Macro Economics
MACROECONOMICS: The Effects of the Politics on Fiscal Policy over the Last Seven Business Cycles
Jennifer Johns
Principles of Macroeconomics
Dr. Jean-Rony Lafalaise, DPA
April 22, 2004
Abstract
Being an election year, all you hear is the incoming presidential nominee bashing the policies of the current president. Of all of the administration policy, his economic stance, the health of the economy under his administration, and this fiscal policy are among the most prevalent. Does the possibility of losing an election affect how administration reacts to a recession? This paper shows that out of the last seven business cycles, during the last five politics does not seem to be an issue when administrations consider what needs to be done to boost the economy. Though Kennedy and Nixon both tried to use fiscal policy to further their own position and ensure reelection, the administration of late have understood that the economy is not a reelection tool and that what ever need to be done to bring us out of a recession is necessary, even if it means they may risk not getting reelected.
MACROECONOMICS: The Effects of the Politics on Fiscal Policy over the Last Seven Business Cycles
Reelection be Damned
One might wonder how politics plays into fiscal policy. Does the possibility of not getting reelected affect the choices a president makes? No, in fact, the administrations of the last seven business cycles usually make fiscal policy decisions that prove to be political suicide, yet are best for the economy. Started with the farthest back, John F. Kennedy is an exception to this rule. In his campaign, he promised tax cuts, but by the time congress got around to it, the economy was obviously expanding. Seeing as this would be embarrassing to the administration, congress went ahead and approved the unnecessary tax cut. Richard Nixon, whose reelection was a...
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