Iycee Charles de Gaulle Summary Normative Economics Essay

Normative Economics Essay

The issue of balancing the budget has been one of the prominent points of contention between the Republican and Democrat parties for several decades already. The importance attached to this issue is understandable, since the issue of balancing the budget is the cornerstone of each party’s fiscal policy and reflects their diverging views on a vast variety of other macroeconomic issues, ranging from inflation targeting to job creation.

As concerns the Republicans, in their annual overview of the state of the economy in 2007, the party laid down their approach to balancing the budget in the most straightforward way. Balancing the budget, in George W. Bush’s view, should consist of two main elements, namely pro-growth policies and spending restraint. In practice, the ‘pro-growth’ course is a euphemism for the tax cuts, which the Republicans have always been strongly in favor of. The second element of the strategy should be implemented through a harsher control of public expenditure ‘to help prevent billions of taxpayer dollars from being spent on unnecessary earmarks’ (Republican National Committee, 2007, ‘Balancing The Budget’) as well as though redesigning entitlement programs.

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In the Democrats’ view, balancing the budget should be done by implementing a progressive tax reform. The deepest disagreement between the Republicans and the Democrats concerns making the tax cuts for the richest segments of the population permanent, as proposed by McCain (The Democratic Party, 2008). The Democrats suggest pulling out from Iraq and eliminate the aforementioned tax cuts as the means to generating more revenue. The Republicans retort by arguing that eliminating the tax cuts for citizens whose income exceeds $250,000 would generate a mere $40 billion a year, according to Alan Reynolds of Cato Institute (Republican National Committee, 2008).

Furthermore, Republicans had long opposed pay as you go rules, implying that any move to cut taxes or higher expenditure should be compensated by a tax increase or spending cut in another area of the federal budget. However, the pay-go approach to budgeting was eventually pushed through in the Democratic House.

Analyzing the aforementioned approaches to fiscal discipline, it is possible to conclude that the Democratic party relies more on positive economics, which contains a moral or ethical aspect, while the Republicans follow the principles of normative economics, which is purely descriptive. The Democrats often employ the rhetoric of societal justice versus economic figures.

For instance, they frequently accuse the Republican party of balancing the budget on backs of veterans, of the poor, and senior citizens, since Bush’s intention is to keep expenditure on social policy at minimum.

On the contrary, Republicans take a detached view on the state of economy, acknowledging both pressing issues and workable solutions. Republicans restrain from attaching any value to their fiscal decisions accept from the highest value of economic efficiency.

For example, the have never offered a moral justification for the tax cuts for the rich, except from the workability of this policy, while Democrats have always questioned this policy on the grounds of its ethical ambivalence, i.e. contradicting the idea of social justice and richer citizens’ obligation to help their poorer compatriots.

Therefore, certain fundamental differences in the Republicans’ and Democrats’ approach to balancing the budget stem from their commitment to descriptive and normative economics, respectively.


The Democratic Party. ‘McCain Myth Buster: John McCain and the Cost of the War in Iraq.’ March 17, 2008. June 29, 2008. <http://www.democrats.org/a/2008/03/mccain_myth_bus_21.php>

Republican National Committee. ‘Fact Sheet: The State Of The Economy.’ January 31, 2007. June 29, 2008. <http://www.gop.com/News/NewsRead.aspx?Guid=e9852f67-9540-41a1-a21d-ea49e359f9ee>

Republican National Committee. ‘Thought of the Day.’ June 11, 2008. June 29, 2008. <http://www.gop.com/blog/Read.aspx?guid=4e136b91-d8ef-44f8-9d2b-78e207798c43>