Economic Policy

ECONOMIC POLICY President & Congress held responsible for economic “health” of nation Policy involves improving overall economic health of nation through gov’t spending & taxation policies

Raising Revenue Gov’t raises revenue through collection of taxes (federal gov’t collects individual income taxes, corporate income taxes, social insurance taxes, excise taxes, customs duties, & estate & gift taxes) Gov’t also raises revenue through sale of gov’t securities by Fed Reserve & through collection of fees for services provided (e.g. patent fees)

Government Spending May be discretionary or mandatory – Discretionary – spending about which gov’t planners may make choices – Mandatory – required by existing laws for current programs Recently, mandatory has grown while discretionary has decreased

Government Spending Discretionary includes defense spending, education, student loans, scientific research, environmental cleanup, law enforcement, disaster aid, & foreign aid Mandatory includes interest on national debt & social welfare programs (Social Security, Medicare, Medicaid, veterans’ pensions, & unemployment insurance)

Historical View Historical View

Monetary policy: Role of the Federal Reserve – Purpose & structure – Methods of control – Independence …

Fiscal policy Keynesian policy Supply-side policy Why is the economy hard to control??

Political differences in groups interested in policymaking – Most want benefits, protections from economic hardship 3 main players: – Businesses – Consumers – Labor

Began with antitrust policy in 1890 – Sherman Act 1890 – “trust-busting” – 1914 Clayton Anti-trust Act Political differences in regulation of market consolidation – ex: Bush vs. Obama administrations

Role of the SEC Late 90s thru 2000s – corporate scandals and frauds – Ex: Enron, Goldman Sachs Starting in 08: TARP used to protect market & prevent business bankruptcy

Consumer protection policy begins with 1906 Food & Drug Act – Created FDA Today, FDA regulates manufacturing, contents, marketing, & labeling 60s/70s: rise in focus on consumer issues – CPSC: hazardous products – FTC: truth in advertising & labeling

Issues: wages & hours, contracts/collective bargaining, child labor, safety Until 1914 Clayton Act, gov’t involved in disrupting unions 1935 National Labor Relations Act/Wagner Act – Created Natl Labor Relations Board – Collective bargaining, unionizing protection

1947 Taft-Hartley Act: some restrictions on union behavior – Prez can halt major strikes thru injunction – Allowed for “right-to-work” states 2 major labor successes: – Unemployment $ – Minimum wage

Partisan differences in views of regulation Two types of regulatory agencies: – Independent regulatory commissions – Independent (executive) agencies

1970s, Clear Air & Water Acts: limited pollution; regulated many corporate behaviors regarding environmental treatment – Created the EPA to enforce Environmental impact statements: controversial requirement for projects using federal funds – Pros & Cons …

1990, Clean Air Act: tighter control on auto industry Clean Air Act & Clean Skies use profit motive to encourage businesses to self- regulate – “cap-and-trade” policies