Issue Position: Economy

Issue Position

Growing the American Economy is the best thing that can be done to improve the standard of living of the American People.

Both the Federal Government and the Federal Reserve Board can implement policies that can both accelerate the growth of the American economy and decelerate the growth of the American economy, Dale Blanchard wants to go to Congress to propose and support legislation that will help the Federal Government accelerate the growth of the American economy. If the Federal Government implements policies that will accelerate the growth of the American economy correctly, then the Federal Reserve Board will implement monetary polices that will help to accelerate the growth of the American economy even faster.

There are basically two types of ways that the American Economy can grow. There is Demand-Pull Growth and there is Supply-Push Growth.

Demand-Pull Growth occurs when there is an increase in the Demand for products. For example, there are times when the American People feel good or optimistic about themselves or their futures in the aggregate. When people feel optimistic they spend money faster. Another example of Demand Pull Growth occurs when foreigners feel optimistic. This optimism many times translates into an increase demand for American products. These two examples are both situations that will occur without stimulants from either the Federal Government or the Federal Reserve Board.

Demand-Pull Growth also can occur if the Federal Government were to cut taxes and place more money in the pockets of the American people or if the Federal Reserve Bank were to reduce interest rates it chargers to Banks which places more money in the American Money Supply.

Each of the above examples will lead to faster economic growth. However, the problem with each of these Demand-Pull Growth situations is that the resulting growth will also trigger higher rates of inflation. Inflation is the undesirable by-product of Demand-Pull Growth. Thus, the Federal Reserve Board will fight off inflation by increasing the interest rates on loans the Federal Reserve Bank makes to Commercial Banks and pull the additional money that is causing the inflation, out of the American Economy. Thus, Tax Cuts in-acted to attempt to grow the economy would be offset by Federal Reserve Board actions if the tax cuts lead to higher and unacceptable levels of inflation. The Federal Reserve Board would simply raise interest rates and siphon out of the economy most of the tax cuts. The only exceptions to this are if the American Economy is facing a recession or if it is facing a period of general Deflation. Then Demand-Pull growth strategies are necessary.

This is why I favor Supply-Push Growth strategies to Demand-Pull Growth strategies.

Supply-Push Growth occurs when there is an increase in the Supply of products that are available for American consumers. For example, there are times when American Companies find more efficient methods of producing goods and services as a result of Advancements in Technology or there are times when there is an increase in the U.S. Labor Supply, or there are times when there is an increase in the Supply of Raw Materials or increased levels of Investment Capital. When any of the activities occur, the supply of Goods and Services made available to the American People increases. Another example of Supply-Push Growth occurs when foreigners have an increase in products that they have to sell. These two examples are both situations that will occur without stimulants from neither the Federal Government nor the Federal Reserve Board.

Supply-Push Growth also can occur if the Federal Government were to cut the taxes that wealthy and/or high income people pay. Wealthy American tend to save and invest a larger portion of their marginal income when compared to other Americans and as a result they generally save and invest most of any tax reduction which would provide more capital for production assets that would lead to an increase in the supply of goods and services.

Supply-Push Growth also can occur if the Federal Government were to balance its budget. When the Federal Government Balances its Budget, it will stop borrowing additional funds. This will provide additional capital for Business Investment and the supply of goods and serves will increase.

In addition, Supply-Push Growth can occur if the Federal Government were to provide tax incentives for American Businesses such as:

the Immediate Depreciation of Production Assets,
the Re-implementation of the Investment Tax Credit; and
the Implementation of 110% Expensing of Payroll Cost.

These incentives would encourage American Businesses to invest and place into service more production assets and to hire and train more Americans creating more and better paying jobs. And these actions will lead to higher levels of goods and services that will be made available to the American People.

In addition, Supply-Push Growth can also occur if the Federal Government were to provide American Middle Class and Working Class people with tax incentives to save and invest a larger portion of their disposal income. In the aggregate, Middle Class and Working Class people have substantial amounts of disposal income which they can either spend on non necessities or invest in their futures and in the future of the American economy by investing in the American economy. To encourage them to invest more of their disposal income it would be nice if the Federal Government provided additional incentives such as allowing them to defer paying income taxes on their savings and investments until withdrawn for consumption purposes. Again, this will provide additional capital for American Business investment that will lead to an increase in the amount of Goods and Services that are made available to the American people.

Finally, Supply-Push Growth will occur if Foreign Trade is Expanded by lowering import tariffs. The amount of foreign products will dramatically increase, which will increase the amount of products made available to the American people.

Each of the above examples of Supply-Push Growth strategies will lead to faster economic growth. But, unlike the inflation triggering side effects of Demand-Pull Growth strategies, Supply-Push Growth strategies are deflationary in nature. This makes Supply-Push Growth strategies better in effect because the Federal Reserve reacts to Supply-Push Growth strategies by reducing interest rates in order to increase the American Money Supply which provides additional money for Americans to purchase the additional products that are made available to American consumers.

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