EC-009 The Gray Zone

What causes business cycles? According to some economists, politicians do! Supposedly, in the months leading up to an election, elected leaders focus on economic expansion. They spend money to create jobs, increase government projects, and provide services. They also may lower taxes so businesses and voters have more money to spend. Why? Because when people have more income and feel positive about the economy, they are more likely to reelect the incumbent instead of voting for a new candidate. But, after the election is over, the country is left with high inflation and large budget deficits due to all the spending that occurred. To combat these problems, the administration often raises taxes and cuts back on government spending. The result? An economic contraction, complete with unemployment, less money, and more bankruptcies. Then, as another election approaches, the elected leaders start the cycle all over again.

Do you think this is possible? Do our elected leaders cause business cycles? If so, is it ethical for government officials to influence the direction of the economy prior to (and after) political elections? Why or why not?