Unit 2 government and trade academic
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Unit 2 government and trade academic






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Unit 2 government and trade academic Unit 2 government and trade academic Presentation Transcript

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