1. Goals of Economic Policy
November 29, 2017

2. Goal #1: Fund Government Services
In fiscal year (FY) 2016, the U.S. government spent how much money funding government programs?
$899,000
$5,899,000
$5,899,000,000
$5,899,0000,000,000
Goal #1: Fund Government Services
“A billion here, a billion there, pretty soon, you’re talking real money.”—the late Everette Dirksen, R., Illinois
That’s $5.9 trillion.

3. Major (>5 %) or Minor (< 5%)?
* 2016 data
Major (>5 %) or Minor (< 5%)?
< 1 %
Education
Medicare
Foreign aid
Transportation
Scientific & Medical Research
Social Security
National Defense
2 %
Space Exploration
Agriculture
Energy & the Environment
Interest on the Debt
Social Safety Net (welfare, unemployment, etc.)
Medicaid, SCHIP
Big
< 1 %
15 %
< 1 %
1 %
< 1 %
6 %
1 %
Big
13 %
Big
24 %
Big
Big
8 %
15 %

4. Federal Outlays 2017
Expenditures
What are outlays?

5. Note: Much of federal spending goes to fund the welfare state.
Every wealthy democracy has a welfare state in which the government takes responsibility for the welfare of its citizens through programs in public health, housing, old-age pensions, unemployment compensation, and the like.
Note: Much of federal spending goes to fund the welfare state.

6. Social Safety Net
Some programs that are part of the welfare state are also sometimes referred to as a social safety net because they protect individuals from the worst effects of the catastrophes of life, such as ill health, unemployment, poverty, aging, etc.

7. Safety Net Programs
What threats to personal security do each of these programs address?
Social Security
Medicare
Medicaid
Food Stamps
Unemployment Compensation
Housing Assistance
Disability

8. Other Expenditure Categories
Which categories of expenditures can be justified as necessary to defend the national security and protect American interests around the world?
Which categories of expenditures can be justified as investments in the nation’s future, designed to lead to future economic growth?
Continued on next slide . .

9. Nat’t Security? Investment? Social Safety Net?
Education
Healthcare
Foreign aid
Transportation
Scientific & Medical Research
Social Security
National Defense
Investment
Space Exploration
Agriculture
Energy & the Environment
Interest on the Debt
Social Safety Net (welfare, unemployment, etc.)
Safety net
Safety net
Nat’l Sec.
Investment
Investment
Investment
Safety net
Safety net
Nat’l Sec.

10. Goal 2: Encourage/ Discourage Economic Activity
The government encourages certain activities through tax breaks or subsidies. A subsidy is financial incentive given by government to an individual or a business interest to accomplish a public objective. In contrast, government can discourage activities by taxing them.
Goal 2: Encourage/ Discourage Economic Activity
Taxes and Subsidies

11. Taxes and Subsidies
Does government use economic policy to encourage or discourage each of the following? If so, how?
Smoking
Attending college
Purchasing a home
Growing tobacco
Drinking
Building nuclear power plants
Discourage by taxing
Encourage with financial aid
Encourage with tax breaks
Encourage with farm subsidies
Discourage with taxes
Encourage with tax breaks

12. More Taxes and Subsidies
Drilling for oil offshore
Producing ethanol
Growing peanuts
Giving to charity
Purchasing flood insurance
Attracting or retaining a sports franchise
Encourage with tax breaks
Encourage with subsidies
Encourage with subsidies
Encourage with tax breaks
Encourage with subsidy
Encourage with subsidies

13. Goal 3: Redistribute Income
Income redistribution involves the government taking items of value, especially money, from some groups of people and then giving items of value, either in cash or services, to other groups of people.
Goal 3: Redistribute Income

14. Income Redistribution
Pros
Cons
Income inequality is incompatible with democracy.
Places with large income disparities have high rates of crime and drug use.
Government policies should encourage economic growth, not redistribution.
Government should reward hard work, not punish it.

17. Redistribution Policies
Tax structure that falls more heavily on the wealthy.
Programs to help the poor.
Minimum wage laws.
Support for education to promote social mobility.

18. Goal: Promote Economic Growth with Stable Prices
Encourage economic growth
Promote full employment
Control inflation
Counter effects of recession and depression

19. Economic Stabilization
What is a recession?
How does it differ from a depression?
What economic indicators are used to measure a recession or a depression?
A recession is an economic downturn characterized by high unemployment. A depression is longer lasting than a recession. Measures include unemployment rate and GDP growth.

20. What Is Inflation?
How is it measured?

21. We Have Answers
Inflation is a decline in the purchasing power of the currency. It is measured by the consumer price index (CPI), a measure of inflation that is based on the changing cost of goods and services.

22. What You Have Learned What are the goals of U.S. economic policy?
What are the major federal government spending categories?
What is the welfare state? The Social Safety net?
What is a Recession?
What is inflation?