Economics professors go head-to-head in the “Battle of Economic Ideas”

Uniformed in a fitted gray suit, economics professor Ahmed Rahman debated economics professor emeritus Frank Gunter on Monday afternoon in Packer Auditorium.

This was the fifth time the two professors have gone “head-to-head” in an event series, called the “Battle of Economic Ideas,” centered around current economic policy. This event series is hosted by Lehigh’s economic society.

Gunter said Rahman won the four-round duel, focused on comparing fiery economic ideas, due to his crowd management skills. He said Rahman treated the crowd like adults, while he cracked jokes to an almost full house.

Rahman said the students won the debate, in a joking manner.

“I’m very happy with the turnout,” said vice president of Lehigh’s economics society Ella Smith, ‘27.

Smith said the purpose of the match was to highlight the importance of critical thinking and discourse.

A coin flip decided who would be the proponent or opponent for each topic of debate.

Round one: Should the federal government use broad-based tariffs to shield American businesses from foreign competition, or do imports inflate prices for consumers and provoke retaliatory trade barriers?

Gunter called the coin flip, resulting in him arguing against broad-based tariffs and Rahman in favor of tariffs.

Rahman framed his argument around the idea that tariffs could serve the U.S. well even from a free market perspective. 

He referenced Alexander Hamilton’s ‘Infant Industry’ argument, which states tariffs can protect newly established domestic industries while the technology is still developing. 

He advocated for large economies like the U.S., having some level of tariffs can improve terms of trade, allowing it to capture a bigger share of the gains. 

Rahman criticized the current administration’s method of rolling out tariffs, but said a poor approach doesn’t make tariff policy bad in general. 

Gunter countered Rahman, and said using tariffs to restore manufacturing jobs would move the country backward. He said the U.S. shifted from a farming economy to a manufacturing economy by the mid-20th century, and that it is now moving towards the direction of services. 

“The idea that somehow agriculture was important or manufacturing is more important than services, I don’t really buy it,” Gunter said. 

Gunter then called out the impacts of tariffs on prices. 

He said if imports become more expensive, the price of imported goods will rise.

Gunter also said this also gives American companies that don’t import goods room to raise their own prices, since they no longer face cheaper foreign competition.

He said imports are such a small share of the economy, and tariffs would do little to boost American industries, and the decision to implement tariffs is swayed by politics. 

Round two: Should the federal government expand major tax cuts to spur private activity, or prioritize debt reduction to prevent economic instability?

Gunter acknowledged his answer strayed from the question. He argued the deficit is a governmental spending problem, not a tax problem.

He opened by saying he wanted to convince the audience that there’s no poverty in the U.S.

According to the Assistant Secretary for Planning and Evaluation, the U.S. federal poverty line for a family of four is $33,000.

He estimated it would take $400 billion a year to lift every one of these families out of poverty. Gunter then mentioned how there’s still poverty, despite the federal government spending $1.1 trillion on anti-poverty programs.

“It’s not a matter that we’re not spending enough money,” Gunter said. “It’s a matter that the money isn’t being spent in any kind of reasonable fashion.” 

Rahman began his rebuttal citing economist Arthur Laffer, who in 1974 sketched on a pizzeria napkin what became known as the Laffer Curve. The curve suggests one could lower taxes and raise revenues simultaneously. 

Outside of extremely high tax rates, Rahman said this has never worked.

“It’s a powerful approach because it’s a simple approach, but instead of simple, I would call it a bit simplistic,” Rahman said. 

Rahman then reminded the audience that the national debt is $40 trillion. 

“I could stand up here and say $40 trillion for five minutes, and I think I (would) win,” he said.

He also said fiscal stewardship that hasn’t been demonstrated in Congress is needed to tackle this debt. 

Round three: Should the executive branch exercise direct oversight over rate adjustments, or should monetary policy remain insulated from elected officials?

Going into the second half of the debate, Rahman took the reins, arguing for more political oversight than rate adjustments. He said this idea of coordination between the administration and the federal reserve is not far-fetched, because it’s happening now.  

Rahman said the current separation between monetary and fiscal policy dates back to the aftermath of World War II when the U.S. economy was facing inflationary pressures and massive debt. 

From this, “federal chairman controls liquidity, and the treasury secretary is given powers to deal with the fiscal responsibilities of taxing and spending the American money,” Rahman said.

Rahman called it a “creaky” system, saying just because it’s what the U.S. has had for decades doesn’t mean it has to be held onto. He said splitting the Federal Reserve could keep control of the balance sheet, while interest rate decisions could be made in concert with elected officials. 

He also said this would connect the constituents to interest rate decisions. 

“When you see a calamity coming down the line, don’t you want as many brains, as many resources as possible to address the problem?” Rahman said. 

Gunter reminded the audience the Federal Reserve has a dual mandate of price stability and maximum employment, and they’re often at odds with each other.

He argued monetary policy should remain insulated from elected officials, while reminding the crowd a politician’s goal is to get reelected. He also said when the Federal Reserve raises interest rates to fight inflation, it makes mortgages, car and college loans more expensive. 

“The independence of the Federal Reserve is important because what they are doing, trying to control inflation, is not going to get anybody elected,” Gunter said. 

Round four: Should the federal government expand legal entry pathways to supply needed workers, or restrict immigration to protect the domestic labor market?

In the final heat, Gunter said throughout history, the U.S. has gained hardworking, smart and courageous people willing to leave their homes to work in the U.S.

He said bringing the smartest people to the U.S. benefits the nation. 

Gunter said that if it were up to him, “anyone who graduates with a STEM degree in the United States would immediately receive a green card.” 

He closed by saying the U.S. should not abandon its border regulation, but the country does benefit from smart and hardworking people moving and contributing to the U.S. 

Before responding, Rahman said he would be arguing against his own pro-immigration research, calling it a hard but important exercise. 

He said it was a time to challenge his own perceptions and “shake” himself up a bit.

“(Gunter) and I are up here not necessarily just to show off and show how clever we are,” Rahman said. “But we’re pretty damn clever, right?”

Citing economist George Borjas, Rahman pointed out that for a 10% increase of migrant workers, the native wage of that occupation class decreased by 3-4%. 

He said while the contribution of migrant workers does increase productivity, those gains aren’t spread evenly across the economy. Instead, they mostly go to companies that benefit from cheap labor. 

Rahaman said the U.S. has an anti-immigration sentiment that Americans can’t ignore. 

He said even when economists point out the positive gains of immigration, people don’t listen.

Rahman joked after challenging his own research. 

“Thanks, don’t believe anything I just said.”