea:
corporate                               •expand the capacity to produce
taxes            Suppliers
                                           • lower the cost of business
Keep
wages
low                                                   Move Jobs
                                                      overseas?
(mention Reagan’s summer wage rate for
                                                      Keep lawsuits on
teenage employees)
                                                      business low?

  1/18/2007            (C) Copyright Sean Wilson. 2007.                   7
                              The Basic Idea


                                                                 Raising the
              Basic idea:                                        minimum wage
• 2/3rds of economic growth is due
 to consumer spending (consumer                                        Government
              culture)                                                 spending?
 • You must have a viable middle                     Buyers                 highways
 class to play capitalism properly
                                                                    stimulus package?
• by increasing aggregate demand,
   you will kick-start the economy
                                                               middle class tax cuts




  1/18/2007                 (C) Copyright Sean Wilson. 2007.                           8
Two Different Liberal Strategies

    Aggregate Demand

-- Stimulating aggregate levels of spending
   • Bush: $50 billion program: $600 stimulus check
-- Keynesians speak of a “multiplier effect”
                                                          Spent




Analogy:
like a wave

There will be
                                                        Secondary
secondary effects
when you increase                                        effects
aggregate spending




 1/18/2007           (C) Copyright Sean Wilson. 2007.               10
Two Different Liberal Strategies

    Aggregate Demand

-- Stimulating aggregate levels of spending
   • Bush: $50 billion program: $600 stimulus check
-- Keynesians speak of a “multiplier effect”

                                         Question:
Cf: Giving a $600 check
to everyone (Bush $50              Is this kind of stimulus
    billion stimulus).                  good or bad?
Everyone
 Votes!
           1.   Yes, it is a good way to   0
                help the economy
           2.   No, it is not a good way   0
                to help the economy
           3.   I don’t know               0
Is this a good
    way to
stimulate the
   economy
                 0
                 0
                 0
Two Different Liberal Strategies

     Public Investment

-- More current in its thinking
-- Trying to stimulate aggregate demand is too imprecise
of a weapon.
-- Instead, make public investments
            Highway
            Spending




                                                          Create Jobs




                New infrastructure
                that makes the
                place more
                valuable (capital
                asset)




1/18/2007              (C) Copyright Sean Wilson. 2007.                 15
Clinton Started This
Clinton’s 1992 Recovery Plan:
       • spend money on a capital investment

     short-term benefit                     long-term benefit

     -- Build a highway                 -- Better transportation

       -- Build high speed               -- Better transportation
       rail                              infrastructure

                                                          Question:
                                                 Are these programs
                                                    good or bad?


11/21/2012                Copyright, Sean Wilson. 2007.               20
Everyone
 Votes!
           1.   Yes, it is a good way to   0
                help the economy
           2.   No, it is not a good way   0
                to help the economy
           3.   I don’t know               0
High Speed
   Rail


             0
             0
             0
Two Different Liberal Strategies

    Public Investment

-- Democrats also like to make long-term investments,
which can be more controversial
-- They try to change things for the better 10 or 20 years
into the future
            Green
            jobs.
            Green
            technology

            Clean Coal

            Synthetic Fuels




                                                      Question:
                                          Are these programs
                                             good or bad?




1/18/2007                (C) Copyright Sean Wilson. 2007.         24
Clinton:
Listen to the philosophy of the
plan:
 Government now has two
kinds of spending:
1. Spending spending
2. Investment spending
Romney’s
Response
Everyone
 Votes!       Yes, this will make us
           1.                                0
              stronger in the future
           2. No, only the market            0
              should be doing this, not
              government
           3. I don’t know. I just want to
              go home                        0
High Speed
   Rail


             0
             0
             0

				
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