There Should Be a Mix of Keynesian Economics and Reaganomics

by Cornell University Library

The economic split between Keynesianism and Reaganomics will continue to exist so long as there is politics because the two parties, Democrats and Republicans, will have to subscribe to their policies respectively. When looking at them, it is easy to see that they both present methods that really could prove effective in the United States economy. The issue comes in because each party gains control of the government at different times, so they constantly change things around when it might not have needed it.

In the world, one of most effective ways to get a good output is to have a well balanced system. It is dangerous to put all your eggs in one basket because while one plan might work for some time, suddenly, something happens and that isn’t the case any longer. Because of this, one of the things that our politicians are unable to do because they need to stick to their political ideals is to present an economic plan that has a mixture of both.

In an economy that is nose diving like the one that we are just slowly beginning to crawl out of, the mentality that the economy will right itself through the markets is one that won’t work. The market takes too long to right itself and the economy has the risk of collapsing. Because of this, it is important for the government to step in and invest a considerable sum of money. By putting this money into the economy, more money appears to be invested in other things.

This is what happened in the past six months. The government has put a ton of money (trillions) into trying to save the economy. While a lot of people say that this is a bad idea because we’re wasting a ton of money, what it does is allow the economy to right itself much faster. The part that gets worrisome is that we begin to accrue a tremendous amount of public debt. Because of this, Keynesianism is should only be used when there is a direct need for economic investment.

When the economy is doing a lot better, the government needs to step back and not interfere so much in the economy. The markets, in a laissez-faire economy, will show what is good and what is bad. If the government invests, those businesses that are politically good will benefit. When the government gets out of the way, the economy can shoot up much faster because the markets decide.

Both sides present ideas that are beneficial; however, it requires fiscally responsible politicians to apply them. Keynesian economics can’t just be continuous spending because then we get a ton of debt. On the flip side, Reaganomics can’t say that they are going to lower taxes and then start increasing the size of the government. That gets a ton of debt. However, if both policies are presented in a mixture and are used properly, the economy won’t have to worry about such screwy episodes.