Reference no: EM131094603

Signs of investor uneasiness in continuing to purchase treasury securities issued by heavily indebted sovereign states such as Greece and Spain have triggered a debate in the past about raising the debt ceiling here. “Tea Party” republicans in the House of Representatives have made “out of control” government spending a rallying cry in all their political campaigns since fall 2010 and insist that any legislation to balance the federal budget over the next few years must rely solely on reductions in government spending and transfer programs with no tax increases. The republican presidential candidate in the previous election repeats this party line as well. Democrats insisted that some significant portion of any deficit reduction package must be based on closing tax loopholes and increasing marginal tax rates on wealthy households (income greater than $1 million). They also argued that although credible deficit reduction measures need to be put in place soon, the actual phase-in of those measures—whether tax increases or reductions in entitlement spending programs --must be gradual and await a strengthening of RGDP growth in the US economy. Given the current situation of the US economy, compare and contrast the views of a “Keynesian”, to those of a “Supply Sider” with respect to the issues in this debate. (Note: you do not have to agree with my political perspective to score well on this question. You do need to demonstrate understanding of the arguments on either side of the debate between Keynesians and Supply Siders and demonstrate understanding of the distinction between the short run and the long run in terms of those issues.