For years, the United States economy has been far from booming, so the number one priority seems to be finding ways to jumpstart the economy and create more jobs. The biggest theories seem to surround around economic austerity, and whether to cut government spending or continue borrowing money. Conservatives tend to vote on the side of cutting government spending, believing that the national debt of more than 15-trillion United States dollars (“US Debt Clock.org”) is too high to continue borrowing money. They contend that cutting government spending will heighten employment and boost the economy. On the other end, liberals tend to vote for more government spending, because they believe the economy is too slow-growing to impose economic austerity at this time. These two arguments oppose each other, but supporters of these theories work toward the same outcome.
Wall Street Journal columnist Sara Murray discusses her take on economic austerity in an interesting opinion editorial called “Tug of War Over Best Time for Belt-Tightening.” Murray takes a more conservative view, believing that cutting government spending is the cure-all solution for the starving economy, and that continuing to borrow money will hurt the economy in the short- and long- runs. Murray believes that spending more money will only raise the national debt even higher and will worsen the unemployment problem. On top of this, Murray acknowledges the conservative concern about the inevitable long-term tax increases that would come from cutting spending. If the government does not borrow money from other countries, it will have to obtain it somehow, and the outcome will undoubtedly be that the government will snatch money out of the pockets of the public, “dragging down the economy in the short run” (Murray).
On the other end of the spectrum is New York Times opinion editorial columnist Paul Krugman, who writes in an opinion editorial called “Keynes Was Right,” about the same topic, but argues the opposite view. Krugman leans toward the left on the issue, as he stands behind economist John Maynard Keynes (“John Maynard Keynes”), whose standpoint was that “the boom, not the slump, is the right time for austerity in the Treasury.” According to Keynes, the government should minimize government spending while the economy is booming, avoiding a situation like this, and when the government is growing as slowly as it is now, the government’s only choice, at that point, is to continue to borrow money. Keynes declared this during Franklin Delano Roosevelt’s presidency. The United States economy had been on its way to recovery when Roosevelt attempted to balance the national budget too soon, spiraling the nation into a tragic recession. Taking this as proof, Krugman contends that “slashing government spending in a depressed economy depresses the economy further.” One of Krugman’s concerns is that the economy is already growing slowly enough, and if the government were to cut spending, that would slow the economy that much more, which would hurt the already depressed employment rate (Krugman). Furthermore, an International Monetary Fund review in 2010 revealed that, for each percentage point of economic austerity, the unemployment rate, generally speaking, rises approximately 0.3 of a percentage point (Murray). Krugman believes that, with all of this evidence supporting his views, the best idea for boosting the economy and creating more jobs is to refrain from cutting government spending (Krugman).
Both arguments are logical and seem to argue decent ideas. However, they both can not be cure-all solutions simultaneously. Murray’s idea of cutting government spending may be the most widely believed solution for the current economic recession in the United States. If accruing a national debt is what pushed the nation into a recession in the first place, then it would seem that the proper solution would be to do the complete opposite – cut government spending, and pay back the national debt that is already an issue for the country. Obviously, higher taxes would be a must, if the government were to take this course of action, but neither theory comes without consequences. However, Krugman poses an interesting argument against this common viewpoint. He does not argue against economic austerity; he simply explains that there is a specific time for it, and if the government imposes it on the economy at the wrong time, then its efforts will be counterproductive. Krugman’s ideas of cutting spending when the economy is booming, and opposing austerity when the government is in a recession, are legitimate ones, especially since he has covered his bases with intriguing “fun facts” and evidence. The truth is, there is no way to know the outcome until the government implements a plan. However, it is the government’s job to research its options and implement the plan that will be better for the nation in the long-run and cause the least amount of damage.
What the United States government has a habit of doing is only choosing one side. The conservatives vote for what they want, and the liberals vote for what they want. Since the government only chooses to implement one plan or the other, it neglects to even make an attempt at a compromise between the two common beliefs. If the government were to implement the conservative plan, that does not mean that it needs to borrow a ton of money to fund organizations that are, at this point in time, not as important. On the same token, if the government were to implement the liberal plan, that does not mean that it needs to cut government spending, “cold-turkey.” As a reasonable compromise, the government should cut spending for the most part, so that it only borrows money for the bare necessities, rather than not borrowing any money at all or borrowing way too much. That way, public taxes will only rise a minimum amount, so the nation will be happy, but the unemployment rate will also have a chance to drop, and the economy will have a chance at entering into a recovery stage.
Works Cited
"John Maynard Keynes." The Concise Encyclopedia of Economics. 2008. 378-97. Print.
Krugman, Paul. "Keynes Was Right." New York Times (2012). Web. 24 Jan. 2012.
Murray, Sara. "Tug of War Over Best Time for Belt-Tightening." Wall Street Journal (2011).
Web. 24 Jan. 2012.
"US Debt Clock.org." U.S. National Debt Clock: Real Time. 2 Feb. 2012. Web. 02 Feb. 2012.
You can see how quickly the U.S. national debt has risen over the years.
Keep in mind that these numbers are in trillions of dollars.
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