Does Government Spending Help Or Hurt The Economy

One of the questions many economists have trouble with is “does government spending help or hurt the economy?” The reason why according to Chris Matthews, writer for Fortune.com, is “simply because it affects all taxpayers and consumers of government provided services” (Matthews 1). In other words, it affects nearly everybody. Government austerity can have a big impact on the economy and the people living in it; which is why it is important to know if it can help or hurt the economy. The “Great recession” (2008-2012) has been used as an experiment for economists to understand how government stimulus and austerity programs affect the economy, especially during economic downturns (Matthews 2). Ed Dolan, a former economics professor who holds a PhD in economics from Yale University has said the question of whether government spending helps or hurts the economy has even been a hot topic in the U.K …show more content…
This shows more government austerity measures could actually be good for the economy, which as a result, means high spending could be bad for the economy. While making the chart Dolan adjusts government spending figures so that he can ignore “automatic stabilizers” like unemployment insurance and the deficits that are incurred because of reduced tax receipts during a recession. Ignoring these factors, Dolan argues, “gives us a better picture of what the actions of current policy makers have done to the economy” (Matthews 7). In Response to this, Matthews writes “One could quibble over whether eliminating automatic stabilizers is really a good strategy for analyzing the performance of public policy in the U.S. because extending unemployment benefits has been one of the few spending measures that Democrats and Republicans have been able to agree on during the recovery years” (Matthews