Political ideology and economics | US government and civics | Khan Academy

What we're going to talk about in this video is how various political ideologies can affect folks' views on economics. When we're talking about economics and government policy around economics, there are two fundamental types. There's fiscal policy, which we will focus mainly on in this video, which is the idea of how much does the government tax and how much does the government spend. This is fundamentally in control of the U.S. Congress.

Then you also have monetary policy, and these are ideas around interest rates and the money supply in service of keeping the economy strong without having inflation run amok. This is controlled in the United States by the U.S. Federal Reserve System. Now, if you were to put the various ideologies on a spectrum, it might look something like this. I put liberal ideology on the left because it's often associated with a left-leaning ideology, and I put conservatives on the right because it's often described as a right-leaning ideology.

Libertarians are interesting because if we're talking about economics, they have a lot more in common with conservatives than they do with liberals. However, if we were talking about social issues, it would be the other way around. Libertarians would have a lot more in common with liberals than conservatives on social issues. In general, libertarians want less government intervention on either dimension—on economics or social issues.

But now, let's focus on the entire spectrum. So, if we were to think about liberals, what's your sense of how a liberal might think about, say, fiscal policy, taxation, and government spending? Generally speaking, liberals favor a larger government, and this larger government happens through higher taxes, higher taxes, and higher government spending, and more government programs. Higher spending. The reason why they tend to favor a larger government is they will invoke ideas of a safety net—that in a wealthy society, everyone should be provided for on some level. They might invoke ideas of fairness.

They also believe that a larger government is out there to protect the citizenry from being taken advantage of, and so they'll also favor more regulation. Now, conservatives would take the opposite stance. They tend to favor smaller government, smaller government, and it would be in the form of lower taxes, lower taxes, lower spending, lower spending, and less government regulation, less regulation. They'll make the argument that the less that the government gets in the way, the more that the economy can actually thrive.

The more that business can do well, the more competitive our country will be, in which case everyone will be better off. So, they're often associated as being pro-business, but many conservatives would argue that by being pro-business, it's actually helping more individuals. Now, an idea that often gets associated with liberals is one of Keynesian economics.

Now, John Maynard Keynes was an early 20th-century economist who argued that a government could use fiscal policy in order to stimulate the economy. So, Keynes argued that during recessions, the government could even run deficits in order to stimulate the economy—that even deficits were not bad—by lowering taxes because lower taxes would put more money in individuals' and businesses' pockets and increasing spending, so higher government spending, higher government spending.

Now, although Keynes is most associated with a liberal ideology, especially because it was practiced during the Depression by FDR, some would argue that it might have helped come out of the Depression. It turns out that most mainstream liberals and conservatives do practice some form of Keynesian economics. Liberals tend to stress the higher government spending. If we're in a recession, the government should spend more to stimulate the economy, to put more money in folks' pockets so that there's more consumer spending, which could drive the economy.

Conservatives try to favor the lower taxes. You will see conservative government officials say, "Hey, we want to lower taxes to stimulate the economy." Fundamentally, that is a Keynesian point of view, therefore focusing on the lower taxes angle of it. In either case, if your spending is higher than your taxes, both sides would run a deficit in order to stimulate the economy. Sometimes, conservatives are associated with the idea of supply-side economics, and this goes back to being pro-business and even lower taxes.

That, hey, if more people have more money in their pockets, especially those who invest or those who are starting businesses or businesses themselves, that they can then expand their capacity. They could go and hire more people, and that this would be good for everyone. Now, what about libertarians? Well, on economic policy, you could view them as even more conservative than conservatives. They would favor the smallest possible government—smallest, smallest possible government.

Many libertarians would argue that the government should only be there to protect property rights, to have a common self-defense, to have some basic public safety, and outside of that, the government should get out of the way, and people would be best off in liberty. Many libertarians would even argue that the whole idea of a Federal Reserve System that's actively controlling monetary policy is a bad idea. So, I'll leave you there. This gives you a big picture of how political ideology connects to folks' views on economics.