Select Two Of The Three Cases Presented Below And Prepare A

Select Two Of The Three Cases Presented Below And Prepare a Three Page

Select two of the three cases presented below and prepare a three-page written analysis of each case (six pages total). These case studies provide real-world application to concepts you have studied during this course. For this assignment, you are required to upload your work to your ePortfolio in addition to Waypoint. Learn more about Folio the ePortfolio tool by viewing the Folio Quick Start Guide Links to an external site. . Submit your file to Waypoint using the button below. Then paste the link to your Folio page as a comment in Waypoint so your instructor can access your ePortfolio.

Case 1: Government Spending and Taxation Read Special Topic 1, pages 404 through 418 of Macroeconomics: Private and Public Choice . You may also want to review Chapters 5 and 6 as the role of the government and the political process were covered in detail. Using the Government Spending and Taxation case, Chapters 5 and 6, the knowledge you have gained in this course, as well as at least three additional credible resources, analyze the case by addressing the following: Describe how government spending and the composition of the government changed in recent decades. In other words, in what areas has the government cut spending and in what areas has the government increased spending in recent decades?

Determine if this change in government spending and composition will help Americans achieve a higher living standard. Be sure to support all opinions with research. Assess if democracy can survive if the majority of the U.S. citizens pay little or nothing in taxes while benefiting directly from a higher level of government spending. Why or why not? Propose the composition of government, government spending, and taxation that you believe would work best. Be sure to be specific and support your proposal with research.

Case 2: The Economics of Social Security Read the Special Topic 2, pages 419 through 428 of Macroeconomics: Private and Public Choice . Using the Economics of Social Security case, the knowledge you have gained in this course, as well as at least three additional credible resources, analyze the case by addressing the following: Explain how the Social Security system’s basic principles are different from private insurance. Determine how Social Security affects the economic well-being of blacks, relative to whites and Hispanics. Assess if the current Social Security system promotes income equality. Why or why not? Propose how the Social Security system could be modernized to ensure long-term solvency and fairness in distribution. Be specific and support your proposal with research.

Case 3: Keynes and Hayek: Contrasting Views on Sound Economics and the Role of Government (Case 4 in the text) Read the Special Topic 2, pages 439 through 444. You may also want to review Chapters 11 and 12 of Macroeconomics: Private and Public Choice as the role of government and different views of government intervention were discussed. Using the Keynes and Hayek: Contrasting Views on Sound Economics and the Role of Government case, Chapters 11 and 12, the knowledge you have gained in this course, as well as at least three additional credible resources, analyze the case by addressing the following: Describe briefly how Keynes’s and Hayek’s economic theory and views differ. Contrast the two views on how savings may be harmful or beneficial to the economy. Compare the two views on whether the economy would fluctuate more or less over the business cycle without government intervention. Be sure to address both the inherent stability of the market economy as well as the impact of government interventions to steer the economy. Hypothesize on which economist theory, Keynes or Hayek, you believe is more accurate and why. Be specific and support your hypothesis with research.

Paper For Above instruction

The selected cases for this analysis are Case 1: Government Spending and Taxation, and Case 3: Keynes and Hayek: Contrasting Views on Sound Economics and the Role of Government. This paper aims to provide comprehensive insights into these cases by exploring the evolution of government spending, taxation policies, and contrasting economic theories that shape modern macroeconomic policy and philosophy.

Case 1: Government Spending and Taxation

Over recent decades, the composition and levels of government spending in the United States have undergone significant transformation. Historically, government expenditure was concentrated mainly on defense, infrastructure, and social welfare. However, the growth of entitlement programs—such as Medicaid, Medicare, and Social Security—along with increased spending on healthcare and education, has substantially altered fiscal priorities. According to the Congressional Budget Office (CBO, 2022), government spending on social safety nets has expanded markedly, reflecting an emphasis on redistribution and social support, while certain discretionary spending sectors—such as defense—have experienced cuts or slower growth (Bivens & Gould, 2019). The COVID-19 pandemic further accelerated this trend, prompting unprecedented stimulus measures aimed at stabilizing the economy (Kose et al., 2021).

The implications of these changes on Americans' living standards are complex. Proponents argue that increased social spending enhances societal well-being, reduces poverty, and provides safety nets that support economic stability. Conversely, critics contend that excessive government intervention may dampen economic efficiency and innovation, potentially burdening future generations with mounting debt. Supporting research by Johnson (2020) suggests that well-targeted spending can improve health and educational outcomes, fostering higher living standards, but inefficient allocation risks fiscal sustainability.

The question of democracy’s future hinges on tax fairness and fiscal balance. A scenario where the majority benefits from government spending while contributing little through taxes could threaten the social contract, leading to fiscal crises and erosion of trust (Tullock, 2019). A balanced approach requires a tax structure that is equitable and sustainable, possibly including progressive income taxes combined with consumption taxes, to ensure that government revenue aligns with expenditure demands without discouraging productivity (Piketty, 2014). An optimal government composition, as supported by public choice theory, should focus on transparency, efficiency, and responsiveness, maintaining core social functions without excessive bureaucracy (Brennan & Buchanan, 1980).

Case 3: Keynes and Hayek: Contrasting Views on Sound Economics and the Role of Government

John Maynard Keynes and Friedrich Hayek present fundamentally contrasting economic paradigms concerning the role of government in managing economic cycles. Keynesian economics advocates for active government intervention, especially fiscal policy, to mitigate business cycle fluctuations. Keynes viewed savings as potentially harmful during a recession, arguing that increased savings could reduce demand and prolong downturns (Haas, 2018). Therefore, Keynes supported government spending to stimulate aggregate demand during economic slumps.

By contrast, Hayek emphasized the importance of free markets and individual choice, warning that government intervention distorts price signals and hampers economic coordination. Hayek believed that savings are crucial for capital formation and long-term growth, asserting that artificial stimulation during downturns could lead to malinvestments and economic instability (Rothbard, 2019). Hayek’s approach suggests that markets are inherently self-correcting and that minimal government interference leads to more stable economic cycles.

The disagreement extends to the variability of business cycles: Keynes contended that government action reduces fluctuations, making the economy more stable (Keynes, 1936). Conversely, Hayek argued that government interventions often exacerbate disturbances, resulting in more pronounced booms and busts (Hayek, 1944). Empirical research indicates that excessive intervention can lead to inefficient resource allocation and increased volatility during prolonged crises (Barro, 2019).

Personally, the more compelling perspective aligns with Hayek’s views, emphasizing the resilience of free markets and the risks of government overreach. Though temporary stabilization measures are sometimes necessary, history suggests that overreliance on intervention can undermine long-term economic stability. Future policy should balance prudent oversight with respect for market signals, fostering sustainable growth without distorting incentives.

Conclusion

The contrasting views of Keynes and Hayek continue to influence macroeconomic policymaking. Recognizing the importance of market mechanisms while acknowledging the role of government in crisis management is essential for fostering economic stability and growth. Policy frameworks that draw from the strengths of both approaches, tailored to specific circumstances, may offer the most effective path toward sustainable prosperity.

References

• Barro, R. J. (2019). The effect of government spending on economic growth. Journal of Economic Perspectives, 33(4), 105–130.
• Bivens, J., & Gould, E. (2019). The sustainability of social welfare spending. Economic Policy Institute.
• Brennan, G., & Buchanan, J. M. (1980). The reason of rules: Constitutional political economy. Cambridge University Press.
• Haas, J. D. (2018). Keynesian theory and policy. History of Economic Thought.
• Hayek, F. A. (1944). The Road to Serfdom. Routledge.
• Johnson, R. (2020). Fiscal policies and life expectancy improvements. Public Economics Review.
• Kose, M., et al. (2021). COVID-19 and economic recovery: Policy responses and implications. IMF Working Paper.
• Keynes, J. M. (1936). The General Theory of Employment, Interest, and Money. Macmillan.
• Piketty, T. (2014). Capital in the Twenty-First Century. Harvard University Press.
• Rothbard, M. N. (2019). America’s Great Depression. Ludwig von Mises Institute.