1. Government and the Economy
What is the Government’s job in our Economy?

3. Era’s First 100 years our country left the economy up to the states.
States built up and regulated private practices
Built Canals, rail roads, and roads
This worked just fine in a rural lifestyle
Industrial Revolution comes along and we have lots of industrial accidents, disease, outbreaks, labor conflicts, and unemployment was a problem
The federal government thought these issues were to big for the states to handle alone
Interstate Commerce Act and Sherman Anti-Trust Act

4. The Progressive Era Middle class reform movement
Wanted to reign in corporate power and make it more responsive to society and the democratically elected government
Lots of legislation was passed which made consumer protection an important government mandate
This led to many government companies like the FDA, FTC, Federal Reserve…
1895 the Supreme Court ruled that the Our Income tax was unconstitutional
What happened?
16th Amendment

5. The Great Depression and New Deal
WWI ended the Progressive Era and Laissez Faire Returned
Stock Market Collapse
“New Deal”
Established the National Government as a major regulator of private businesses, a provider of Social Security, and is responsible for maintaining a stable economy

6. Post WWII Era Employment Act and Taft-Hartley act
Employment Act was a liberal demand on the government to become involved in employment policy
Taft-Hartley- was a conservative demand on the government to become involved in employment policy
Obviously the government was now firmly entrenched in the economic life of our country

7. Social Regulation
Policies of the 1960 and 1970 dealt with the quality and safety of our products
Consumer Product Safety Commission, Occupational Safety and Health Administration, EPA, and others were created to protect us from a variety of threats
Upton Sinclair’s book the Jungle helped form the FDA

8. Deregulation What is Deregulation?
A reduction of market controls ( price fixing, subsidies, or controls on who can enter the field) in favor of market based competition
Airline Deregulation Act of 1978

9. Stabilizing the Economy
Monetary Policy
Involves the regulation of the country’s money supply and interest rates in order to stabilize the economy
The Federal Reserve System
Created in 1913 and is a mixture of private interests and public authority
Federal Reserve Board
Federal Open Market Committee
12 Federal Reserve Banks

10. Federal Reserve Board
Made up of 7 members appointed by the President serving 14 year overlapping terms with the approval of the Senate
In order to control the money supply the Fed has a number of tools at its disposal
Manipulating the reserve requirement
Changing the discount rate
Open Market operations (buying or selling securities)

11. Fiscal Policy
The government’s use of taxing and spending policies to influence the overall operation of the economy
This is formulated by Congress and the President through the budget process
JFK was the first president to actively use Fiscal policy by deliberately running a deficit in order to fuel economic growth.

12. The Budget Process
The budget is primarily funded through individual income taxes and social insurance/retirement receipts
Most government spending goes to National Defense and Human Resources (health, income security, and social security)

13. Congress and the Budget Process
The Budget and Accounting Act of 1921 gave the President Authority to prepare an annual budget and submit it to congress
The OMB (Office of Management and Budget) was created to assist the President in preparing the budget for the fiscal year
Provides bureaucracy with instructions and guidance on presidential priorities to prepare the budget requests nine months before Congress sends it to the president

14. Problems Divided Government
Many of the President’s request may not be adopted and this would cause a voting imbalance in the Congress
Leads to a delay in the Budget being passed and sometimes there is no budget when a new fiscal year begins so congress must pass continuing resolutions to keep programs running on the government will shut down
In 1995 and 1996 the government shut down because the budget was not passed
Republican Congress was to blame

15. The Budget Deficit and Debt
Since the 1980s the US has run large budget deficits and has had a rapidly growing national debt
Is this a good or a bad thing?
Congress has tried to pass balanced budget amendments to the Constitution but they have not worked
One that did pass was the Gramm-Rudman-Hollings Act.
Created in 1985 and created a procedure for a balanced budget. This act would automatically cut procedures. (Did not work)