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  • 1. Chapter Eighteen Economic Policy American Government and Politics: Deliberation, Democracy, and Citizenship
  • 2. Chapter Eighteen: Learning Objectives
    • Sketch the history of economic policy and its relationship to citizenship
    • Describe the elements of fiscal policy
    • Explain why the tax system is so complex
  • 3. Chapter Eighteen: Learning Objectives
    • Analyze the mechanics of monetary policy
    • Summarize the elements of regulatory policy, especially in matters of finance
    • Understand the politics of trade policy
  • 4. Chapter Eighteen: Learning Objectives
    • Discuss how policymakers and citizens deliberate on economic policy
    MARK RALSTON/AFP/Getty Images
  • 5. Introduction
    • Most agree on certain economic goals
    • Economic growth (change in GDP)
    • Low unemployment
    • Low inflation (general rise in prices)
  • 6. Introduction
    • Economic policy includes
    • Fiscal policy
    • Monetary policy
    • Regulatory and trade policy
  • 7. A Brief History of Economic Policy
    • Founding an economy
    • Laissez-faire approach
    • Government fostered economic growth through communication and transportation
    • Creation of Banks of the United States
  • 8. A Brief History of Economic Policy
    • Civil War and Progressivism
    • Economic policy caused rift between North and South
    • Laws passed to create uniform national currency
    • Progressive movement influenced economic policy
  • 9. A Brief History of Economic Policy
    • World Wars and their aftermaths
    • Government finances difficult to track
    • New Deal programs created annual deficit
    • Tax withholding authorized in 1943
  • 10. A Brief History of Economic Policy
    • An age of uncertainty
    • 1970s saw high inflation, economic stagnation, and unemployment
    • Supply-side economics became more prevalent economic theory and Ronald Reagan was a strong supporter of this idea
  • 11. Fiscal Policy: Taxes
    • What are the costs and benefits of the federal government’s complex system of income taxes?
    National archives
  • 12. Fiscal Policy: Taxes
    • Types of taxes
    • Individual income taxes
    • Corporate payroll taxes
    • Payroll taxes
    • Excise and sales taxes
    Harley Schwadron/Reprinted by permission of
  • 13. Myths and Misinformation
    • Income tax tales
    • A quick search of the Internet will reveal many myths about how much citizens owe on their taxes.
    • The IRS warns against using such misinformation.
  • 14. Fiscal Policy: Spending and the Budget
    • How do the executive and legislative branches deliberate about fiscal policy?
    • Two considerations
    • Economic impact of fiscal policy
    • Must consider the components of the budget
  • 15. Fiscal Policy: Spending and the Budget: The Budget Process
  • 16. Pledges and Promises
    • Full faith and credit of the United States
    • The “full faith and credit” of the federal government backs the payments on public debt.
    • What would happen if the government failed to pay its debts?
  • 17. Fiscal Policy: Limits of Fiscal Policy
    • Limits of fiscal policy include
    • Proposals take months to become law, so there may be a policy lag
    • Much of federal spending is outside the appropriations process
    • Uncertainty about future economic conditions
  • 18. Fiscal Policy: Deficits, Surpluses, and the Debt
    • Why do deficits happen?
    • Deficits may grow because policy goals often override fiscal goals.
    • A president may be insistent on a policy without regard to the long-term economic impact of that policy.
  • 19. Monetary Policy: Organization and Policy
    • It is the responsibility of the Federal Reserve Board (the Fed) to assist in managing the supply of money and credit.
    • The goal of the Federal Reserve Board is economic stability.
  • 20. Monetary Policy: Organization and Policy
    • The Fed does not directly dictate interest rates, rather it has power over the federal funds rate .
    • The Fed does not have unlimited power as it is limited by global economic conditions and federal government deficits.
  • 21. Monetary Policy: Organization and Policy Source: “The Federal Reserve System,” structure/, accessed May 7, 2009.
  • 22. Monetary Policy: Deliberation and the Fed
    • A member of the Federal Open Market Committee explained that his research is not only based on hard data, but also personal accounts and anecdotal evidence.
    • How does that approach contribute to deliberation?
  • 23. Regulatory and Trade Policy
    • What is the appropriate role for the government in policing economic activity?
    • Do international trade agreements infringe on American sovereignty?
  • 24. Regulatory and Trade Policy: Regulating the Marketplace
    • Four goals of financial regulation
    • Protect consumers from fraud, deception, or unfair practices
    • Ensure the integrity and fairness of markets to prevent fraud and manipulation
  • 25. Regulatory and Trade Policy: Regulating the Marketplace
    • Four goals of financial regulation
    • Monitor the safety and soundness of institutions
    • Ensure the stability of the overall financial system
  • 26. Regulatory and Trade Policy: Trade
    • International trade is a source of conflict.
    • Those that profit from exports typically support free trade and those who are concerned about foreign competition typically support protectionism .
  • 27. International Perspectives
    • Economic and political freedom
    • According to the data presented, does there appear to be a relationship between economic and political freedom?
    • Where does the United States rank?
  • 28. Economic Debate and Deliberative Democracy
    • Deliberation depends on knowledge of basic information and shared goals but, when it comes to economic policy, Americans often disagree about how to achieve goals.
    • Disagreements underlie deliberations about economic policy.
  • 29. Deliberation, Citizenship, and You
    • Catching waste and abuse
    • The federal government is encouraging citizens to report waste and abuse with government money through the Internet, toll-free phone hotlines and fax.
  • 30. Summary
    • Federal budget large part of economy, but private sector is larger
    • United States part of global economy
    • No one government economic policy
    • Many ways to appraise economic policy