US Politics

1. US Politics Economic Policy

2. 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

3. 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

4. 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

5. 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

6. 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

7. Public Policy Develop the administrativeprotocol andprocedures • Problem Identification • Agenda Setting • Policy Formulation • Policy Legitimation • Policy Implementation • Policy Evaluation Participants: Pres, bureaucracy, IG

8. 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

9. Economic Policy

10. 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

11. Goals of Economic Policy Who determines the“price” of a good, buyers or sellers? Price Quantity

12. Goals of Economic Policy Demand Curve Price What would a“demand” curvelook like? Quantity

13. Goals of Economic Policy Demand Curve Price When price is high, buy fewer goods Quantity

14. Goals of Economic Policy Demand Curve Price As price drops, buy more goods When price is high, buy fewer goods Quantity

15. Goals of Economic Polcy Supply Curve Price What wouldthe “supply”curve looklike? Quantity

16. 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

17. Goals of Economic Policy supply Price Market Price Who setsthe price ofthe good? demand Quantity

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. Tools of Economic Policy • Tax revenue streams: • income (personal/corporate) • property • capital gains • sales • usage • List of US tax forms

25. 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.

26. 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

27. Basic Strategies “Normal” Economic Cycles GDP Growth Years

28. Basic Strategies “Normal” Economic Cycles Managed EconomicGrowth GDPGrowth Years

29. Basic Strategies If economy is in downturn: Government spending, Taxes If economy is heating up too quickly: Governmnt spending, Taxes

30. 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

31. 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

32. Monetary Policy If economy is in downturn: Decrease rate If economy is heating up too quickly: Increase rate

33. 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

34. Economic Inequality

35. Economic Inequality

36. Economic Inequality

37. Economic Inequality

38. Economic Inequality

39. Economic Inequality

40. Economic Inequality

41. Economic Inequality

42. Economic InequalityEconomic Inequality

43. Poverty in US • Design a budget • Family of 4 in Hudson County • Calculate monthly expenses then determine the yearly income necessary for those expenses

44. Poverty in US Poverty rates for selected racial demographic groups

45. 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

46. 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

47. 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)

48. 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)