Debate over economy brings out a full range of philosophies

07/14/2010 12:51 PM

(WITH VIDEO) Creating jobs, or at least stopping the hemorrhaging, remains a top concern of voters. And it has inspired a full range of suggested remedies from Kentucky’s candidates and leaders.

Their views of what government’s role should be in a recession cover nearly the full spectrum of economic theory, from the Keynesian philosophy that public sector spending is needed to bolster a weak private sector to the more “supply side” model that government should roll back taxes and get out of businesses’ way.

Of the six political figures cn|2 Politics caught up with, perhaps no two are farther apart on that spectrum than Democratic U.S. Rep. Ben Chandler of Central Kentucky’s 6th District and his Republican challenger Andy Barr.

Here’s a breakdown of what Chandler, Barr, U.S. Senate candidates Rand Paul and Jack Conway and Kentucky’s Republican U.S. Senators, Mitch McConnell and Jim Bunning, say about what government should do to stabilize and jump-start the economy.


The $787 billion American Recovery and Reinvestment Act in 2009 — nicknamed the stimulus bill — kept the recession and the unemployment rate from being much worse, Chandler said.

“I think it stopped the decline, the downwards spiral in the economy … and since then, the economy has been moving in a better direction,” Chandler said in an interview in Washington last month. “When the bank crisis hit, the private sector essentially shut down. People quit spending money, consumer confidence crashed, and something had to be done to get that back in decent shape.”

Such a view closely follows the philosophy of John Maynard Keynes, whose economic theory he conceived in the early 20th century has helped shape debates over coping with downturns for decades.

“It’s general economic dogma, I guess you can say, that you don’t cut government spending in a time when the private sector is weak and has cut large sectors of jobs,” Chandler said. “You have to compensate for a loss of jobs in the private sector, and when the private sector strengthens itself enough, that’s when you deal with the deficit.”

Chandler, a lawyer by training who has served three full terms in Congress, pointed to the second economic downturn in the 1930s to support his point. He said President Franklin Roosevelt and Congress started too soon to try to slash the deficit, causing the economy to backslide in 1937. It wasn’t until World War II and the massive engine of government spending that came along with it that the United States fully emerged from the back-to-back recessions.

Chandler said he’s convinced this recession “would be significantly worse” without the extra government spending, although he acknowledged that the Recovery Act was “far from a perfect” bill.

“Had we not intervened, particularly in state budget situations, you would have seen wholesale loss of jobs throughout the economy and some very high-profile professions, like teachers and policemen,” he said. “I think it would have negatively affected consumer confidence. If you start seeing people like that losing their jobs, you lose more confidence in where the country is going and then the economy.”


It would be hard to find someone with a more diametrically opposed economic philosophy from Chandler than Barr, his Republican challenger.

Barr called the Recovery Act a “throwback to the failed Keynesian model” and said the double-digit unemployment rate in Kentucky and 9.7 percent rate nationwide shows ‘the failure of the stimulus in action.”

It’s not a recovery if only the public sector is adding jobs, he said.

“What I’d like to see is the exact opposite: government shrinking and the private sector growing,” Barr said.

He suggested a more supply side economic approach, in which Congress should move to make permanent the tax cuts Congress approved during George W. Bush’s administration in 2001 and 2003.

“That would have sent a strong signal that this government is committed to keeping taxes low,” Barr said, adding that companies would have more money available to hire to expand and businesses and individuals would have more confidence in the economy.

Barr favors broader tax reform, including the application of a flat income tax rate across all income levels and reducing taxes on savings and investments.

“We need a system that rewards success — does not punish success,” he said. “If we can accomplish a flat tax, I think that’s comprehensive reform.”


Barr’s philosophy closely mimics that of McConnell, who has been a vocal critic of the Recovery Act. He said the only discernible outcome has been that the country added to the debt and managed only to protect those state and federal jobs.

“I don’t think that going on a spending binge and spending it on public sector employees made any sense at all,” he said. “If the goal was to stimulate the private sector, there’s scant evidence of it.”

McConnell has been pushing in the Senate to prevent the repeal of the Bush tax cuts.


While Senators Bunning and McConnell haven’t seen eye-to-eye on some issues lately, they agree on protecting the tax cuts as the top way government can help. Take a look:


Paul offered a pair of suggestions for the government to help improve the economy: balance the budget and halt the “destruction of the currency” by the Federal Reserve’s monetary policies. Here’s what he told cn|2 Politics:


Conway has advocated for two different strategies to spur the economy have been to pass a tax credit for companies that create new positions and to relax certain regulations on community banks.

“We need to get capital flowing again to small and community banks,” Conway said last week at a candidate forum in Louisville. “We need to increase the lending amounts for credit unions. And we need to streamline the small business lending process. If we do that, perhaps we can once again get capital flowing to the small and medium sized businesses that are engines of job growth in these communities”

BONUS BACKGROUND: For a summary of the federal government’s past actions to combat recessions, the New York Times produced a sharp interactive graphic in 2009.

- Ryan Alessi with video produced by Dan Pelstring and Holly Thompson


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