A:

Generally speaking, the Republican Party is considered more business friendly and favors a more limited role of government in terms of regulating the economy. This includes less regulation on business, such as restrictions that might seek to relegate the pursuit of profits to environmental concerns, labor union interests, healthcare benefits and retirement payouts. Given this more pro-business bias, Republicans tend to receive support from the owners of business and investment capital, as opposed to the labor component that constitutes workers and their interests.
Democrats are said to rely more heavily on government intervention to influence the economy's direction and keep the profit motive of businesses more at bay. Higher regulation comes with increased costs, which Democrats can support through higher taxation. As a result, the party is also described as "tax and spend," with a belief that businesses are more focused on earning a return for shareholders and willing to cut corners in terms of protecting the overall social good.

During economic downturns, Democrats will therefore tend to believe that deficit spending is necessary to help stimulate the economy until private business prospects improve. Influencing government spending levels is referred to as fiscal policy. They might also look to enhance and extend welfare programs to help citizens that have lost their jobs or are more in need due to more challenging economic conditions. Republicans would tend to rely less on government intervention, but might push more monetary levels, which seek to alter the money supply. Lowering the Federal funds rate and the banking reserve ratios qualify as monetary policy levers they can pull.

The reality is that the lines between what are considered traditional Republican and Democratic approaches to regulating the economy are more blurred. The U.S. has run a budget deficit for nearly three decades, meaning it has spent more than it has taken in. This has increased the role of government in the economy and has meant that spending has continued in good times or bad. Government politicians also have personal differences in how they manage the economy, but knowing their party affiliation can still be a solid indicator in the approach they may take in influencing the economy.

RELATED FAQS
  1. What's the difference between monetary policy and fiscal policy?

    Learn how monetary policy refers to bank actions to control interest rates and money supply, while fiscal policy refers to ... Read Answer >>
  2. What impact does government regulation have on the financial services sector?

    Learn about how the financial services industry is affected by government regulation, and the different types of regulations ... Read Answer >>
  3. What is the role of deficit spending in fiscal policy?

    Read about the role deficit spending can play in a government's fiscal policy, and learn why economists are torn about the ... Read Answer >>
  4. To what extent does government regulation impact the electronics sector?

    Learn more about production regulation in the electronics industry and how these regulations may contribute to lesser productivity ... Read Answer >>
  5. What are some advantages of a market economy over other types of economies?

    Learn what a market economy is, the main assumption behind a market economy and some important advantages a market economy ... Read Answer >>
  6. What is the effect of a fiscal deficit on the economy?

    Take a deeper look into the real impacts of government budget deficits on the economy, and why government financing reduces ... Read Answer >>
Related Articles
  1. Taxes

    5 Economic Changes to Expect if a Republican Wins in 2016

    Discover the five most likely economic changes the United States can expect if a Republican wins the presidential election in 2016.
  2. Taxes

    Parties For Taxes: Republicans Vs. Democrats

    Read about the political parties' differences in tax ideology, and how it can affect your paycheck.
  3. Investing

    For Higher Stock Returns, Vote Republican Or Democrat?

    The president's political party is correlated to market performance. Find out which party tends to outperform.
  4. Insurance

    5 Economic Changes to Expect if a Democrat Wins in 2016

    Discover the potential economic effects of a Democratic White House win in 2016, including higher taxes for the wealthy and tighter banking regulations.
  5. Financial Advisor

    4 Ways that the Presidential Election Will Affect Your Portfolio

    Healthcare, pharmaceutical, energy and defense stocks could be impacted, as presidential campaign statements translate into buying and selling pressure.
  6. Insights

    Tea Party Vs. Republican Party: Who Will Win In 2016?

    What agendas define the rift between the Tea Party and the Republican establishment, and which side will win the presidential nomination in 2016?
  7. Insights

    What Is Fiscal Policy?

    Learn how governments adjust taxes and spending to moderate the economy.
  8. Investing

    Whose Money Keeps the Republican Party Rolling (VHI, LVS)

    We'll take a look at largest Republican donors, a collection of moguls, magnates, shadowy corporations and more than one donor from beyond the grave.
  9. Insights

    Free Markets: What's The Cost?

    Some argue that when the free market fails to protect consumers, government regulation is required.
  10. Small Business

    Government Regulations: Do They Help Businesses?

    These rules are in place to protect consumers and help businesses thrive at the same time.
RELATED TERMS
  1. Fiscal Policy

    Government spending policies that influence macroeconomic conditions. ...
  2. Super Tuesday

    Super Tuesday refers to the date in the U.S. presidential primary ...
  3. Regulation F

    A regulation set forth by the Federal Reserve. Regulation F specifies ...
  4. Deficit Spending

    When a government's expenditures exceed its revenues, causing ...
  5. Economic Stimulus

    Attempts by governments or government agencies to financially ...
  6. Revenue Cap Regulation

    A form of economic regulation generally applied to utility companies. ...
Hot Definitions
  1. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  2. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  3. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  4. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  5. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  6. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
Trading Center