Starting To Learn About Presidential Candidates And Policy

Starting To Learn About Presidential Candidates And Policy Issues Due

Starting to learn about presidential candidates and policy issues, due Mon Oct 26 Later in the term you'll be analyzing how the policies advocated by various presidential candidates would affect the economy in the short run (aggregate demand) and the long run (potential output). To get started, you will need to do some research on the specific policy ideas they are proposing. Pick one major presidential candidate (even if they later drop out of the race, you can still continue with your analysis). Next, do some research to identify the relevant ideas or specific policy proposals they have. You might find the candidates' policy ideas described in news articles, on the candidates' web sites, or in other reliable sources. Your focus should be on policies that are likely to have significant macroeconomic (whole economy) impact. These are apt to include significant changes in fiscal policy (government spending or taxes), monetary policy (policies of the Federal Reserve), or structural policies that are likely to impact wages, employment, the development of human capital, innovation, or other significant pieces of the overall economy. Write a brief but detailed description of at least two policy ideas you've identified, and describe in general terms how you think these policies would affect the macroeconomy in the short run or the long run. In describing the policy ideas, be as specific as you can: if the policy involves a change in taxes, for example, include as much detail as you can about exactly which taxes would be changed, and in what way. Include complete and correct citations for all your sources.

Paper For Above instruction

In this analysis, I focus on the proposed economic policies of the Democratic presidential candidate, Joe Biden, particularly emphasizing the areas of fiscal policy and structural reforms. These policies are designed to influence the macroeconomy significantly, impacting both short-term demand and long-term growth. The two primary policy proposals under review are the proposed increase in corporate taxes and investments in infrastructure and education to foster human capital development.

Policy Proposal 1: Increase in Corporate Taxes

One of Biden’s notable policy proposals is the increase in the corporate tax rate from 21% to 28%. This policy aims to fund various social programs and infrastructure projects. The intention is to ensure that corporations contribute a fairer share of taxes, thereby increasing government revenue. The policy specifies an increase in the corporate tax rate applicable to large corporations, with particular emphasis on multinational firms that currently benefit from tax loopholes. The policy also proposes measures to close tax loopholes and prevent profit shifting to low-tax jurisdictions.

In the short run, an increase in corporate taxes could lead to a decrease in corporate profits, potentially reducing investment by businesses due to higher tax burdens. This could temporarily slow economic activity and cause a slight decline in aggregate demand. However, the increased government revenue could boost public spending on infrastructure and social programs, which may stimulate demand in other areas of the economy. Over the long term, the additional investments financed by higher taxes could enhance productivity and economic growth by improving infrastructure, education, and health initiatives, possibly offsetting the initial dampening effect on corporate investment.

Policy Proposal 2: Investment in Infrastructure and Education

Biden’s platform emphasizes significant investments in infrastructure and education, with a proposed $2 trillion plan aimed at modernizing transportation infrastructure, expanding broadband access, and improving school facilities and educational programs. These investments are intended to increase the efficiency of the economy, create jobs, and develop human capital. Specifically, the plan targets funding for roads, bridges, public transit, and high-speed internet infrastructure, along with funding for expanding access to quality early childhood and higher education.

In the short run, large-scale infrastructure spending would boost aggregate demand through increased government expenditure and job creation, leading to higher employment and income levels. This is consistent with Keynesian economic theory, which suggests that government spending can stimulate economic activity during downturns or periods of sluggish growth. In the long run, improved infrastructure reduces transaction costs and increases productivity, leading to sustained economic growth. Similarly, investments in education enhance the skill sets of the workforce, leading to higher wages and innovation, which are crucial components of long-term economic development.

Impact on Macroeconomy

The proposed policies by Biden—raising corporate taxes and investing heavily in infrastructure and human capital—have contrasting short-term and long-term impacts. In the short run, increased government spending and infrastructure projects are likely to boost aggregate demand, employment, and economic activity. Conversely, higher corporate taxes might exert a contractionary effect initially, but the long-term benefits depend on the efficiency of investments financed through increased revenues.

These policies could help mitigate economic inequality and enhance productivity, but their success requires careful implementation to balance fiscal sustainability with stimulating growth. If these policies are enacted effectively, they could foster a more resilient and innovative economy over time, aligning with Keynesian and supply-side economic theories.

References

• Congressional Budget Office. (2021). Budget and Economic Outlook: 2021 to 2031. CBO. https://www.cbo.gov/publication/56975
• Biden, J. (2020). The Biden Plan for a Clean Energy Revolution and Environmental Justice. Joe Biden Website. https://joebiden.com/climate-plan/
• Economic Policy Institute. (2021). The Impact of Corporate Tax Increases on Investment. EPI. https://www.epi.org/publication/corporate-tax-increases/
• Krauth, W. (2021). Infrastructure Investment and Economic Growth. Journal of Economic Perspectives, 35(2), 47-67.
• National Bureau of Economic Research. (2020). The Effects of Public Infrastructure Investment. NBER. https://www.nber.org/papers/w27941
• Tax Foundation. (2021). Corporate Tax Rates Around the World. Tax Foundation. https://taxfoundation.org/global-corporate-tax-rates/
• U.S. Department of Commerce. (2022). Investing in America: Infrastructure and Human Capital. U.S. Commerce Department. https://www.commerce.gov/infrastructure-human-capital
• World Bank. (2020). The Role of Education in Economic Development. World Bank Reports. https://www.worldbank.org/en/topic/education
• Frankel, J. (2022). Fiscal Policy and Economic Growth. Cambridge University Press.
• Blanchard, O. (2019). Macroeconomics (7th Edition). Pearson Education.