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3. 1787 We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

4. Mallory Reports Honesty of U.S. businesses

6. Some of our new banks • New Leaf • Bank of Miranda, Bank of Santi, Bank of Mallory, Bank of Marissa, Bank of Ian Swaby • Sarah’s Bank of Seashells • Union Bank • Bank of the Future • SIBL • JG’s

7. Government Finance

8. Government Finance …it’s gonna be painful

9. What’s Dr. S. saying in this chapter?

10. Government Finance • Decisions governments make affect the economy as a whole by changing incentives

11. Government Finance • Decisions governments make affect the economy as a whole by changing incentives • Heavily taxed activities, products, localities, industries or people react accordingly… move elsewhere, convert money to alternate uses, not work as hard, illegal behavior (avoiding taxes)

12. Government Finance • Manner in which government acquires its $ also affects economy

13. Government Finance • Manner in which government acquires its $ also affects economy • How does government get its dough?

14. Government Finance • Manner in which government acquires its $ also affects economy • How does government get its dough? • Taxes, bonds, sale of goods and services and the good old printing press

15. Government Finance • Manner in which government acquires its $ also affects economy • How does government get its dough? • Taxes, bonds, sale of goods and services and the good old printing press • Each of which has its own consequences, no matter what the intent

16. Couple of terms • Balanced budget:

17. Couple of terms • Balanced budget: if all current government spending is paid for with money received from taxes

18. Couple of terms • Balanced budget: if all current government spending is paid for with money received from taxes • Budget surplus:

19. Couple of terms • Balanced budget: if all current government spending is paid for with money received from taxes • Budget surplus: a hypothetical status whereby current tax receipts exceed current spending

20. Couple more terms • Deficit:

21. Couple more terms • Deficit: the preferred way to govern in 2011 whereby tax receipts don’t even come close to covering current expenses so gap is closed by bonds and printing press

22. Couple more terms • Deficit: the preferred way to govern in 2011 whereby tax receipts don’t even come close to covering current expenses so gap is closed by bonds and printing press • National debt:

23. Couple more terms • Deficit: the preferred way to govern in 2009 whereby tax receipts don’t even come close to covering current expenses so gap is closed by bonds and printing press • National debt: the accumulation of those deficits over time, or the total amount owed by the national government

24. $14,135,932,295,120.09

25. $14,135,932,295,120.09 • The estimated population of the United States is 310,416,409so each citizen's share of this debt is $45,582.68

26. $14,135,932,295,120.09 • The estimated population of the United States is 310,416,409so each citizen's share of this debt is $45,582.68 • The National Debt has continued to increase an average of$4.1 billion per day since September 28, 2007

28. Taxation

29. Taxes • All that governments control is tax rates

30. Taxes • All that governments control is tax rates • Increases in tax rates don’t necessarily translate to increased taxes

31. Taxes • All that governments control is tax rates • Increases in tax rates don’t necessarily translate to increased taxes • Our old friend the Laffer Curve

32. Taxes • All that governments control is tax rates • Increases in tax rates don’t necessarily translate to increased taxes • Our old friend the Laffer Curve • CBO has been very wrong about impacts of tax increases and decreases

33. Taxes • All that governments control is tax rates • Increases in tax rates don’t necessarily translate to increased taxes • Our old friend the Laffer Curve • CBO has been very wrong about impacts of tax increases and decreases • Key point: tax rates change behavior

35. Couple more terms • Regressive tax:

36. Couple more terms • Regressive tax: one that affects lower income people disproportionally

37. Couple more terms • Regressive tax: one that affects lower income people disproportionally • Example?

38. Couple more terms • Regressive tax: one that affects lower income people disproportionally • Example? Sales tax get a higher percentage of income from low-income people. Social Security tax also is regressive because the 7.65% tax stops after $106,800 earned (most of it)

39. Couple more terms • Regressive tax: one that affects lower income people disproportionally • Example? Sales tax get a higher percentage of income from low-income people. Social Security tax also is regressive because the 7.65% tax stops after $106,800 earned (most of it) • But it get worse: employer pays another equal amount

40. Still more terms • Progressive tax:

41. Still more terms • Progressive tax: a tax that hits the higher income people disproportionally

42. Still more terms • Progressive tax: a tax that hits the higher income people disproportionally • Examples: income tax with higher marginal rates

43. One more term • Hypocrite: a politician who loves taxing and spending but is greedy with their own

44. One more term • Hypocrite: a politician who loves taxing and spending but is greedy with their own • President Obama: 2003 income of $238,000… contributions to charity/religious organizations, $3,400 (1.4%)

45. One more term • Hypocrite: a politician who loves taxing and spending but is greedy with their own • President Obama: 2003 income of $238,000… contributions to charity/religious organizations, $3,400 (1.4%) • Vice President Biden: 2007 income of $319,853… contributions $995 (0.0000001%, estimated)

46. Other taxes • Most states (all but Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming) and many cities also tax your income

47. Other taxes • Most states (all but Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming) and many cities also tax your income • Worst tax states (hall of shame for combined state and local taxes): New Jersey (12.2%), New York (12.1%), Connecticut, Wisconsin, Rhode Island, California, Minnesota, Vermont, Maine

48. Where’s Florida?

49. Where’s Florida? • 31st

50. Where’s Florida • 31st • Lowest tax state?