Economic Policy Chapter 18

Roots of Economic Policy The early years of our nation were marked by a _____________ economic policy. Interstate Commerce Commission (ICC)- 1 st attempt at gov’t _______________ in To Learning Objectives

Consumer Protection (Progressive Era) Sherman Anti-Trust Act of 1890 ______________________ Act (1906) Federal Reserve Act (1913)

Great Depression/ New Deal The economy collapsed in _________ FDR’s New Deal created programs that were supposed to safeguard our _________. Laissez faire replaced with interventionism- gov’t having an ______ role in the economy

Government Regulation The decades of the 1930s thru the 1970s were marked by economic and social _________________. Social activism combined with _____________ politicians led the way for government regulation.

Deregulation A reduction in market ________ in favor of market based competition began in the mid 1970s. Starting with Jimmy Carter, most presidents have continued to ____________ industries with mixed results.

Fiscal Policy Congress controls Fiscal policy- government _________________, revenues, and debt It is conducted through the federal budget process.

The Budget The Budget Account Act of 1921: This created the OMB and delegated budget power to the President. The ___________________ Budget Act of 1974: This created new procedures for the budget. First, the President submits the budget. Then, the House and Senate budget committees analyze the budget with the Congressional Budget Office (CBO). 2/3 of spending is on entitlements: A government program that guarantees and provides benefits to a particular group. This is uncontrollable spending.

Budget The primary purpose of the budget is to _________ government programs. Most spending goes toward national defense and human resource spending. Mandatory vs ________________ spending

Entitlements _________________ programs are benefits paid to American citizens who meet criteria set by the government. Examples: _______________, medicaid, food stamps, etc.

Social Security Insurance for the unemployed and _______ –insurance program- created for the unemployed and the elderly Everybody would be taxed and all would be eligible for insurance –Assistance program- created for the blind, dependent children, and aged Only poor ( by the ________ test) are considered for assistance

Problems with social security 1) baby boomers reaching retirement age 2) not as many ____________ as recipients 3) payouts not progressing with cost of living increases Surplus projected to _____________ in next few years.

Deficits/Debt Deficit- expenditures > revenues Debt- collection of yearly deficits Most our our ________ is owned by China

Monetary Policy The Federal Reserve System (“the Fed”) manages monetary policy They control the money __________ and interest rates.

Machinery of Economic Policy Making There is fragmented policy-making that is not under the presidents full control because within the __________________________, numerous organizations influence policy. Congress is most important in __________ policy making. It approves all taxes and most ________. It consents to wage and price controls. It can influence the Fed by threatening to reduce it powers.

Path to Reducing Spending The Gramm-Rudman Balanced Budget Act of 1985 was __________________. New Strategy of 1990: –If entitlements increase, then taxes have to increase

Levying Taxes Policies on Taxing: The tax burden is too low on citizens, however, there are loopholes for industry (client politics). The rise of Income tax: The __________ amendment (1913) Usually, taxes increase during ____________ and decrease during peace.