Socratic Seminar Seminar Guidelines: 1)150 points Grade based on performance and preparation 2)Bring Notes & Come Prepared Each student must have notes—have data for support Notes will be collected 3)If absent during seminar: 3-4 Paper will be the “make-up” assignment

BenefitsCosts/Risks. 1) Discuss whether President Obama should Make the income tax more progressive Tax Rate Single 10%$0 – $8,350 15%$8,351– $33,950 25%$33,951 – $82,250 28%$82,251 – $171,550 33%$171,551 – $372,950 35%$372,951+ Question # 1

Why Raise Taxes? 1) To lower deficit-- 2) Redistribute Income => Rich to Poor 3) To increase Gov’t spending Tax Rate Single 10%$0 – $8,350 15%$8,351– $33,950 25%$33,951 – $82,250 28% $82,251 – $171,550 33% $171,551 – $372,950 35%$372,951+

Raising Taxes on the “Rich”? Tax Rate Single 10%$0 – $8,350 15%$8,351– $33,950 25%$33,951 – $82,250 28%$82,251 – $171,550 33%$171,551 – $372,950 35%$372,951+

The Laffer Curve Potential Impact of Tax increase: An ↑ tax rate => ↑ tax revenues or An ↑ tax rate => ↓ tax revenues Tax

6 When are Tax Rates too high? Tax Rates increase too much GDP ↓ GDP Tax Revenue ↓

BenefitsCosts/Risks. 1) Discuss whether President Obama should Make the income tax more progressive Tax Rate Single 10%$0 – $8,350 15%$8,351– $33,950 25%$33,951 – $82,250 28%$82,251 – $171,550 33%$171,551 – $372,950 35%$372,951+ # 1 Analysis

Question # 2 BenefitsCosts/Risks. 1) Discuss some possible solutions to increase the current rate of GDP growth.

GDP What creates real economic growth?

# 2 Ideas? IdeasCosts/Risks. 1) Discuss some possible solutions to increase the current rate of GDP growth.

Question # 3. 3) Discuss some long term solutions to the Federal Government’s rising national debt. RiskSolutions

Growth of Entitlements *Current services estimate. Source: Budget of the United States Government, FY 2005, Office of Management and Budget. Defense Social Security Net interest Medicare & Medicaid All other spending * 9% 19%

A Demographic “Perfect Storm”

Growth of Entitlements 2011 Entitlement Spending & Interest on Debt 50% of Gov’t Budget 2040? Entitlement Spending & Interest on Debt Over 70% of Gov’t Budget Rep. Ryan versus President Obama proposed changes

# 3 Analysis. 3) Discuss some long term solutions to the Federal Government’s rising national debt. RiskSolutions

Question # 4. 3) Discuss whether the Federal Reserve should keep interest rates at zero

Who “wins” with zero percent interest rates? 5.25% 0.0%

Money not Wealth An increase in money supply does not lead to more wealth MS Wealth Unchanged

Keynes vs. Hayek Part 2 Animal Spirits versus Malinvestment

Friedrich Hayek Economist from School of Austrian Economics Believed in: Free Markets, Limited central bank action artificially low interest rates lead to Malinvestment Friedrich Hayek

Quantitative Easing What is quantitative easing—link below

Solution: Loose Monetary Policy Affects AD Economic Situation GDP growth = -1.0%, Unemployment = 10.0% Little to no inflation MS i2i2 MD Interest Rate Qty of $ MS i1i1