Government and The Economy

In the News   Presented by Prairie Title  

October 31, 2016

         

Election Season is Here: Thinking of Government’s Role

By Frank Pellegrini, Prairie Title CEO   

It’s Halloween, so naturally the goblins and ghouls will be out in full force in our neighborhoods. Trick or treating reminds me of an economic concept I’ve been thinking a lot about lately. With the election just days away it’s a good time to ask the questions: How involved in our economy do we want our government to be? How many “treats” do we expect, or need? The federal government, of course, is very involved in our everyday economy, directly through regulation, taxation policy, etc., but also in some ways more indirectly.

Think of Social Security. While the money we all pay into Social Security is more or less the same money we eventually take out (hopefully), the government is still involved as the collector and distributor. And that money, when distributed, for the most part goes directly into the economy in the form of payments for housing, food, entertainment, etc.

Taking things a step further, some economists advocate strategic use of so-called “helicopter money” where the government flies in and “drops” money into a situation to solve a problem and at the same time provide economic benefit. Infrastructure is a good example. Government money spent on roads and bridges not only improves our lives by providing safer roadways, but also provides stimulus in the local area. Workers who provide the labor, in turn, pay taxes back to the government.

In an interesting piece by A. Gary Shilling published in Bloomberg News, Shilling argues that a form of helicopter money is needed to further stimulate our economy.

“Both U.S. political parties seem to agree that funding for infrastructure projects is needed, given the poor state of American highways, ports, bridges and the like. And a boost in defense spending may also be in the works, especially if Republicans retain control of Congress and win the White House. Given the ‘mad as hell’ attitude of many voters in Europe and the U.S., on the left and the right, don't be surprised to see a new round of fiscal stimulus financed by helicopter money, whether Donald Trump or Hillary Clinton is the next president.”

What’s your point of view? I’d love to start a conversation about this. Call or email me, or write a comment.

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Election Day is next week. If you haven’t voted already, I urge you to make your voice heard.

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