There are 5 big debates over macroeconomic policy. They are: The minimum wage, fiscal stimulus, interest rates, free trade protectionism, and unconventional monetary policy. These are the cornerstones of modern economics. And they all have their own individual bases, which determine the eventual direction of the economy. The big debates all tend to come back to one fundamental issue.
All of the macroeconomic policy debates start with the debate over the minimum wage. On the one side, you have the labor unions, who want a higher minimum wage. On the other side, you have business owners, who complain that any increase in the minimum wage will cost them money. It turns out that these two groups have completely different conceptions of what is good for the economy. But it is really not the concept of the minimum wage per se that is at issue; it is the aggregate demand theory, which they both support.
The issues in the other three major corners of macroeconomic policy all center around either supply, demand, or some combination thereof. But when you get down to it, these are all concepts that have some value in terms of trying to understand the relationship between the government and the private sector in the economy. So these are the topics that really require a detailed understanding. But in general, when you boil it all down to the core, supply-side and demand-side of macroeconomics, labor and business are usually the main areas of contention. But even here there are disagreements among economists, with some arguing that there is a place for both of these concepts in the overall economic strategy.
In addition to all of this, there are also the so-called technical and fundamental issues. These include such topics as the role of the state in stabilizing the economy, the appropriate role of monetary policy, and the proper relationship of fiscal policy to the national level. There are many more such fundamental debates, and they range from the most elementary of issues to the most complex of academic discussions. There is also the so-called fiscal policy debate, which revolves around the relationship between the central bank and the various domestic and foreign banks.
Of the six debates over macroeconomic policy, two remain the most relevant today. They are the debate over the appropriate level of interest rates and the relationship of this rate to other aspects of the macroeconomic equation. These two topics alone constitute the bulk of the economics profession and are not really discussed in isolation. It is worth noting, for example, that there was a recent episode in which the Reserve Bank of America (RBA) indicating that it might consider raising interest rates above the current level of around 2 percent. And there have been some very lively discussions over the issue, particularly on the part of the two main parties in Congress.
Another of the six debates over macroeconomic policy is over the optimal use of various macroeconomic policy instruments. This includes such unconventional monetary policy instruments as exchange rates, interest rates, fiscal stimulus programs, and even structural reforms. While this last area has received more attention in recent years, it does not comprise the bulk of the issues discussed in the profession. One of the central debates concerns the relevance of unconventional instruments, and this has led some commentators . . . . . . to label such tools as “fiscal weapons” or “seizures.” Some people argue that the use of such tools is appropriate and necessary if the economy faces a long-term downturn. Other commentators, however, caution against relying too heavily on such policies, arguing that excessive reliance can have damaging consequences.