1. ECONOMICS 101
The Role of Government

2. ALTHOUGH WE HAVE A CAPITALIST, FREE-ENTERPRISE, MARKET ECONOMY, THE GOVERNMENT PLAYS A VERY IMPORTANT ROLE

3. THE GOVERNMENT DOES FIVE BASIC THINGS IN OUR ECONOMY
Provide public goods & services
Regulate market activities
Maintain competition
Provide a “safety net” for needy Americans through entitlement programs
Maintain economic stability

4. PROVIDING PUBLIC GOODS AND SERVICES

5. LET’S FIRST DISTINGUISH BETWEEN A PUBLIC GOOD/SERVICE AND A PRIVATE GOOD/SERVICE

6. PRIVATE GOODS AND SERVICES (ALSO KNOWN AS A CONSUMER GOOD OR SERVICE) ARE GOODS AND SERVICES THAT, WHEN CONSUMED BY ONE INDIVIDUAL, CANNOT BE CONSUMED BY ANOTHER

8. A PERSON IS EXCLUDED FROM CONSUMING A PRIVATE GOOD OR SERVICE UNLESS HE OR SHE PAYS FOR IT

9. THIS IS CALLED THE EXCLUSION PRINCIPLE

10. THE VAST MAJORITY OF GOODS AND SERVICES IN A CAPITALIST ECONOMY ARE PRIVATE (CONSUMER) GOODS AND SERVICES

11. PRIVATE/CONSUMER GOODS AND SERVICES ARE PROVIDED BY THE PRIVATE SECTOR (THE PRIVATE SECTOR IN A CAPITALIST ECONOMY IS MADE UP OF ALL THE PRIVATELY OWNED, FOR-PROFIT BUSINESSES/COMPANIES)

12. THE VAST MAJORITY OF JOBS IN A CAPITALIST ECONOMY ARE JOBS IN THE PRIVATE SECTOR

13. PRIVATE SECTOR JOBS INCLUDE EMPLOYEES WORKING AT… PIZZA HUT, SAS, HARRIS TEETER, WELLS FARGO, BEST BUY, TARGET, APPLEBEE'S, FORD MOTOR COMPANY, WAL-MART, DICK’S SPORTING GOODS, COCA-COLA BOTTLING COMPANY, REX HOSPITAL, LOWE’S, BRUEGGER’S BAGELS, JERSEY MIKE’S, AVALON CLEANERS, HUDSON-BELK, BARNES & NOBLES, STARBUCKS COFFEE, ETC, ETC….

14. ON THE OTHER HAND…

15. PUBLIC GOODS ARE GOODS AND SERVICES THAT CAN BE CONSUMED BY ONE PERSON WITHOUT PREVENTING CONSUMPTION BY ANOTHER (EXAMPLES OF PUBLIC GOODS AND SERVICES INCLUDE ROADS, PUBLIC SCHOOLS, PRISONS, PUBLIC PARKS, SUBWAYS, GREENWAYS, LIBRARIES, ETC.)

16. NO ONE IS EXCLUDED FROM CONSUMING PUBLIC GOODS REGARDLESS OF WHETHER OR NOT HE OR SHE PAYS FOR IT (NON-EXCLUSIONARY PRINCIPLE)

17. BECAUSE OF THE DIFFICULTY OF CHARGING FOR PUBLIC GOODS, THE PRIVATE SECTOR DOES NOT PROVIDE THEM

18. THIS CAN ALSO LEAD TO THOSE WHO DON’T PAY FOR THEM OVERUSING THEM, CAUSING AN UNDERPROVISION OF GOODS.
THIS IS KNOWN AS THE FREE-RIDER PROBLEM.

19. FOR CERTAIN GOODS AND SERVICES, IT IS VERY DIFFICULT TO MAKE A PROFIT IN PROVIDING THAT PARTICULAR GOOD AND/OR SERVICE THEREFORE, THE PRIVATE SECTOR DOES NOT WANT TO GET INVOLVED AND TRY TO PROVIDE THEM

20. AS A RESULT, THE GOVERNMENT PROVIDES PUBLIC GOODS AND SERVICES

21. THE PEOPLE WHO WORK FOR THE GOVERNMENT IN PROVIDING PUBLIC GOODS AND SERVICES MAKE UP THE PUBLIC SECTOR IN OUR ECONOMY

22. PUBLIC WORKERS INCLUDE: PUBLIC SCHOOL EMPLOYEES, POLICEMEN, FIREMEN, SOCIAL WORKERS, PARK RANGERS, SANITATION ENGINEERS, AIR TRAFFIC CONTROLLERS, FBI AGENTS, E.P.A. EMPLOYEES, JUDGES, SECURITY GUARDS IN PRISONS, PROBATION OFFICERS, SCHOOL CUSTODIANS, STREET REPAIR WORKERS, PUBLIC DEFENDERS, GUIDANCE COUNSELORS, METEOROLOGISTS, STATE TROOPERS, MAYORS, CONGRESSMEN, FORENSIC SCIENTISTS, STENOGRAPHERS, ETC, ETC…

23. SIDE NOTE: THE VAST MAJORITY OF JOBS IN A COMMAND ECONOMY ARE PUBLIC SECTOR JOBS, BUT WE DO NOT HAVE A COMMAND ECONOMY

24. SIDE NOTE: PRIVATE SECTOR JOBS PAY MUCH, MUCH, MUCH BETTER THAN JOBS IN THE PUBLIC SECTOR HOWEVER, PUBLIC SECTOR JOBS HAVE A BIT MORE JOB SECURITY THAN PRIVATE SECTOR JOBS, BUT THAT IS NOT ALWAYS THE CASE, PARTICULARLY WITH BUDGET CUTS AT THE FEDERAL AND STATE LEVELS!

25. ALTHOUGH HE WANTED LIMITED GOVERNMENT INVOLVEMENT IN THE ECONOMY (LAISSEZ-FAIRE), ADAM SMITH, THE FOUNDER OF CAPITALISM, RECOGNIZED THAT THE GOVERNMENT MUST PROVIDE PUBLIC GOODS

26. (1) Protect society from invasion (2) Defend citizens from injustice
Smith believed government should have 3 basic roles:
(1) Protect society from invasion
(2) Defend citizens from injustice
(3) Build and maintain public works

27. THE GOVERNMENT PAYS FOR PUBLIC GOODS AND SERVICES WITH TAXES

28. MAINTAINING COMPETITION…

29. AS WE KNOW, MARKETS WORK BEST WHEN THERE ARE MANY BUYERS AND SELLERS

30. HOWEVER, WHEN A MARKET IS CONTROLLED BY A MONOPOLY, OR SOLE PROVIDER, THAT COMPANY CAN CHARGE ANY PRICE.

31. GOVERNMENT ANTITRUST LAWS ARE INTENDED TO CONTROL MONOPOLY POWER AND TO PRESERVE AND PROMOTE COMPETITION

32. THE GOVERNMENT USED ANTI-TRUST LAWS TO BREAK UP STANDARD OIL’S MONOPOLY BACK IN THE 1930’S

33. MORE RECENTLY, THE GOVERNMENT USED ANTITRUST LAWS TO BREAK UP AT&T TO ALLOW MORE COMPETITION IN TELEPHONE SERVICE

34. THERE ARE SOME INDUSTRIES THAT LEND THEMSELVES TO NATURAL MONOPOLIES… A NATURAL MONOPOLY IS A MARKET SITUATION IN WHICH ONLY ONE BUSINESS CAN PROVIDE THAT GOOD OR SERVICE FOR CONSUMERS

35. AN EXAMPLE WOULD BE PROGRESS ENERGY WHICH PROVIDES POWER AND ELECTRICITY TO ITS CUSTOMERS

36. IT IS NOT FEASIBLE TO HAVE TWO POWER COMPANIES RUNNING TWO DIFFERENT SETS OF POWER LINES THROUGH A NEIGHBORHOOD. ONLY ONE COMPANY CAN PROVIDE POWER TO A COMMUNITY. THAT IS AN EXAMPLE OF A NATURAL MONOPOLY

37. SO WHAT PREVENTS PROGRESS ENERGY FROM RIPPING OFF CUSTOMERS AND CHARGING WHATEVER IT PLEASES FOR ITS SERVICE?

38. THE NORTH CAROLINA PUBLIC UTILITY COMMISSION REGULATES PROGRESS ENERGY, DUKE POWER, AND OTHER POWER AND ELECTRICITY PROVIDERS

39. THE NC PUBLIC UTILITIES COMMISSION SETS THE RATES THAT PROGRESS ENERGY CAN CHARGE ITS CUSTOMERS. IT ALLOWS FOR PROGRESS ENERGY TO MAKE A PROFIT WHILE PREVENTING THEM FROM ABUSING THEIR CUSTOMERS

40. A MERGER IS A COMBINATION OF TWO OR MORE COMPANIES TO FORM A SINGLE BUSINESS

42. HOWEVER, IF THE GOVERNMENT FEELS A MERGER WOULD RESULT IN LESS COMPETITION AND HIGHER PRICES FOR CONSUMERS, IT MAY STOP THE MERGER FOR CERTAIN MERGERS TO OCCUR, THOSE BUSINESSES MAY NEED PRIOR GOVERNMENT APPROVAL

43. REGULATING MARKET ACTIVITIES…

44. THERE ARE FOUR MAIN REASONS FOR THE GOVERNMENT TO REGULATE MARKET ACTIVITIES: 1) PROTECT THE CONSUMER 2) PROTECT THE WORKER 3) PROTECT THE ENVIRONMENT 4) PROTECT OTHER BUSINESSES FROM UNFAIR PRACTICES AND TO MAINTAIN COMPETITION

45. FOR EXAMPLE, THE FEDERAL GOVERNMENT REQUIRES TRUTH IN ADVERTISING AND PRODUCT LABELING THE FEDERAL TRADE COMMISSION (FTC) DEALS WITH FALSE ADVERTISING AND PRODUCT CLAIMS THE FTC ALSO INSURES COMPETITION IN THE MARKET

46. ANOTHER EXAMPLE, THE FOOD AND DRUG ADMINISTRATION (FDA) ENFORCES THE PURITY, EFFECTIVENESS, AND LABELING OF FOOD, DRUGS, AND COSMETICS

48. ADDITIONALLY, THE GOVERNMENT ALSO REGULATES PRODUCT SAFETY THROUGH THE CONSUMER PRODUCT SAFETY COMMISSION (CPSC) THE CPSC RECALLS UNSAFE PRODUCTS

49. IN A RECALL, A COMPANY PULLS THE PRODUCT OFF THE MARKET OR AGREES TO CHANGE IT TO MAKE IT SAFE.

52. THE FOLLOWING IS A CHART OF THE MAJOR FEDERAL GOVERNMENT REGULATORY AGENCIES… REMEMBER, THESE AGENCIES HAVE THE AUTHORITY TO PASS RULES, GUIDELINES, AND REGULATIONS WHICH HAVE THE POWER OF FEDERAL LAW THIS TYPE OF LAW IS CALLED ADMINISTRATION LAW

54. PROVIDING A “SAFETY NET” FOR NEEDY AMERICANS THROUGH ENTITLEMENT PROGRAMS…

55. ALTHOUGH EQUALITY IS A FUNDAMENTAL PRINCIPLE IN THE UNITED STATES, THERE ARE WIDE VARIATIONS IN INCOME AMONG AMERICANS

56. LEVEL OF EDUCATION HAS A MAJOR IMPACT ON A PERSON’S INCOME.

58. FOR THIS REASON, THE GOVERNMENT OFFERS COLLEGE GRANTS AND LOW-INTEREST LOANS TO ENCOURAGE PEOPLE TO IMPROVE THEIR EDUCATION.

61. INCOME DISTRIBUTION BY STATE VARIES WIDELY

62. Median household income (2006 dollars)
State
Rank
Median household income (2006 dollars)
New Jersey 1
66,752
Maryland 2
63,082
Hawaii 3
61,005
Connecticut 4
60,551
New Hampshire 5
60,441
Alaska 6
57,071
Massachusetts 7
56,592
Minnesota 8
56,102
Utah 9
55,619
Virginia 10
55,368

63. UNITED STATES NATIONAL MEDIAN ($48,023)

64. Indiana 35
44,618
Missouri 36
44,487
Kansas 37
44,478
Texas 38
43,044
North Dakota 39
42,311
North Carolina 40
41,616
Tennessee 41
40,696
South Carolina 42
40,583
New Mexico 43
40,126
Montana 44
39,821

65. AS A RESULT OF DISCRIMINATION, WOMEN AND MEMBERS OF MINORITY GROUPS WERE NOT HIRED INTO HIGH-PAYING JOBS OR RECEIVE DESIRABLE PROMOTIONS.

66. TO TRY TO PREVENT DISCRIMINATION, CONGRESS HAS PASSED FEDERAL LEGISLATION SUCH AS THE… EQUAL PAY ACT OF 1963 CIVIL RIGHTS ACT OF 1964 AMERICANS WITH DISABILITIES ACT OF 1990
THESE HAVE EXTENDED PROTECTION AND EQUAL TREATMENT TO MILLIONS OF AMERICANS

67. THE GOVERNMENT OFFERS PROGRAMS TO HELP PEOPLE LIVING IN POVERTY

68. THE MOST COMMON MEASURE OF POVERTY IN THE UNITED STATES IS THE "POVERTY LINE" SET BY THE U.S. GOVERNMENT

69. TO DETERMINE WHO IS CONSIDERED “POOR”, THE GOVERNMENT SETS GUIDELINES BASED ON ESTIMATES OF HOW MUCH IT COSTS TO BUY ENOUGH FOOD, CLOTHING, AND SHELTER TO LIVE

70. THE “POVERTY LINE” MEASURE RECOGNIZES POVERTY AS A LACK OF THOSE GOODS AND SERVICES COMMONLY TAKEN FOR GRANTED BY MEMBERS OF MAINSTREAM SOCIETY

71. Persons in Family or Household 48 Contiguous States and D.C. Alaska
2008 HHS Poverty Guidelines
Persons in Family or Household
48 Contiguous States and D.C.
Alaska
Hawaii 1
$10,400
$13,000
$11,960 2
14,000
17,500
16,100 3
17,600
22,000
20,240 4
21,200
26,500
24,380 5
24,800
31,000
28,520 6
28,400
35,500
32,660 7
32,000
40,000
36,800 8
35,600
44,500
40,940
For each additional person, add
3,600
4,500
4,140

72. POVERTY IN THE UNITED STATES IS CYCLICAL IN NATURE WITH ROUGHLY 12% TO 16% LIVING BELOW THE FEDERAL POVERTY LINE AT ANY GIVEN POINT IN TIME, AND ROUGHLY 40% FALLING BELOW THE POVERTY LINE AT SOME TIME WITHIN A 10 YEAR TIME SPAN.

73. MOST AMERICANS (58.5%) WILL SPEND AT LEAST ONE YEAR BELOW THE POVERTY LINE AT SOME POINT BETWEEN AGES 25 AND 75

74. THOSE UNDER THE AGE OF 18 WERE THE MOST LIKELY TO BE IMPOVERISHED.

77. THE FEDERAL GOVERNMENT HAS CREATED A NUMBER OF PROGRAMS TO PROVIDE A “SAFETY NET” FOR DISADVANTAGED, NEEDY AMERICANS THESE PROGRAMS ARE CALLED “ENTITLEMENT” PROGRAMS

78. THESE PROGRAMS ARE CALLED "ENTITLEMENTS" BECAUSE INDIVIDUALS WHO HAVE MET THE ELIGIBILITY REQUIREMENTS FOR THE PROGRAMS ARE ENTITLED TO RECEIVE THE BENEFITS OR SERVICES OF THE PROGRAMS

79. IN OTHER WORDS, IF YOU MEET THE CRITERIA/GUIDELINE OF THE FEDERAL PROGRAM, YOU QUALIFY TO RECEIVE THE BENEFITS OF THE PROGRAM

80. IF YOU QUALIFY FOR THE PROGRAM, THE GOVERNMENT MUST PAY OUT THE BENEFIT YOU WILL CONTINUE TO RECEIVE THE BENEFIT OF THE PROGRAM UNTIL CONGRESS CHANGES THE CRITERIA/GUIDELINES FOR ELIGIBILITY OR CONGRESS CHANGES THE BENEFITS

81. SO WHAT ARE THE MAJOR ENTITLEMENT PROGRAMS?

82. THE BIG THREE ARE … SOCIAL SECURITY MEDICARE MEDICAID

83. SOCIAL SECURITY IS A PENSION (RETIREMENT) PROGRAM FOR OLDER AMERICANS IT GIVES PAYMENTS TO PERSONS AGE 65 AND OLDER CONGRESS HAS ADJUSTED THE RETIREMENT AGE SINCE ITS INCEPTION IN 1937…

84. MEDICARE IS THE HEALTH INSURANCE PROGRAM FOR ELDERLY AMERICANS 65 YEARS OF AGE AND OLDER

85. MEDICAID IS THE HEALTH INSURANCE PROGRAM FOR DISADVANTAGED (POOR) AMERICANS

86. OTHER FEDERAL PAYMENT PROGRAMS ARE SUPPLEMENTAL SECURITY INCOME (SSI)
OTHER FEDERAL PAYMENT PROGRAMS ARE SUPPLEMENTAL SECURITY INCOME (SSI). SSI GIVES PAYMENTS TO DISABLED ADULTS AND CHILDREN WHO HAVE LIMITED INCOME AND RESOURCES

87. OTHER ENTITLEMENTS INCLUDE… TEMPORARY ASSISTANCE TO NEEDY FAMILIES (TANF) TANF MAKES PAYMENTS TO FAMILIES WHO NEED HELP BECAUSE A PARENT IS DEAD, DISABLED, OR ABSENT.

88. TANF IS THE FEDERAL PROGRAM COMMONLY KNOWN AS “WELFARE” IN OTHER WORDS, A SINGLE PARENT GETS A CHECK FROM THE FEDERAL GOVERNMENT FOR HER CHILDREN BECAUSE THERE IS NO MOTHER/FATHER.

89. WHAT PEOPLE MAY NOT KNOW ABOUT TANF, IT LIMITS THE NUMBER OF MONTHS THAT SOMEONE CAN RECEIVE BENEFITS TO ENCOURAGE PEOPLE TO LOOK FOR PAYING WORK RATHER THAN RELY ON THE PROGRAM

90. THERE IS A MAXIMUM OF 60 MONTHS OF BENEFITS WITHIN ONE'S LIFETIME …
THERE IS A MAXIMUM OF 60 MONTHS OF BENEFITS WITHIN ONE'S LIFETIME …. UNMARRIED MINOR PARENTS HAVE TO LIVE WITH A RESPONSIBLE ADULT OR GUARDIAN. PATERNITY OF CHILDREN MUST BE ESTABLISHED IN ORDER TO RECEIVE BENEFITS

91. TWO OTHER FEDERAL GOVERNMENT ENTITLEMENT PROGRAMS ARE SNAP AND WIC

92. FORMERLY KNOWN AS FOOD STAMPS, IT HAS BEEN CHANGED TO SNAP (THE SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM)

93. SNAP IS RUN BY THE DEPARTMENT OF AGRICULTURE

94. SNAP CLIENTS CAN BUY ALL FOODS INTENDED TO BE EATEN AT HOME

95. SOME THINGS, SUCH AS ALCOHOLIC BEVERAGES, CIGARETTES, FOODS HOT AT THE POINT OF SALE, NON-FOOD ITEMS, VITAMINS OR MEDICINES, AND PET FOODS ARE NOT ALLOWED

96. THE WIC PROGRAM PROVIDES HELP WITH NUTRITION AND HEALTH CARE TO LOW-INCOME WOMEN AND CHILDREN UP TO AGE FIVE WIC IS SHORT FOR WOMEN, INFANTS, AND CHILDREN

97. WIC IS A SHORT-TERM PROGRAM
WIC IS A SHORT-TERM PROGRAM.  DEPENDING ON WHETHER THE INDIVIDUAL IS PREGNANT, POSTPARTUM, BREASTFEEDING, AN INFANT, OR A CHILD, AN ELIGIBLE INDIVIDUAL USUALLY RECEIVES WIC BENEFITS FROM 6 MONTHS TO A YEAR, AT WHICH TIME SHE/HE MUST REAPPLY.

98. MANY OF THESE ENTITLEMENT PROGRAMS UNDERWENT REFORM IN THE 1990’S WORKFARE DESCRIBES PROGRAMS THAT REQUIRE WELFARE RECIPIENTS TO WORK FOR BENEFITS

99. POVERTY
In addition the government uses tax policies to help lower-income Americans.
A progressive income tax is a system that taxes lower incomes at a lower rate and higher incomes at a higher rate.
This helps lower-income people by taking a smaller portion of their income in taxes.

100. THE EARNED INCOME TAX CREDIT (EITC) GIVES TAX CREDITS AND EVEN CASH PAYMENTS TO QUALIFIED WORKERS

101. WHEN THE EITC EXCEEDS THE AMOUNT OF TAXES OWED, IT RESULTS IN A TAX REFUND TO THOSE WHO CLAIM AND QUALIFY FOR THE CREDIT.

102. WHEN CERTAIN POLITICIANS CLAIM THAT CERTAIN AMERICANS DO NOT PAY INCOME TAXES, IT’S BECAUSE THEY QUALIFY FOR EITC. THESE AMERICANS ARE WORKING AMERICANS WHO DO NOT MAKE ENOUGH MONEY TO PAY FEDERAL INCOME TAXES ($14,880 FOR SINGLE W/O KIDS IN 2016) OF COURSE, THEY STILL PAY TAXES. THEY PAY STATE TAXES (SALES TAXES AND PROPERTY TAXES) AS WELL AS FEDERAL AND STATE EXCISE TAXES.