The Instigator
A.K
Pro (for)
Winning
7 Points
The Contender
BobTurner
Con (against)
Losing
0 Points

If not in a liquidity trap, monetary policy is more effective than fiscal policy.

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Post Voting Period
The voting period for this debate has ended.
after 1 vote the winner is...
A.K
Voting Style: Open Point System: 7 Point
Started: 4/19/2014 Category: Economics
Updated: 2 years ago Status: Post Voting Period
Viewed: 784 times Debate No: 52895
Debate Rounds (4)
Comments (6)
Votes (1)

 

A.K

Pro

Definitions:
A "liquidity trap" is when interest rates cannot be lowered enough to make a significant change in the economy. (In other words, the zero-bound problem).
"Monetary policy" is the use of open market operations (buying and selling securities) by a central bank to influence interest rates.
"Fiscal policy" is the use of deficit spending to stimulate the economy.

Alterations to these definitions may be considered.

First round: state that you accept the debate. Actual debate will start in round 2.

I'm looking forward to it.
BobTurner

Con

I accept, and am looking forward to an interesting debate.

As we agreed in the comments, we'll be debating monetary policy and fiscal policy without regard to the zero bound or to political implications. I presume that we'll be doing this within a dual burden of proof.
Debate Round No. 1
A.K

Pro

Yes, burden of proof is shared. Is it all right if round 2 is just opening statements, no rebuttal>

Here are my core arguments:

1: Monetary policy has no immediate costs. A central bank (the Fed) can increase or decrease the money supply and interest rates without borrowing or taxing money. This is incredibly important, because borrowing or taxing both have very clear and severe costs.
2: Government spending is either run off of taxation or borrowing. Taxation reduces a person's income, which lowers GDP and thus employment. If government spending is run off borrowing, that money not only be paid back (by either higher taxes or more borrowing), but also, borrowing raises interest rates through a mechanism known as the crowding out effect. The crowding out effect occurs when government borrows in the loanable funds market. This additional demand for funds raises interest rates. Crowding out effect source (MIT): http://economics.mit.edu...
3: Fiscal policy implemented through tax cuts runs into the problem of savings. According to business insider (http://www.businessinsider.com...), the savings rate for the wealthiest 1% of Americans is 51%, meaning that only 49% of tax cuts on the wealthiest Americans directly increase aggregate spending. For the third quintile (middle class), the savings rate is 11%, so essentially 11% of the stimulus from tax cuts is wasted.
4: Historically speaking, monetary policy has been successfully used to alleviate the hyperinflation of the 1970s, and the 2002 recession.
5: When monetary policy was not used, the consequences were disastrous. According to Nobel laureate Milton Friedman, the great depression was caused when the Federal Reserve failed to use monetary policy to guide the economy following the 1929 flash crash. Source: http://en.wikipedia.org....
BobTurner

Con

BobTurner forfeited this round.
Debate Round No. 2
A.K

Pro

Well thats a shame. I was looking forward to a great debate. Now I have nothing to rebut.

I might be interested in a rematch; any takers?
BobTurner

Con

BobTurner forfeited this round.
Debate Round No. 3
A.K

Pro

Any rematch contenders?
BobTurner

Con

BobTurner forfeited this round.
Debate Round No. 4
6 comments have been posted on this debate. Showing 1 through 6 records.
Posted by Jifpop09 2 years ago
Jifpop09
They definitely both have there uses in specific situations. I prefer monetary though.
Posted by BobTurner 2 years ago
BobTurner
That's perfectly fine. Thanks for that.
Posted by A.K 2 years ago
A.K
I accept that political gridlock is irrelevant, but since you already accepted the debate I can't modify the character limit.
Posted by BobTurner 2 years ago
BobTurner
Hey, I'll accept this debate with a few modifications. First, increasing the character limit from 4000 to 10,000 and second, adding a clause somewhere to specify that political gridlock is irrelevant to the discussion -- hence, the argument that monetary policy is faster than fiscal policy because the latter needs to be approved by Congress wouldn't be valid. I think, if we're going to disregard the zero bound, we should also disregard the political aspect, and that only would be fair. Let me know.
Posted by A.K 2 years ago
A.K
Expanding the economy.
Posted by YYW 2 years ago
YYW
More effective at doing what?
1 votes has been placed for this debate.
Vote Placed by Jifpop09 2 years ago
Jifpop09
A.KBobTurnerTied
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Total points awarded:70 
Reasons for voting decision: FF. Stop doing this Turner