Hello everyone,
Recently I was studying with a group of friends about Canadian social welfare and someone suggested a question: "should government make cuts to social welfare spending during economic downturns?" We thought it would be an interesting question to discuss upon so we divided up into three groups according to the Canadian political parties (the Liberals, the NDP, and the Conservatives) and will be presenting out ideas based on what political party we are in (to answer this question from the point of view of that political party).
I am in the Liberal party but I am not that familiar with it. So based on what I have learned, I analyzed the question and put down what I think the Liberals would do if they were in the situation. For people out there who belong to the Canadian Liberal party, can you please let me know what you think about my argument? For people who belong to the NDP and the Conservative party, please feel free to share your point of view as well :smile:
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Should government make cuts to social welfare spending during economic downturns? – From the point of view of Liberalism along with Keynesian’s economic ideas.
[The Liberal party prefers action over ideology - the idea of pragmatism, one of the characteristics of the Liberal ideology. On a continuum of the political parties in Canada, the Liberals avoid to end up being in either extreme of the continuum (i.e. the NDP and the Conservatives) so that they are free from the unnecessary restrains that might prevent them achieving their goal.]
While the Liberals endorse the idea of a free market system, they also believe that the market should be regulated by the government to a degree and to provide a minimum of income security benefits. From the point of view of Liberalism, government intervention is necessary if we want to let the society remain stable and to have it grow constantly overtime.
According to the concepts of individualism and liberty of the Liberal ideology, if we were to let the free market system runs freely without government intervention, our nation would become prosperous as each individual would go and pursue his own interest and maximize his utility. The disadvantage of having a free market system is, however, that some people are going to become extremely rich and some are going to become extremely poor depending on various personal and situational factors. The result is that the society’s wealth is most likely going to be concentrated only on the hands of a few individuals, and a great proportion of the population would suffer from various degrees of poverty and unemployment. This contradicts the Liberals’ goal of maintaining a stable society, and the gap exists between the rich and the poor would become irremediable. Therefore, it is important for the government to intervene the free market through controlling government spending, which includes controlling its social welfare spending.
Now the question is, should the government make cuts to social welfare spending , as a way to decrease government deficit, during economic downturns? I wish to analyze this question through John Maynard Keynes’s economic theory. This should be appropriate as Keynesian’s economic theory was initially inspired by the Liberal ideology; if we wish to have stable economy and society, then the free market system does need a degree of government intervention to avoid problems such as high levels of unemployment and poverty.
To begin, let’s first define the concepts of aggregate demand and aggregate supply. Aggregate demand represents the total amount of goods and services wanted by the individuals and the public (the government) within a nation. Aggregate supply represents the total amount of goods and services that is supplied by the economy. In an economy, the point where the aggregate demand is equal to the aggregate supply, meaning that the amount of goods demanded by a nation is equal to the amount of goods supplied by a nation, is at equilibrium and the resulting society is said to be stable and will grow constantly overtime.
When the economy is in a recession, where the aggregate supply is greater than the aggregate demand since people do not have the sufficient income to purchase the goods produced by the economy, it has been deviated from a stable society to one where there is a high level of unemployment. At this time, those are unemployed, having no sources of income, would have to withdraw their savings from their bank to consume. As Keynes argue that when there is no savings, there would be no investment and no growth in our capital, so there would be no economic growth for the nation. This is undesirable and it contradicts the Liberals’ goal of wanting the society to grow overtime. Therefore, it is important for the economy to eliminate the excess unemployment and to go back to its equilibrium level.
One obvious way to do this is to increase the aggregate demand so that it equates the aggregate supply. Now there are two major ways to do this: either by increasing spending from the individuals in the society, or by increasing spending from the government (i.e. the public). The former option is characterized by making cuts to social welfare spending through lowering tax rates, and the latter is characterized by an increase in government spending through increasing tax rates, meaning an increase in social welfare spending. Let’s analyze each of them separately.
If the government makes cuts to social welfare spending through a decrease in tax rates during a recession, it means each individual in the economy gets to keep more of their income to spend or to save. If we want to get out of the recession, it is important for us to simulate the economy through individuals increase their spending and thereby increase the aggregate demand. During an economic recession however, people are more likely to save that extra proportion of income to their bank account rather than spending it. This is true because on a psychological level, individuals tend to have pessimistic views of the future when the economy is in a recession and they would want to save more money in case of emergencies. The economy is more likely to remain in recession than to go back to its equilibrium state. The problems of recession such as high levels of unemployment and poverty continue to persist.
If the government makes no cuts to social welfare spending, or even increases in social welfare spending through a increase in tax rates during a recession, it means that although each individual would keep a smaller proportion of his income, the economy is going to be stimulated by an increase in the aggregate demand through an increase in government’s spending on social welfare and all other forms of government spending. When the economy is back to its equilibrium state, where the aggregate demand is equal to the aggregate supply, the problems of recession such as high levels of unemployment and poverty get to be eliminated, and the society as a whole would become stable and would grow overtime.
Through the above examination, government should not make cuts to social welfare spending economic downturns.
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Concerns:
*Would the argument be too economically based instead of politically based?
**Is there anything that the Liberal party has done in the past that is consistent with the above presented idea?
English is not my first language so in case if there is a grammatical mistake or two, please bear it with me lol.
Jason
Recently I was studying with a group of friends about Canadian social welfare and someone suggested a question: "should government make cuts to social welfare spending during economic downturns?" We thought it would be an interesting question to discuss upon so we divided up into three groups according to the Canadian political parties (the Liberals, the NDP, and the Conservatives) and will be presenting out ideas based on what political party we are in (to answer this question from the point of view of that political party).
I am in the Liberal party but I am not that familiar with it. So based on what I have learned, I analyzed the question and put down what I think the Liberals would do if they were in the situation. For people out there who belong to the Canadian Liberal party, can you please let me know what you think about my argument? For people who belong to the NDP and the Conservative party, please feel free to share your point of view as well :smile:
=======================================================================
Should government make cuts to social welfare spending during economic downturns? – From the point of view of Liberalism along with Keynesian’s economic ideas.
[The Liberal party prefers action over ideology - the idea of pragmatism, one of the characteristics of the Liberal ideology. On a continuum of the political parties in Canada, the Liberals avoid to end up being in either extreme of the continuum (i.e. the NDP and the Conservatives) so that they are free from the unnecessary restrains that might prevent them achieving their goal.]
While the Liberals endorse the idea of a free market system, they also believe that the market should be regulated by the government to a degree and to provide a minimum of income security benefits. From the point of view of Liberalism, government intervention is necessary if we want to let the society remain stable and to have it grow constantly overtime.
According to the concepts of individualism and liberty of the Liberal ideology, if we were to let the free market system runs freely without government intervention, our nation would become prosperous as each individual would go and pursue his own interest and maximize his utility. The disadvantage of having a free market system is, however, that some people are going to become extremely rich and some are going to become extremely poor depending on various personal and situational factors. The result is that the society’s wealth is most likely going to be concentrated only on the hands of a few individuals, and a great proportion of the population would suffer from various degrees of poverty and unemployment. This contradicts the Liberals’ goal of maintaining a stable society, and the gap exists between the rich and the poor would become irremediable. Therefore, it is important for the government to intervene the free market through controlling government spending, which includes controlling its social welfare spending.
Now the question is, should the government make cuts to social welfare spending , as a way to decrease government deficit, during economic downturns? I wish to analyze this question through John Maynard Keynes’s economic theory. This should be appropriate as Keynesian’s economic theory was initially inspired by the Liberal ideology; if we wish to have stable economy and society, then the free market system does need a degree of government intervention to avoid problems such as high levels of unemployment and poverty.
To begin, let’s first define the concepts of aggregate demand and aggregate supply. Aggregate demand represents the total amount of goods and services wanted by the individuals and the public (the government) within a nation. Aggregate supply represents the total amount of goods and services that is supplied by the economy. In an economy, the point where the aggregate demand is equal to the aggregate supply, meaning that the amount of goods demanded by a nation is equal to the amount of goods supplied by a nation, is at equilibrium and the resulting society is said to be stable and will grow constantly overtime.
When the economy is in a recession, where the aggregate supply is greater than the aggregate demand since people do not have the sufficient income to purchase the goods produced by the economy, it has been deviated from a stable society to one where there is a high level of unemployment. At this time, those are unemployed, having no sources of income, would have to withdraw their savings from their bank to consume. As Keynes argue that when there is no savings, there would be no investment and no growth in our capital, so there would be no economic growth for the nation. This is undesirable and it contradicts the Liberals’ goal of wanting the society to grow overtime. Therefore, it is important for the economy to eliminate the excess unemployment and to go back to its equilibrium level.
One obvious way to do this is to increase the aggregate demand so that it equates the aggregate supply. Now there are two major ways to do this: either by increasing spending from the individuals in the society, or by increasing spending from the government (i.e. the public). The former option is characterized by making cuts to social welfare spending through lowering tax rates, and the latter is characterized by an increase in government spending through increasing tax rates, meaning an increase in social welfare spending. Let’s analyze each of them separately.
If the government makes cuts to social welfare spending through a decrease in tax rates during a recession, it means each individual in the economy gets to keep more of their income to spend or to save. If we want to get out of the recession, it is important for us to simulate the economy through individuals increase their spending and thereby increase the aggregate demand. During an economic recession however, people are more likely to save that extra proportion of income to their bank account rather than spending it. This is true because on a psychological level, individuals tend to have pessimistic views of the future when the economy is in a recession and they would want to save more money in case of emergencies. The economy is more likely to remain in recession than to go back to its equilibrium state. The problems of recession such as high levels of unemployment and poverty continue to persist.
If the government makes no cuts to social welfare spending, or even increases in social welfare spending through a increase in tax rates during a recession, it means that although each individual would keep a smaller proportion of his income, the economy is going to be stimulated by an increase in the aggregate demand through an increase in government’s spending on social welfare and all other forms of government spending. When the economy is back to its equilibrium state, where the aggregate demand is equal to the aggregate supply, the problems of recession such as high levels of unemployment and poverty get to be eliminated, and the society as a whole would become stable and would grow overtime.
Through the above examination, government should not make cuts to social welfare spending economic downturns.
=======================================================================
Concerns:
*Would the argument be too economically based instead of politically based?
**Is there anything that the Liberal party has done in the past that is consistent with the above presented idea?
English is not my first language so in case if there is a grammatical mistake or two, please bear it with me lol.
Jason
