Transcript Regulations

Copyright © 2011 Pearson Education, Inc. Publishing as Longman
America’s Democratic
Republic
Chapter 15:
Budget and Economic Policies
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
In This Chapter
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How government economic policies affect the lives and
well-being of Americans
The federal budget, the deficit, and the national debt
What tools government uses to manage the economy
Dealing with the financial collapse and the economic
recession
Why government subsidizes some business activities and
regulates others
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
The Policy Process
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Public Policies: government creates
laws, programs and regulations that apply
to all people in a particular jurisdiction
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Distributive
Redistributive
regulatory
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The Policy Process
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Stages of the Policymaking Process
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Agenda setting
Decision making
Implementation
Evaluation and feedback
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The Policy Process
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Theories regarding policy development
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Marxist
Elite
Bureaucratic
Pluralists
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Overview of Economic Policies
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Free enterprise left to itself has periodic
problems
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Inflation
Depression
Recession
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Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Overview of Economic Policies
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Goals of Economic Policy
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Ensure economic growth
Control inflation
Avoid balance of payment problems
Maintain budgetary discipline
Avoid negative externalities
Provide a firm economic foundation
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Main Players and Influences on
Public Policy
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Structural Factors
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Fundamental values and beliefs that have
political consequences
Political Linkage Factors
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People, influence and processes that transmit
the people’s wants and needs
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Main Players and Influences on
Public Policy
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Government Factors
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The individuals and groups with formal
responsibility for making policy
President
 Congress
 Federal Reserve Board (commonly called the Fed)
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Copyright © 2011 Pearson Education, Inc. Publishing as Longman
The Government’s
Macroeconomic Tools
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Macroeconomic Policy: policy that affects
the performance of the economy as a
whole
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Fiscal policy
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Taxing and spending
Monetary policy
Aggregate demand
 Controlling the supply of money and credit
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The Government’s
Macroeconomic Tools
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Policy Debates
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Keynesians
Monetarists
Supply-siders
New growth theorists
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Taxing, Spending and the
Federal Budget
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Federal Budget
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Executive budget
Prepared by president and staff
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Office of Management and Budget (OMB)
Considered, amended and passed by
Congress
Executed by President and executive branch
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Taxing, Spending and the
Federal Budget
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Federal Spending
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Mandatory spending
Changes can only occur if Congress and president
agree to change program legislation or budget
authorization bills
 Automatic
 About 50 percent of budget
 Costs are rapidly increasing
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Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Taxing, Spending and the
Federal Budget
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Federal Spending
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Discretionary spending
Everything else
 57 percent of this goes to national defense
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Supplemental spending
Special one-time expenditures to cover
emergencies
 “off the books”—mischaracterizes the deficit
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Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Taxing, Spending and the
Federal Budget
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Taxes
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Consistently hated by Americans but taxes less than
those of other rich democracies
Rate paid from income has stayed relatively flat for
about 30 years
National government
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Individual income taxes
Payroll taxes
Progressive v. regressive
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Taxing, Spending and the
Federal Budget
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Annual Budget Deficits and the National
Debt
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Deficit: the amount the government spends
over and above what it takes in
Debt: total amount government owes
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The government both owns and owes the debt
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Regulation
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Why?
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Negative externalities that cannot be solved
by individuals or corporations, e.g., pollution
Economic theory of regulation
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Regulation is caused by political efforts of
businesses to have government protect them from
competitors
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Regulation
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History
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Interaction of democratic and nondemocratic
factors
1900-WW I: regulation of powerful new
corporations
 1930s–1960s: New Deal
 1960s–1970s:
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Protection against environmental and health hazards
Provide equal opportunity
Allow public access to regulatory rule making
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Regulation
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History
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1980s–2000: deregulation to advance
economic efficiencies
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Regulation sapped
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Productivity
Economic growth
Disagreements about
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Uniform national standards
Strict deadlines for compliance
Detailed instructions
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Regulation
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Future of Regulation
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Changes due to economic activity and
technological advancement bring new
problems
Environmental concerns
Regulations issued by the European Union
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Economic Policies in the
Democratic Republic
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Government does respond to public
opinion to a certain degree
Special interests retard democracy
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Spending
Taxation
Regulatory process
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Summary
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American economic policies affect such areas as
employment, taxation, and international relationships,
among others
Policy makers use the powers of taxation, interest rates,
stimulus, creation of currency, and creation of national
debt to directly affect monetary policies
Politicians and theorists are split on the level of
government involvement necessary to solve economic
problems
Economic performance has many times determined
which party is in control of political offices after an
election
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Question 1
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The nation’s larges financial institutions
were aided during the George W. Bush
administration by __________ legislation.
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TEEP
TRAN
TAXE
TARP
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Answer
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The nation’s larges financial institutions
were aided during the George W. Bush
administration by __________ legislation.
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
TEEP
TRAN
TAXE
TARP
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Question 2
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When a nation exports more than it
imports, it is called a positive __________.
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Deficit
Balance of payments
Budget
Creative account
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Answer
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When a nation exports more than it
imports, it is called a positive __________.
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Deficit
Balance of payments
Budget
Creative account
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Question 3
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Which season of the year is the
presidential budget sent out through the
OMB?
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Spring
Summer
Fall
Winter
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Answer

Which season of the year is the
presidential budget sent out through the
OMB?
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Spring
Summer
Fall
Winter
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Question 4
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_________ are used by the government to
resolve negative externalities in the
economy.
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Taxes
Liberties
Tributes
Regulations
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Answer

_________ are used by the government to
resolve negative externalities in the
economy.
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Taxes
Liberties
Tributes
Regulations
Copyright © 2011 Pearson Education, Inc. Publishing as Longman
Question 5
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What are the possible long-term effects of
governmental stimulus programs?
Copyright © 2011 Pearson Education, Inc. Publishing as Longman