The use of Keynesian economics was introduced by John Maynard Keynes in order to fight the Great Depression. Keynesian Economics uses monetary and fiscal policy in order to fight recession and inflation. Keynesian economics was a way to keep the economy at equilibrium by using two opposing policies. Both policies encourage spending and circulation of wealth through the economy. Keynes proposed the problem was in the demand and not in the business confidence levels. Through Keynesian economics the solution would not be to cut government spending or to cut wages so that the businesses would hire more people. The solution was to increase government spending and infrastructure to create jobs and lowering taxes to encourage people to spend money. The use of Keynesian economics could be used today for the problems we presently have in our economy, which is mentioned in an article for the New York Times written by Nancy Folbre.
Fiscal and monetary policy work opposite eachother to keep the economy in equilibrium by preventing recession and inflation. Fiscal Policy works through the government by increasing government spending and infrastructure and lowers taxes to encourage spending, which stimulates the economy. One example would be the war that pulled the US economy out of the Great Depression. The more demand for jobs and the increase in salary would promote spending and increase money flow in the economy. Monetary Policy is often the preferred policy because of its benefits over Fiscal Policy. It is much faster to implement because, instead of working through the government, monetary policy works through the Federal Reserve buying bonds in order to lower interest rates. As the supply of money increases the interest rates go down in order to encourage people to borrow money that will then be circulated through the economy. The graph shows how monetary policy increases the supply of money which decreases the interest rates and encourages people to borrow money which is circulated through the economy.
Economists predict the solutions to today’s recession are the same solutions proposed by Keynes during the Great Depression. According to the article written by Nancy Folbre in the New York Times, our society has fallen into debt because of a lack of demand for jobs. His solution to this problem would be jobs created by the government.
One of the topics in class that really interests me is interpretation of the Constitution. My favorite activity we did that had to do with interpretation of the Constitution is Fun With Article II, where we were given hypothetical questions and were to decide whether it was constitutional or not based on Article II. The reason I liked this activity is because, even though a lot has changed since the Constitution was written, you can still interpret it for modern situations. I also liked that there was no clear method of interpretation and there was so many answers that people could make from the same passage in Article II.
Since the Constitution was written in 1787, there have been countless cases in courts to interpret the Constitution for modern cases and problems. In fact, there is a whole panel of judges in the Supreme Court that interpreting the Constitution is their job.
There are many websites that are dedicated to interpreting the Constitution, and most of them say different things. So, is it really possible to interpret the Constitution for modern cases and problems? I doubt the founding fathers had prayer in public schools in mind while the founding fathers were writing the first Amendment of the Constitution.
The Fiscal Cliff was a problem that Americans faced at the end of 2012. We expected to see solutions, but when the time came to discuss solutions, there was a lot of pushed back dates and putting off discussions for other days instead of actual solutions. March is the month that most of the deadlines were pushed to and March is almost here, creating speculation about events to come regarding the economy. The article I read is titled Calendar of Fiscal Crazy: Congress and the Budget, from CNNMoney by Jeanne Sahadi on February 8th. The Article discusses the different things that were set for March and the possible solutions to the Fiscal Cliff that were never made final such as budget cuts and the economic plans from the President, House, and Senate.
The automatic spending cuts, or “sequester”, will cut how much the federal agencies are allowed to spend by $85 million over seven months. This could cause the economic growth to slow and could also cause over 1 million workers to lose their jobs. The spending cuts would most likely come from defense programs with entitlement programs being protected, which was all in Obama’s original plan as President.
The article discusses the different proposals from the President, House, and the Senate. Sahadi says in her article, “If history is any guide, lawmakers won’t take up most of his ideas. But his proposal is supposed to tee-up the budget debate.” From what I have learned about the government in class and the process in which bills are passed, it is not shocking that most of the President’s ideas will not be passed. The process for creating solutions and passing new laws is long and has many different steps. This article shows how difficult it is for the President to play a large role and perform the presidential duty as Chief of State and also Chief Legislator. The amount of work that goes into making something a policy or law makes it hard for the President and members of Congress and the Senate to have a real impact on Americans. There are high expectations for the President and the things he needs to do. He is expected to have a large impact on the rest of government and be able to fix problems, but he can’t do that effectively and with the ferocity that most people expect because all he can really do is suggest ideas with his plan, not actually make them valid until a majority of Congress and Senate also approves.
These regulations make it hard for Congress to act immediately. The article states that Congress has a deadline of March 27th to do something before federal funding “shuts down”. It is so difficult for Congress to make final decisions with a majority that they are giving them a deadline to make something happen. This forces people to choose a solution even if they think there could be a better one, such as the “sequester”. It is the best of a bad situation.
People of America expect the President to be the leader of the country and create different ways to pull America out of our economic problems. The problem is that we cannot expect the President to be able to pull us out of the Fiscal Cliff if we also expect to keep our American system of checks and balances. The article seems exasperated about the lack of progress that has been made by different politicians, but the author needs to remember all of the difficult steps that are necessary to make a suggestion or plan a reality.