“It’s the Economy, Stupid.”

1. “It’s the Economy, Stupid.” A brief summary on the changing course of economic action in the US, leading to Trickle-down Theory and Reaganomics.

2. On the Agenda • Briefly discuss the basis of economic theory in American politics • Discuss the causes of stagflation and the recession of 1977 • Discuss the different economic approaches to fiscal and monetary policy • Discuss Reagans economic views on government • Discuss how Reagans economic policy will effect his overall governmental policy

3. Does it Really Matter? • Yes. • Economic policy is by nature a major game changer and a large factor by which to determine the success of a president. • Reagans divergent economic policy is a common target for AP MX questions and FRQ’s. • Economic Policy will undoubtedly effect you for the rest of your life, mine as well learn it now.

4. Where’s our Starting Point? • John Maynard Keynes • Founder of modern macroeconomics • Believed that government needed control over the “commanding heights” of the economy • Dictates that government action is necessary at times to relieve high unemployment

5. Are There any Opposed? • Friedrich Von Hayek • Austrian School of economics-Ludwig Von Mises • The Road to Serfdom • I hate to burst your bubble, but you can’t create wealth. • Life in Chicago and being awarded a Nobel Prize

6. Can Morals and Economics Mix? John Maynard Keynes Friedrich Hayek • “Long run is a misleading guide to current affairs. In the long run we are all dead.” • Relief from unemployment must come in the short-run, help those who are hurting now. • “I have arrived at the conviction that the neglect by economists to discuss seriously what is really the crucial problem of our time is due to a certain timidity about soiling their hands by going from purely scientific questions into value questions.”

7. Who’s Who? Common Keynesians: Common Classicalists:

8. How does this even begin to effect us? • Franklin D. Roosevelt • FDR and the great Depression. • Alphabet soup sends government spending through the roof. • “I ask Congress for a declaration of war, on the depression!”

9. The Weapons of War Fiscal Policy Monetary Policy • Decisions and actions made by Congress which effect the US economy as a whole. • Raising or lowering taxes • Increasing or lowering spending • Printing more money • Enacting federal regulation • Decisions and actions made by the Federal Reserve Board which effect the US economy as a whole. • Increasing or decreasing unemployment • Increasing or decreasing inflation • Changing the Federal rates of exchange

10. To Spend or not to Spend? • Richard M. Nixon • Nixon runs on a campaign of fiscal and monetary conservatism • Promises to lower inflation • Ends up leaving the gold standard, uses Keynesian economic theory

11. The King of Clumsy • Jimmy Carter • Carter’s failing moral obligations in the middle east cause an oil embargo. • The beginnings of stagflation are then present in the economy. • High Unemployment + high inflation = disaster • What do we do?

12. A Drastic Answer, to a Drastic Situation. • Paul Volcker • Appointed head of the Federal Reserve Board by Jimmy Carter • Wants to lower inflation as a means of escape from stagflation • Original target rate is far too high • Meeting with Reagan and hitting the Bullseye

13. An Actor Made President • Ronald Reagan • The most terrifying words in the English language are: I'm from the government and I'm here to help. • Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it. • Republicans believe every day is the Fourth of July, but the democrats believe every day is April 15.

14. Two Stones, One Bird. Fiscal Policy: Reaganomics Monetary Policy: Supply Side Economics • Cut taxes, especially for corporations and business owners. • Cut government spending to reduce the “crowding out” effect. • Stop regulating business and let the market do what it does best. • Encourage growth of aggregate supply • Keep inflation low • Appreciate US currency • Let the trickle-down effect create wealth for all people

15. A Victory for the Supply Side • At first times are hard, inflation decreases but unemployment is at a stand still. • Monetary policy brings value to the currency. • Fiscal policy brings an end of stagflation. • Lessons which we should have learned.

16. One Little Bump in the Road • “No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!”

17. Side Effects of Taking Reaganomics • Laissez faire government • End of government regulation on corporations • ATC strike • An economic and GDP boom • Not much time for other concerns: civil rights and women's concerns • Sandra Day O’Connor

18. Tying the Knot Between Economics and Morals • Jerry Falwell • Foundation of the Christian right • Born out of the “degenerate society” • Attaches to the moral principles found in Hayek's economic theory

19. All in Favor? Any Against? • The election of 1984 • Bears out Americans feelings on the economic policy • Reagan convinces Americans are over-taxed and then delivers on cutting taxes • Moral majority or economic boom?

20. A Few Black-Spots on the Record • Reagan’s compromise • The debtor nation • $200 Billion dollar increase in national debt • Consistency leads to complacency • The AIDS problem • The War on drugs • Immigration: Shifting Long Run Supply • The failures of Trickle-down theory • Works when businesses need to recover capital and labor. • Increasing the corporate profit margin • Stopping the fountain

21. The Overall Difference Keynesian Presidents Classical Reaganomics • Used spending as a tool to win re-election • Artificially lower unemployment • Use the tools of economics to influence current events without foresight for the future • Relinquishes the reigns on business to maximize profit and American economic growth • Cuts spending and reduces inflation with a mindset to help future generations • Low in practicality

22. Lessons Learned • Economics and politics go hand-in-hand, economics will always shape the course of history, even in moral obligations • Prosperity always has a price; for us and for future generations • What looks good on paper doesn’t always work in real life • A successful president must have a good hold on economics