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US Politics Economic Policy Overview Basics of Public Policy Basic Goals of Economic Policy Market Failures (public goods, externalities, monopolies) Economic Growth Basic Tools Fiscal Policy Monetary Policy Basic Strategies Public Policy Is the problem a “political” problem?

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us politics

US Politics

Economic Policy

overview
Overview
  • Basics of Public Policy
  • Basic Goals of Economic Policy
    • Market Failures (public goods, externalities, monopolies)
    • Economic Growth
  • Basic Tools
    • Fiscal Policy
    • Monetary Policy
  • Basic Strategies
public policy
Public Policy

Is the problema “political”problem?

  • Problem Identification
  • Agenda Setting
  • Policy Formulation
  • Policy Legitimation
  • Policy Implementation
  • Policy Evaluation

Participants:

Congress, Pres,

IG, media, public

public policy4
Public Policy

What issues needto be addressedfirst?

  • Problem Identification
  • Agenda Setting
  • Policy Formulation
  • Policy Legitimation
  • Policy Implementation
  • Policy Evaluation

Participants:

Congress, Pres,

IG, media, public

public policy5
Public Policy

What policy is bestsuited to resolveor solve theproblem?

  • Problem Identification
  • Agenda Setting
  • Policy Formulation
  • Policy Legitimation
  • Policy Implementation
  • Policy Evaluation

Participants:

Congress, Pres,

IG, media, public

public policy6
Public Policy

From the options,enact one intolaw

  • Problem Identification
  • Agenda Setting
  • Policy Formulation
  • Policy Legitimation
  • Policy Implementation
  • Policy Evaluation

Participants:

Congress, Pres,Courts,IG, media, public

public policy7
Public Policy

Develop the administrativeprotocol andprocedures

  • Problem Identification
  • Agenda Setting
  • Policy Formulation
  • Policy Legitimation
  • Policy Implementation
  • Policy Evaluation

Participants:

Pres, bureaucracy,

IG

public policy8
Public Policy

Is the programaccomplishingwhat it wasmeant to?

  • Problem Identification
  • Agenda Setting
  • Policy Formulation
  • Policy Legitimation
  • Policy Implementation
  • Policy Evaluation

Participants:

Congress, Pres,bureaucracy

IG, media, public

goals of economic policy
Goals of Economic Policy
  • Primary goal is smooth running of a capitalist economy
  • Maintain those features necessary for a market economy
      • Stability/Security
      • Fair Competition/Anti Monopoly
goals of economic policy11
Goals of Economic Policy

Who determines the“price” of a good,

buyers or sellers?

Price

Quantity

goals of economic policy12
Goals of Economic Policy

Demand Curve

Price

What would a“demand” curvelook like?

Quantity

goals of economic policy13
Goals of Economic Policy

Demand Curve

Price

When price is high, buy fewer goods

Quantity

goals of economic policy14
Goals of Economic Policy

Demand Curve

Price

As price drops,

buy more goods

When price is high, buy fewer goods

Quantity

goals of economic polcy
Goals of Economic Polcy

Supply Curve

Price

What wouldthe “supply”curve looklike?

Quantity

goals of economic polcy16
Goals of Economic Polcy

Supply Curve

Price

As price rises, try to sell more goods

When price is low, try to sell

fewer goods

Quantity

goals of economic policy17
Goals of Economic Policy

supply

Price

Market Price

Who setsthe price ofthe good?

demand

Quantity

goals of economic policy18
Goals of Economic Policy
  • Market price is determined by the “invisible hand” of the market
  • Buyers and sellers making individual decisions about what is best for them as consumers or sellers lead to market price that is best for all concerned
goals of economic policy19
Goals of Economic Policy

Free market (laissez-faire) economics requires:

  • widespread information among buyers and sellers about the general tendencies and status of the market
goals of economic policy20
Goals of Economic Policy

Free market (laissez-faire) economics requires:

  • Competition among buyers and sellers
    • monopoly: no competition among sellers
    • monopsony: no competition among buyers
  • Rational preference schedules among participants:A>B, B>C A>C
goals of economic policy21
Goals of Economic Policy
  • Market Failures
    • Ensure fair competition
      • Play by same rules
      • No monopolies/monopsonies
    • Provide public goods
      • Minimum wage, consumer protection, unemployment insurance
    • Protect market externalities
      • e.g., anti pollution laws
goals of economic policy22
Goals of Economic Policy
  • For most of the country’s history, economic growth was not a government priority
  • Market was responsible for the market
  • Great Depression brings expanded government involvement
tools of economic policy
Tools of Economic Policy
  • Fiscal Policy
    • Government’s ability to tax and spend
  • Monetary Policy
    • Control the money supply through the manipulation of interest rates
tools of economic policy24
Tools of Economic Policy
  • Tax revenue streams:
    • income (personal/corporate)
    • property
    • capital gains
    • sales
    • usage
  • List of US tax forms
tools of economic policy25
Tools of Economic Policy
  • Types of taxes
    • Progressive Taxes
      • Taxes increase (in percentage) as wealth increases
        • e.g., Income Tax
    • Regressive Taxes
      • Taxes decrease (in percentage) as wealth increases
        • e.g., Social Security tax
    • Proportional
      • Taxes rise as percentage of some fixed measure
        • e.g., sales tax (you pay more as cost of good increases)
    • Flat
      • Tax is same rate regardless of cost, income, etc.
        • e.g., cigarette tax, user fees for driver’s license, parks, etc.
basic strategies
Basic Strategies
  • Keynesian Economics
    • John Maynard Keynes
  • Use government tools to manage economic growth
  • Control the booms and limit impact of the busts in economic cycle
basic strategies27
Basic Strategies

“Normal” Economic

Cycles

GDP

Growth

Years

basic strategies28
Basic Strategies

“Normal” Economic

Cycles

Managed EconomicGrowth

GDPGrowth

Years

basic strategies29
Basic Strategies

If economy is in downturn:

Government spending, Taxes

If economy is heating up too quickly:

Governmnt spending, Taxes

basic strategies30
Basic Strategies
  • Long term impact though has been steady increase in federal deficit and debt
    • Current Federal Budget Debt
    • Current foreign government ownership of the debt
    • Historic data on the debt
monetary policy
Monetary Policy
  • Control the circulation of money in the economy through the manipulation of interest rates
  • Basically determines the “price” of money
  • Determined by the Federal Reserve Board (the Fed)

Fed Chairman Ben Bernanke

monetary policy32
Monetary Policy

If economy is in downturn:

Decrease rate

If economy is heating up too quickly:

Increase rate

implications
Implications
  • Debt obligations limit new government initiatives
  • Ability of social security system and/or state pension systems to meet demands of retiring population.
  • Ability for foreign governments to impact US government policy
poverty in us
Poverty in US
  • Design a budget
    • Family of 4 in Hudson County
    • Calculate monthly expenses then determine the yearly income necessary for those expenses
poverty in us44
Poverty in US

Poverty rates for selected racial demographic groups

poverty in us45
Poverty in US
  • Beginning in 1930s, federal government began to put poverty relief on the public policy agenda
  • Created:
    • Social Security
    • Medicare
    • AFDC (Aid for Families with Dependent Children)
    • Food Stamp Program
    • Unemployment Insurance
poverty in us46
Poverty in US
  • 1960s “Great Society” programs under Lyndon Johnson expanded federal involvement in poverty relief
    • Created Medicaid
    • Expanded Food Stamp
    • New programs to help poor families
      • e.g. Head Start
poverty in us47
Poverty in US
  • Poverty has stabilized since 1970s, despite the expansion of federal dollars on the problem, and new efforts made to transform welfare to limit costs
  • 1996 Welfare Reform Act
    • Shifts program from federal to state administered system
    • Eliminated AFDC and created TANF
      • (Temporary Assistance to Needy Families)
poverty in the us
Poverty in the US
  • 2008 Poverty Rate Guidelines (HHS)
  • HHS FAQ file on Poverty Rates and Poverty
  • Census bureau poverty data
  • Main Federal Poverty Programs
    • TANF (HHS)
    • HHS reports to Congress on TANFTANF data sets
    • Food Stamps (Agriculture)