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Economic Policy

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Roots of Economic Policy The early years of our nation were marked by a laissez faire economic policy. Interstate Commerce Commission (ICC)- 1st attempt at gov t ... – PowerPoint PPT presentation

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Title: Economic Policy


1
Economic Policy
2
Roots of Economic Policy
  • The early years of our nation were marked by a
    laissez faire economic policy.
  • Interstate Commerce Commission (ICC)- 1st attempt
    at govt regulation in 1887.

3
Consumer Protection(Progressive Era)
  • Sherman Anti-Trust Act of 1890
  • Meat Inspection Act (1906)
  • Federal Reserve Act (1913)

4
Great Depression/ New Deal
  • The economy collapsed in 1929
  • FDRs New Deal created programs that were
    supposed to safeguard our economy.
  • Laissez faire replaced with interventionism-
    govt having an active role in the economy

5
Government Regulation
  • The decades of the 1930s thru the 1970s were
    marked by economic and social regulation.
  • Social activism combined with grandstanding
    politicians led the way for government regulation.

6
Deregulation
  • A reduction in market controls in favor of market
    based competition began in the mid 1970s.
  • Starting with Jimmy Carter, most presidents have
    continued to deregulate industries with mixed
    results.

7
Fiscal Policy
  • Congress controls Fiscal policy- government
    expenditures, revenues, and debt
  • It is conducted through the federal budget
    process.

8
The Budget
  • The Budget Account Act of 1921
  • This created the OMB and delegated budget power
    to the President.
  • The Congressional Budget Act of 1974
  • This created new procedures for the budget.
    First, the President submits the budget. Then,
    the House and Senate budget committees analyze
    the budget with the Congressional Budget Office
    (CBO).
  • 2/3 of spending is on entitlements A government
    program that guarantees and provides benefits to
    a particular group. This is uncontrollable
    spending.

9
Budget
  • The primary purpose of the budget is to fund
    government programs.
  • Most spending goes toward national defense and
    human resource spending.
  • Mandatory vs discretionary spending

10
Entitlements
  • Entitlement programs are benefits paid to
    American citizens who meet criteria set by the
    government.
  • Examples social security, medicaid, food
    stamps, etc.

11
Social Security
  • Insurance for the unemployed and elderly
  • insurance program- created for the unemployed and
    the elderly
  • Everybody would be taxed and all would be
    eligible for insurance
  • Assistance program- created for the blind,
    dependent children, and aged
  • Only poor ( by the means test) are considered for
    assistance

12
Problems with social security
  • 1) baby boomers reaching retirement age
  • 2) not as many workers as recipients
  • 3) payouts not progressing with cost of living
    increases
  • Surplus projected to disappear in next few years.

13
Deficits/Debt
  • Deficit- expenditures gt revenues
  • Debt- collection of yearly deficits
  • Most our our debt is owned by China

14
Monetary Policy
  • The Federal Reserve System (the Fed) manages
    monetary policy
  • They control the money supply and interest rates.

15
Machinery of Economic Policy Making
  • There is fragmented policy-making that is not
    under the presidents full control because within
    the executive branch, numerous organizations
    influence policy.
  • Congress is most important in economic policy
    making. It approves all taxes and most
    expenditures. It consents to wage and price
    controls. It can influence the Fed by threatening
    to reduce it powers.

16
Path to Reducing Spending
  • The Gramm-Rudman Balanced Budget Act of 1985 was
    unsuccessful.
  • New Strategy of 1990
  • If entitlements increase, then taxes have to
    increase

17
Levying Taxes
  • Policies on Taxing
  • The tax burden is too low on citizens, however,
    there are loopholes for industry (client
    politics).
  • The rise of Income tax
  • The 16th amendment (1913)
  • Usually, taxes increase during wartime and
    decrease during peace.
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