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Economic Policy

Economic Policy. Hans Jagnandan, Katie Simko, Eric Kansky, Jordan Wolkstein, Jesse Walker, Pooja Eppanapally. Social Security Reform. Ratio of workers per Social Security recipient has decreased significantly. Social Security, as it is, will pay out more than it takes in by 2017.

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Economic Policy

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  1. Economic Policy Hans Jagnandan, Katie Simko, Eric Kansky, Jordan Wolkstein, Jesse Walker, Pooja Eppanapally

  2. Social Security Reform • Ratio of workers per Social Security recipient has decreased significantly. • Social Security, as it is, will pay out more than it takes in by 2017. • President Bush suggested lowering Social Security taxes and have people’s wages go to Private Retirement Accounts (PRA’s) • Some suggest an increase in taxes to compensate for the lack of money coming in. Others say doing so would put too large of a burden on the current workforce. • Aging population has caused decrease in funds. (Baby boomers)

  3. Flat Tax • Single tax rate for all Americans regardless of annual income (around 17%) • Avoids loopholes and tax evasion. Encourages investment. • Deficits in government. Total government revenue would decrease. • Currently lowest tax bracket pays 14% and highest pays 38% (can be seen as elitist) • Republicans tend to support a Flat Tax system due to lower taxes for the majority and the small government rationale.

  4. Balanced Budget Amendment to the Constitution • A balanced budget amendment requires government revenues to equal expenditures. • Keynesian Theory: Deficit Spending • Johnson’s Presidency: Great Society & Vietnam War spending increased the deficit, but greater taxes balanced the budget. • Under Nixon’s presidency, deficit spending resumed. Nixon’s advisors choose to fights inflation rather than the budget. • Congress has attempted to cut spending (ex: Gramm-Rudman-Hollings Act), however these efforts were overturned by the Supreme Court.

  5. Estate Tax • Definition: A tax levied on an heir's inherited portion of an estate if the value of the estate exceeds an exclusion limit set by law. • With a change of laws, small business owners became able to pass on farms and other qualifying businesses to their heirs.   • On February 3, 2005, Hemphill et al. v State of Washington, Department of Revenue. • The Supreme Court ruled that the Department of Revenue must conform to the changes made by Congress in 2001 and that class action members are entitled to a refund of estate tax paid.

  6. Marriage Penalty Tax • The difference between the taxes you pay as a married couple and the taxes you would pay as two single people. • 1916 to 1939-married couples paid less taxes than two single people living together • 1969-the law was changed to a system where the amount of taxes was determined by the difference in income between spouses. This means that if you earned identical incomes, you have the highest taxes. • Jobs and Growth Tax Relief Reconciliation Act of 2003 made taxes equal for all people, married or single. • In an attempt to make the laws fairer, they ended up going from one end of the spectrum to the other.

  7. Farm Subsides • $20 billion in “direct subsidies” annually in U.S. • Texas, Iowa, and Illinois receive most • Subsidy programs give farmers money for crops and set “price floors.” • Legislation mandating use of ethanol creates demand for American grains. (Energy Policy Act of 2005) • World Trade Organization has urged the U.S. to lessen its farm subsidies because they could affect global market prices.

  8. NASA Funding • $8.17 billion per year • Budgeted since 1958 • Usually takes >1% of the federal budget although the average American believes that its 20%. • NASA used $416 in federal funding from 1958-2008 • In 2002, aerospace industry contributed more than $95 billion in U.S. economic activity including $23.5 billion as earnings for about 600,000 employees. • Independent executive agency

  9. Line-Item Veto • Definition: the power of an executive authority to nullify or cancel specific provisions of a bill, usually a budget appropriations bill, without vetoing the entire legislative package. • Sponsored by Republicans in the 1990s, it was struck down by the Supreme Court as unconstitutional in 1998. • “The line-item veto gave the knife to the president, and that was unconstitutional,” White House budget director Peter Orszag told reporters. • The White House said the new authority would help Obama cut “billions” of dollars in spending each year. And officials released a list of current spending measures they said Obama would have used the authority on

  10. Bush Tax Cut • Economic Growth & Tax Relief Reconciliation Act of 2001 • Jobs & Growth Tax Relief Reconciliation Ace of 2003 • Supporters say cuts lead to business expansion and increased entrepreneurship. Cuts are more progressive than those of Reagan. • Critics say cuts give rich an easy way out. This policy favors the upper class and hurt efforts to lessen the deficit. • Republican Congress when passed • Recently renewed under Obama (lack of party discipline)

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