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Wednesday, Feb. 21
The Indiana Daily Student

Breakdown of Senate candidates' economic policies with Professor Paul Graf

U.S. Senate

BRAD ELLSWORTH, DEMOCRATIC CANDIDATE FOR INDIANA U.S. SENATE

Ellsworth’s platform supports small business, tax reductions and protecting domestic jobs.

Ellsworth was quoted in a recent IDS article as saying, “As we negotiate trade agreements with other countries, we have to negotiate them favorably for us, at least on a narrow playing ground, and make sure we enforce those.”

However, basic economic theory suggests that trade is always beneficial as long as the terms of the trade fall between the costs of each nation to produce what they are trading.


GRAF Ultimately, a protectionist platform by any politician is going to resonate with a domestic person. Find me a politician that says, ‘Well, you know, I’m really not for jobs in this state. If we open up competition, some of you guys might lose your job, but don’t worry about that.’ You’re not going to get reelected.

Jobs always sound great, education sounds great, providing services or goods for people, helping the middle class — that all sounds great. The politicians are playing it right. What they fail to also implement is that as you become protectionist, yes, you might be protecting jobs, but then the goods and services people buy may rise.

That’s one of the arguments against free trade, if people aren’t playing fair, but the counterargument to all that is if they’re going to do that, the bottom line is we’re still going to get cheaper goods and services. Let’s let them. But again, at the expense of American jobs? I don’t know.

DAN COATS, REPUBLICAN CANDIDATE FOR INDIANA U.S. SENATE

Coats supports a line-item veto on excess government spending and opposes government earmarks. In a recent IDS article, Coats suggested spending by the government on new programs should be only done when there is a “dire urgency.”

GRAF
Any election year, they’re going to say ‘Cut taxes.’ This year, they’re going to say, ‘Cut government spending.’ We’re hitting some statistical ceilings that become problematic.

Most people can agree that when there’s a national disaster like a hurricane, we should be helping out. There’s no doubt. The government is one place people look to.

I hesitate at the absolute necessity because, again, how do you define ‘needs’? That’s the key. On one hand, it sounds great. We’re going to cut back spending unless it’s absolutely necessary.

Define ‘absolute necessity.’ I would press that issue with a politician — ‘What do you mean by absolute necessity?’ Another A.I.G.-ish fails, is that an absolute necessity? GM goes under again, are they an absolute necessity?

Well, by definition, they are now.   

Do we then create the moral hazard behavior, where once people know what constitutes ‘absolute necessity,’ will they engage in risky behavior because they’re going to be bailed out — Freddie Mac, Fannie Mae?

REBECCA SINK-BURRIS, LIBERTARIAN CANDIDATE FOR INDIANA U.S. SENATE

Similar to Congressional Candidate Greg Knott, Sink-Burris supports legislation known as FairTax. FairTax is a national sales tax that would replace the current tax system in the U.S., which is based on a national income tax. She argues FairTax would relieve the lower-class tax burden and enhance economic growth.

GRAF In terms of pendulum, that might be somewhere in the middle, believe it or not. It’s extreme because you go from an income-based tax to a consumption tax.

So if I’m worried about paying taxes, I change my consumption behavior.

There is some good economic appeal to a consumption-based tax like a national sales tax because putting a tax on my spending habits may encourage me to save, and saving is another method of long-term economic growth. One of the knocks on the United States is that we don’t save enough.

The danger, once again, in doing what appears to be a very simplified solution — going from a progressive-based tax system, or federal income tax, to a consumption-based tax, is the implementation.

I think the easiest way to do it is to just make a national sales tax — literally. There, it’s easy to implement. People understand it. They can see it. They can make decisions based on it. It’s very straightforward.

If you start trying to bring a level of ‘fairness’ into it ... you’re bringing that level of complexity you had with the income tax, and I would question that.

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