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Under the Obama Administration our government has been following increasingly Keynesian beliefs with regards to the economy. Keynesian economics involve an enormous amount of government spending during times when the aggregate demand is down along with tax cuts in order to increase consumer confidence and get people to buy again. They are named after John Maynard Keynes, a turn of the century Economist back in the early 1900’s through the depression. His ideas would be widely used during most of the 20th century, up until the 70’s during the oil crisis where it hit the wall when a new problem posed itself upon the world with the oil crisis. But now, in the current day, America, and subsequently the world, finds themselves with an ever so familiar problem. With our current economic policy, the government will spend a lot and tax little, which we have already seen with the Obama tax cuts and the colossal stimulus bill. If everything goes as planned looking no further than this Americans should be able to get enough money to get back on their feet all across the country and increase spending which should correct our economy.
It is at this point that we hit a little snag in the master plan. With the new Stimulus bill being passed, there were major changes made to the Welfare system which was recently changed under the Clinton administration back in 1996. Under the plan before the Clinton changes, called the Aid to Families with Dependent Children, or the AFDC, there was essentially limitless money being supplied to the welfare program. States also received more money for the more people they had on welfare, which is a perverse incentive since to keep the budget low we would want as few people as possible on welfare and more people contributing to the economy and holding jobs. President Clinton changed this with the Temporary Assistance to Needy Families plan, or the TANF. This plan Encouraged people to get off the welfare system, and while not perfect, got millions of people off of welfare rolls, raised employment and lessened poverty levels. There was an overall change in welfare thought with it now being to get people back on their feet rather than taking care of the needy. Although similar there are very important differences. Under the new plan being put into place, we will return to the previous line of thought, with more money than during the AFDC plan being put towards welfare.
While we certainly need the welfare program and it is in no way a bad idea to want to help people down on their luck, we must be careful with the amount of money we start throwing around. The classic principle behind Keynesian thought is that in times of trouble we spend in enormous amounts and tax less, but when everything gets back to normal we must raise taxes and curb spending drastically in order to make up everything we have lost. In this lies the problem, since no one likes increasing taxes and very few politicians want to dive in front of the political bullet to encourage a tax increase to give the government money. So along with record breaking expenditures and what will probably be very large amounts of welfare dependant families, we have to figure out how we will pay for all of this. Right now we are fine, but down the line when the bills need to be paid where will all of this money come from? With more people on welfare we won’t be getting their taxes, assuming we actually get the increase we will need to cover all of this spending when everything turns back around, which it will, although it will take time, which leaves the next generation with huge amounts of debt and no real idea of how it will be paid off. Our government needs to make sure that after all the smoke clears from the recession that we figure out what will be done about all of the money being thrown around during these current times.
Last edited by Awesome X on Sun May 03, 2009 8:24 pm, edited 1 time in total.
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