As we continue to talk about government spending and deficits, it is important to note that the "fiscal cliff" problem in the U.S. congress has not been resolved but moved until March. Depending on where America is on the Aggregrate supply graph we looked at today may decide whether spending cuts will help/hurt the recessionary trends of the country. Policy Makers in the house are looking at large spending cuts to balance this budget, but is this the best move while our economy is slowing recovering?
This NY Times article will help to update everyone on the details of the extension:
http://www.nytimes.com/2013/01/24/opinion/a-debt-crisis-averted-for-now.html?hp&_r=0
In my opinion, the Aggregate Supply explains a little bit how the spending cuts will affect the economy. Probably, the Agregate Demand will reduce. Therefore, it will hurt the recessionary trends of the country, which gets worse the risk of the recession. However, the problem of the budget is not only an Agregate demand or supply, but also is a complex problem. When I discuss complexity, I refer to chaos. According to this theory, when one affects the initial condition, the effects change in different ways. That is why when I relate this theory and the current situation in US, I realize that the consumer's expectation are affected and these could determine the credibility in the US economy.
ReplyDeleteWhile no one truly loves spending cuts, the problem with our economy and the spending of the government has to be dealt with in some way and the Republicans believe that we should cut spending and Democrats believe we should raise taxes. There are big problems with both of these and those are that by cutting spending our economy may take a down turn, and people in the U.S. do not like it when they have things that were free taken away from them. Honestly I believe that we will need to use both policies, raising taxes and cutting spending. To truly understand what it takes to right our economic debt citizens of the U.S. need to feel how big this debt is. Also U.S. citizens need to feel the repercussions f constant spending, yes it may hurt our economy at first but it will solve our mid term problems allowing us to then begin spending a little more at a time.
ReplyDeleteThis argument in the House is getting exhausting. I was most intrigued by this, "If the House actually wants to put forth a balanced budget over the next 10 years, as Mr. Boehner vowed to do on Wednesday, let the public see what that really means: unimaginable cuts and changes to Medicare and Medicaid, and the elimination of scores of popular and vital programs that benefit both the poor and the middle class." The reason this interested me is because this is what will effect us most! Obviously, I want deficits to be balanced. But, I want to know what will be cut and how this will exactly effect me (selfish of me but that is what I want).
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