Make a journal entry analyzing ONE of the two debates

• include:
  • the basics question being asked and the principles addressed
  • a summary of the arguments on both sides of the debate
  • your viewpoint on the debate - which side would you take?
  • why you would choose that side

ey Balanced Budget Should the Government Balance its Budget? Question being asked: Should the government balance its budget? Arguments The case FOR balancing the budget The Case AGAINST balancing the budget Government debt places a burden on future generations Burden of the government's debt is exaggerated - it is only a tiny % of a person's lifetime income Budget deficits (spending > tax revenue) crowd out investment, reducing growth and future living + Cutting the deficit could do more harm than good: standards o cutting education would reduce human capital accumulation and future living standards While deficits may be justified during recessions or wars, the surging peacetime debt of recent = raising taxes reduces incentives to work and save decades is unsustainable and detrimental Divert attention from other programs that redistribute income across generations Debt/income ratio more relevant than debt itself $ Spending or Tax Cuts Should fiscal policy fight recessions with spending hikes or tax cuts? Question being asked: Should fiscal policy fight recessions with spending hikes or tax cuts? Arguments The Case for Spending Hikes The Case for Tax Cuts Each dollar of government spending adds directly to aggregate demand Tax cuts increase households' disposable income and therefore increase consumption spending ) Tax cuts can increase AD with incentives - like investment tax credit But only part of each dollar of a tax cut does because consumers save part of it ) ) L . . Tax cuts can increase AS by increasing incentive to work and produce goods and services Most states keep balanced budgets Rapid spending increases may be wasteful ("bridges to nowhere\") and will require future tax increases Federal spending given to states can prevent states from laying off public workers, saving jobs