How the Economy Functions Under a Democrat and a Republican President

Managing the Deficit

2. Managing the Deficit

Republicans historically take steps to sustain economic growth by reducing the national debt by limiting spending. This is typically done by altering the money supply through fiscal policy changes (i.e. lowering the Federal funds rate or banking reserve ratio). In theory, these measures increase economic activity by encouraging consumers to borrow, not the government. Conversely, Democrats are proponents for deficit spending in an attempt to grow the economy. Democrats may extend unemployment benefits or otherwise increase overall spending to provide additional cash flow to those in need.

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