1. Economics and Politics

2. Changing Nature of Economic Policy 3 types of policy – Discretionary someone chooses to implement – Passive reacts automatically due to the economy – Structural= plans/programs to strengthen the economy

3. Decline of Discretionary, Importance of Passive, Structural Policies Reasons for decline: – Recognition lag of economic instability – Implementation lag time it takes for policy to take effect (ave. recession 8 months) – Political gridlock  Automatic stabilizers (pasive) (soc sec, UE-I) Changing tax brackets protect consumers Health Care Reform (structural)

4. Bush Tax Cuts and Decline of Discretionary Policy President pushed for 10 year 1.35 trillion tax cut late 2001 Was anticipating surplus Implementation lag of proposal and policy being enacted In between federal tax revues plummeted country had record deficit

5. Why Economist Differ Economist differ in policy b/c of disagreement of crucial issue Theories supported from data from different times (i.e. Great Depression) Most economist are not strictly demand-side or supply side They go back and forth depending on need and economic issue

6. Economic Politics Economist are advisors/reporters, politicians direct or implement Council of Economic Advisors Economist have had success in describing, analyzing and explaining Americans have become more aware of the economy /c of periods of instability (1970’s, Great Recession)