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Crafting Economic Policies: A Comprehensive Guide

Learn about fiscal vs. monetary policy, Keynesianism, monetarism, supply-side theory, Reaganomics, and the key players who shape economic policies. Understand budget submission and analysis processes for effective policymaking.

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Crafting Economic Policies: A Comprehensive Guide

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  1. ECONOMIC POLICY (Or… “How Many Harvard Economists Does It Take to Craft an Economy Policy?”

  2. FISCAL VS. MONETARY POLICY FISCAL POLICY • Tax and spend to affect economy • Deficit vs. Surplus MONETARY POLICY • Use interest rates to control economy • Lower rates encourage borrowing and spending

  3. KEYNESIANISM(CANE-ZEE-AN-ISM)John Maynard Keynes1883-1946

  4. The market will not automatically operate at • full-employment, low inflation • Emphasis on savings vs. spendings • The key is to create the right demand • If demand is too low, government should pump • $ into economy (public works, etc) • If demand is too great, government should • taken $ out of circulation by raising taxes and/ • or spending less. • Government activism • Liberal • FISCAL POLICY

  5. MONETARISM Milton Friedman (1912-2006)

  6. Inflation occurs when there is too much • money, and too few goods • Value of dollar decreases • Gov’t should have a steady, predictable • increase in the money supply equal to growth • Generally, gov’t should leave matters alone • (Free Market) • Conservative • MONETARY POLICY

  7. Price & Wage Controls John Kenneth Galbraith (1908-2006)

  8. Government should regulate the max prices • charged and wages paid in larger industries to • control inflation • Socialism

  9. INDUSTRIAL POLICY Robert Reich (1946- )

  10. Government should invest to keep key • industries healthy or plan for replacements • Socialism

  11. SUPPLY-SIDE THEORY Arthur Laffer (1940- ) Paul Craig Roberts (1939- )

  12. Less government interference • Cut taxes a lot to encourage people to work, • save, and invest • Increased investment will lead to more jobs • Conservative • FISCAL POLICY

  13. REAGANOMICS

  14. Reduced government spending on social • programs • Increased military spending • Sharp income tax cuts • Increased social security taxes • Result: HUGE budget deficit that lowered • unemployment and helped the rich

  15. WHO HELPS CRAFT ECONOMIC POLICY? • CEA (Council of Economic Advisors) • OMB (Office of Management and Budget) • Secretary of Treasury • The Federal Reserve Board (the Fed) • -7 members appointed by Pres, confirmed • by Senate for 14 year terms • -Regulates the supply and price (interest • rates) of money • -Congress must approve all expenditures • -Can control Fed by threatening to reduce its power • BUDGET • -Pres submits to Congress in Feb • -Analyzed by the CBO (Congressional Budget office) • -Budget Resolutions come out of committee

  16. THE BUDGET • President submits budget to Congress in February • Budget is analyzed by the CBO (Congressional Budget Office) • Budget resolutions come out of committees

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