Unit 2 - Academic Government and Trade
<ul><ul><ul><li>Federal Programs </li></ul></ul></ul><ul><ul><ul><ul><li>Mandatory Spending (Entitlements) </li></ul></ul>...
C.  Fiscal Policy <ul><ul><ul><li>1.  What is it? </li></ul></ul></ul><ul><ul><ul><ul><li>Budget set for fiscal year (Octo...
<ul><ul><ul><li>3.  Contracting the economy </li></ul></ul></ul><ul><ul><ul><ul><li>Increase Taxes </li></ul></ul></ul></u...
D.  Deficits and Debt <ul><ul><ul><li>1.  Balancing </li></ul></ul></ul><ul><ul><ul><ul><li>Expenditures: What the governm...
 
 
E.  Partisan Spending <ul><li>Republicans – Traditionally in favor of Laissez Faire. </li></ul><ul><li>Democrats – Keynesi...
F.  Taxes <ul><li>Federal government uses IRS to collect wage taxes.  </li></ul><ul><ul><li>Social Security </li></ul></ul...
G.  How a Budget is Made <ul><li>Federal departments & independent agencies submit budgets. </li></ul><ul><li>Office of Ma...
<ul><li>United States House & Senate Committees on Budget must finalize legislative procedure on budget. </li></ul><ul><li...
Part 2 - International Economics
A.  Global Economy <ul><ul><li>Distribution </li></ul></ul><ul><ul><ul><ul><li>Not all nations have natural resources. </l...
B.  Why we are Interdependent <ul><ul><li>Self-sufficiency/protectionism </li></ul></ul><ul><ul><ul><li>Barriers </li></ul...
<ul><ul><ul><li>2.  Cooperation </li></ul></ul></ul><ul><ul><ul><ul><li>Free Trade - One of the few things Adam Smith beli...
C.  Absolute and Comparative Advantage  <ul><li>Absolute advantage = those that can produce the most using the resources t...
<ul><ul><li>Positive Attributes </li></ul></ul><ul><ul><ul><ul><li>Receiving goods & services produced better abroad allow...
C.  Classifying Development <ul><ul><ul><li>1.  Levels </li></ul></ul></ul><ul><ul><ul><ul><li>Developed, less developed <...
D.  Banking and Loans <ul><li>New Organizations are developed to help poor countries.  </li></ul><ul><li>International Mon...
E.  Africa <ul><li>Pre-colonial stage saw exchange of minerals and resources for crafts and salt. </li></ul><ul><li>Africa...
4.  Colonial or Imperial Era <ul><li>British, Portuguese, Belgians, French, Spanish, and Germans divided continent.  </li>...
5.  Independence <ul><li>Some states retained independence (Liberia, South Africa, Egypt, Ethiopia). </li></ul><ul><li>WWI...
6.  Aftermath <ul><li>South Africa was left with decades of Apartheid and eventual equality and light manufacturing. </li>...
E.  China <ul><li>Great Leap Forward – disaster, Mao thought having everyone producing steel was bad because. </li></ul><u...
F.  India <ul><li>Growth due to cheap labor and strong education among advanced students. </li></ul><ul><li>English compat...
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    1. 1. Unit 2 - Academic Government and Trade
    2. 2. <ul><ul><ul><li>Federal Programs </li></ul></ul></ul><ul><ul><ul><ul><li>Mandatory Spending (Entitlements) </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Social Security ($644 billion) </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>i. Social Security has been expanded since 1935 to include disability benefits and Medicare. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>ii. These benefit programs face financial problems with more recipients living longer. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>b. Interest Payments ($260 billion) </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Discretionary </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Defense ($515 billion + 70 billion for War on Terror) </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Education ($59.2 billion) </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Art ($46 million) </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Science ($24 billion including NASA) </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Transportation ($11.5 billion) </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>In the 50’s & 60’s, the DOD received more than half the federal budget. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Defense now constitutes about one-sixth of all federal expenditures. </li></ul></ul></ul></ul></ul><ul><ul><ul><li>State and Local Government </li></ul></ul></ul><ul><ul><ul><ul><li>Day to Day Expenses must be paid </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Investments are made </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Bonds are sold </li></ul></ul></ul></ul><ul><ul><ul><ul><li>State and local govt’s must balance the budget </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Programs </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Education </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Transportation </li></ul></ul></ul></ul></ul>
    3. 3. C. Fiscal Policy <ul><ul><ul><li>1. What is it? </li></ul></ul></ul><ul><ul><ul><ul><li>Budget set for fiscal year (October 1 to September 30) to avoid elections </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Office of Management & Budget (executive) and Congressional Budget Office (legislative) : make suggestions. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>General Accounting Office keeps departments in check. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Each house has an Appropriations Committee </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Incrementalism </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>The idea that last year’s budget is the best predictor of this year’s budget, plus some. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Agencies can safely assume they will get at least what they got last year. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Focus & debate on the increase over last year. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>The budgets tend to go up a little each year. </li></ul></ul></ul></ul></ul><ul><ul><ul><li>2. Expanding the economy </li></ul></ul></ul><ul><ul><ul><ul><li>Increase Government Spending </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Cut Taxes </li></ul></ul></ul></ul>
    4. 4. <ul><ul><ul><li>3. Contracting the economy </li></ul></ul></ul><ul><ul><ul><ul><li>Increase Taxes </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Decrease Spending </li></ul></ul></ul></ul><ul><ul><ul><li>4. Laissez Faire up till 1932 </li></ul></ul></ul><ul><ul><ul><ul><li>Invisible Hand </li></ul></ul></ul></ul><ul><ul><ul><ul><li>No government intervention </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Supply and Demand </li></ul></ul></ul></ul><ul><ul><ul><li>5. Keynesian Economics from 1932-1981 </li></ul></ul></ul><ul><ul><ul><ul><li>Spend out of a recession </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Used by most Developed nations. </li></ul></ul></ul></ul><ul><ul><ul><li>6. Supply-Side Economics (Reagan Era 1981 ---) </li></ul></ul></ul><ul><ul><ul><ul><li>Taxation affects economy. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Laffer Curve proves that high taxes hurts the economy. </li></ul></ul></ul></ul>
    5. 5. D. Deficits and Debt <ul><ul><ul><li>1. Balancing </li></ul></ul></ul><ul><ul><ul><ul><li>Expenditures: What the government spends money on. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Revenues: Sources of money for the government. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Surplus – making $ (Clinton) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Deficit – losing $ (most of the time) (now $407 billion) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Debt – overall losses (last paid off: Jackson) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Fiscal Conservatives have pushed for balanced budget amendment to Constitution </li></ul></ul></ul></ul><ul><ul><ul><ul><li>That would tie the gov’ts hands if there was an emergency </li></ul></ul></ul></ul><ul><ul><ul><li>Debt </li></ul></ul></ul><ul><ul><ul><ul><li>Interest payments make up about fifteen percent of budget. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>World Crisis could bring doomed US economy if debt persists. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>2009 – $10.4 trillion </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Average person’s share: $34,666 </li></ul></ul></ul></ul><ul><ul><ul><li>Borrowing </li></ul></ul></ul><ul><ul><ul><ul><li>The Treasury Department sells bonds - this is how the government “borrows” money. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>The federal debt is the sum of all the borrowed money that is still outstanding. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>The government competes with other lenders. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Government does not have a capital budget. </li></ul></ul></ul></ul>
    6. 8. E. Partisan Spending <ul><li>Republicans – Traditionally in favor of Laissez Faire. </li></ul><ul><li>Democrats – Keynesian economics, especially FDR. </li></ul><ul><li>Both parties try to outspend each other on the military. </li></ul><ul><li>Elected officials spend on special projects known as earmarks or parks in their communities to get re-elected. </li></ul>
    7. 9. F. Taxes <ul><li>Federal government uses IRS to collect wage taxes. </li></ul><ul><ul><li>Social Security </li></ul></ul><ul><ul><li>Income </li></ul></ul><ul><ul><ul><li>Shares of individual wages and corporate revenues. </li></ul></ul></ul><ul><ul><ul><li>The 16 th Amendment permitted Congress to levy an Income tax. </li></ul></ul></ul><ul><ul><li>Progressive – percentage of income taken increases with your wealth. </li></ul></ul><ul><ul><li>Six brackets of Americans </li></ul></ul><ul><ul><li>0 - $8,000 = 10% </li></ul></ul><ul><ul><li>$8,000-32 = 15% </li></ul></ul><ul><ul><li>$32,000-77= 25% </li></ul></ul><ul><ul><li>$77,000-160 = 28% </li></ul></ul><ul><ul><li>$160,000-350 = 33% </li></ul></ul><ul><ul><li>Over $350,000 = 35% </li></ul></ul><ul><li>Flat – same percentage for everyone: 18% national, NO DEDUCTIONS! </li></ul><ul><li>Regressive: Percentage taken from income increases the poorer you get </li></ul><ul><ul><li>Sales – state tax is 6% </li></ul></ul><ul><ul><li>National would be 23% </li></ul></ul>
    8. 10. G. How a Budget is Made <ul><li>Federal departments & independent agencies submit budgets. </li></ul><ul><li>Office of Management & Budget (OMB) which is part of Executive Office of President, creates spending plan for exec branch. </li></ul><ul><li>Prez must submit budget by first Monday in Feb. </li></ul>
    9. 11. <ul><li>United States House & Senate Committees on Budget must finalize legislative procedure on budget. </li></ul><ul><li>This must be approved by a floor vote. </li></ul><ul><li>Both House & Senate must have similar bills, if not, approved by conference committee. </li></ul><ul><li>13 appropriation bills are passed by their respective committees & on the floor following budget procedure OR one big budget bill called and Omnibus Spending Bill can be passed. </li></ul><ul><li>Bills must be identical from both houses, if not, they are resolved by a conference committee. </li></ul><ul><li>Congress will get advice from the Congressional Budget Office. </li></ul><ul><li>They must be signed by the president. </li></ul>
    10. 12. Part 2 - International Economics
    11. 13. A. Global Economy <ul><ul><li>Distribution </li></ul></ul><ul><ul><ul><ul><li>Not all nations have natural resources. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>USA – rare minerals from Africa, oil from Mid-east </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Following supply and demand, tech/labor is cheaper elsewhere. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>If a country has a comparative advantage, then the domestic price will be below the world price, and the country will be an exporter of the good. </li></ul></ul></ul></ul>
    12. 14. B. Why we are Interdependent <ul><ul><li>Self-sufficiency/protectionism </li></ul></ul><ul><ul><ul><li>Barriers </li></ul></ul></ul><ul><ul><ul><ul><li>Import quotas. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Export restraints. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Tariffs </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Results </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Increased prices </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Trade Wars </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Both tariffs and import quotas . . . </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>raise domestic prices. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>reduce the welfare of domestic consumers. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>increase the welfare of domestic producers. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>cause deadweight losses. </li></ul></ul></ul></ul></ul><ul><ul><ul><li>Protectionism </li></ul></ul></ul><ul><ul><ul><ul><li>Jobs </li></ul></ul></ul></ul><ul><ul><ul><ul><li>National Security </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Infant Industry </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Unfair Competition </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Protection-as-a-Bargaining Chip </li></ul></ul></ul></ul>
    13. 15. <ul><ul><ul><li>2. Cooperation </li></ul></ul></ul><ul><ul><ul><ul><li>Free Trade - One of the few things Adam Smith believed the government should protect. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>David Ricardo – nations with the lowest opportunity cost should produce a particular good or service. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Reciprocal Trade Act of 1934 </li></ul></ul></ul></ul><ul><ul><ul><ul><li>World Trade Organization 1995 </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Ensures compliance with General Trade Agreements of Tariffs and Trade. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>European Union </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>NAFTA – North American Free Trade Agreement </li></ul></ul></ul></ul></ul>
    14. 16. C. Absolute and Comparative Advantage <ul><li>Absolute advantage = those that can produce the most using the resources they have. </li></ul><ul><li>Comparative Advantage = producing the most with the smallest opportunity cost. </li></ul>
    15. 17. <ul><ul><li>Positive Attributes </li></ul></ul><ul><ul><ul><ul><li>Receiving goods & services produced better abroad allow for cheaper prices, efficiency. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Domestic consumers of the good are better off </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Trade raises the economic well-being of the nation as a whole. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Creates peace </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Third World Nations have… </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Higher employment </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Larger tax base </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Infrastructure </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>USA </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>World’s leading exporter. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Largest importer. </li></ul></ul></ul></ul></ul><ul><ul><li>Negative Impact </li></ul></ul><ul><ul><ul><ul><li>Laborers disadvantages in low skill jobs, skilled or high tech jobs are and advantage. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>International Corporations - Free trade has allowed international companies to exist that may dominate industries. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Domestic producers of the good are worse off. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Third World nations face… </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Large companies with low wages </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Pollution and labor hazards </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Can be overwhelmed with cheap manufactured goods from developed nations. </li></ul></ul></ul></ul></ul>
    16. 18. C. Classifying Development <ul><ul><ul><li>1. Levels </li></ul></ul></ul><ul><ul><ul><ul><li>Developed, less developed </li></ul></ul></ul></ul><ul><ul><ul><ul><li>1 st (demo) , 2 nd(Communist), 3 rd </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Core, semi-periphery, periphery, </li></ul></ul></ul></ul><ul><ul><ul><li>Measuring </li></ul></ul></ul><ul><ul><ul><ul><li>GDP </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Life expectancy </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Infant Mortality Rate </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Energy Consumption </li></ul></ul></ul></ul>
    17. 19. D. Banking and Loans <ul><li>New Organizations are developed to help poor countries. </li></ul><ul><li>International Monetary Fund – monitors exchange rates and policies of nations. </li></ul><ul><ul><li>President is a European </li></ul></ul><ul><ul><li>Has isolated inflation problems </li></ul></ul><ul><ul><li>Helps advise poorer nations fix economies. </li></ul></ul><ul><li>World Bank – provides monetary assistance to developing nations. </li></ul><ul><ul><li>President is always American </li></ul></ul><ul><ul><li>Loans to nations to build infrastructure </li></ul></ul><ul><ul><li>Is accused of setting unrealistic goals </li></ul></ul>
    18. 20. E. Africa <ul><li>Pre-colonial stage saw exchange of minerals and resources for crafts and salt. </li></ul><ul><li>African elite sold slave labor to Arabs and Europeans. </li></ul><ul><li>Europe ignored direct contact until 19 th century. </li></ul>
    19. 21. 4. Colonial or Imperial Era <ul><li>British, Portuguese, Belgians, French, Spanish, and Germans divided continent. </li></ul><ul><li>Brutal oppression of kingdoms and tribes, sometimes with assistance of African elite. </li></ul><ul><li>Paternalistic approach taken, but really on by British. </li></ul><ul><li>French hoped to assimilate Africans. </li></ul><ul><li>Portuguese and Belgians used torture and mutilation to gain economic advantage. </li></ul><ul><li>Continent emptied of many valuables. </li></ul>
    20. 22. 5. Independence <ul><li>Some states retained independence (Liberia, South Africa, Egypt, Ethiopia). </li></ul><ul><li>WWII helped awaken self-determination. </li></ul><ul><li>Urban growth led to large concentration of labor, unions, and strikes. </li></ul><ul><li>Unrest led to riots in some colonies. </li></ul><ul><li>Britain attempted to guide states to independence such as in Ghana or Gold Coast. </li></ul><ul><li>France </li></ul><ul><ul><li>Hoped to retain Africans until they became French too. </li></ul></ul><ul><ul><li>Prize colony was Algeria = part of France </li></ul></ul><ul><ul><li>Military torture was used to root out rebels. </li></ul></ul><ul><ul><li>Colonists and local military revolted when France decided to give up colony. </li></ul></ul><ul><li>Belgium left the Congo without putting any effort into bettering the nation. </li></ul><ul><li>Portuguese brutally oppressed colonies until death toll was skyrocketing. </li></ul>
    21. 23. 6. Aftermath <ul><li>South Africa was left with decades of Apartheid and eventual equality and light manufacturing. </li></ul><ul><li>Saharan states like Libya and Egypt have oil wealth, but dictatorships. </li></ul><ul><li>Somalia, Sudan, and Ethiopia have weak governments, actual chaos. </li></ul><ul><li>Mineral wealth such as in the Congo leaves spoils for military juntas and corrupt leaders. </li></ul><ul><li>Little investment made due to risk </li></ul><ul><li>An attempt at African Union has been fruitless. </li></ul>
    22. 24. E. China <ul><li>Great Leap Forward – disaster, Mao thought having everyone producing steel was bad because. </li></ul><ul><ul><li>It took workers from other industries. </li></ul></ul><ul><ul><li>They had little or no knowledge of making steel. </li></ul></ul><ul><ul><li>Different metals were melted down to make brittle, useless beams. </li></ul></ul><ul><li>Post-Mao Zedong government has encouraged foreign investment and local control. </li></ul><ul><li>Rapid growth in GDP. </li></ul><ul><li>Rapid modernization. </li></ul><ul><li>Urban life is Westernized. </li></ul><ul><li>On the heel of USA as most powerful economy. </li></ul><ul><li>Owns large chunk of USA debt from purchasing bonds. </li></ul><ul><li>Negative </li></ul><ul><ul><li>Pollution </li></ul></ul><ul><ul><li>Income gap (between rich and poor) </li></ul></ul><ul><ul><li>Homelessness </li></ul></ul><ul><ul><li>Rural poverty </li></ul></ul><ul><ul><li>Big swings in economic performance </li></ul></ul>
    23. 25. F. India <ul><li>Growth due to cheap labor and strong education among advanced students. </li></ul><ul><li>English compatibility due to colonialism. </li></ul><ul><li>Technological advancements. </li></ul><ul><li>Negative </li></ul><ul><ul><li>Caste system segregation </li></ul></ul><ul><ul><li>Hundreds of millions of poor </li></ul></ul><ul><ul><li>Slums next to skyscrapers. </li></ul></ul><ul><ul><li>Sprawling government and Hindu v. Muslim conflict. </li></ul></ul>
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