1. Copyright 2009 Pearson Education, Inc., Publishing as Longman Longman PoliticalScienceInteractive Magleby & Light Government by the People Chapter 18 Economic Policy

2. Copyright 2009 Pearson Education, Inc., Publishing as Longman The Federal Tax System The American federal tax system is among the most complicated in the world Most Americans want tax reform, but only if it protects their favorite tax breaks –Interest on home loans –Charitable contributions

3. Copyright 2009 Pearson Education, Inc., Publishing as Longman Economic Policy Fiscal Policy Government policy that attempts to manage the economy by controlling taxing and spending Monetary Policy Government policy that attempts to manage the economy by controlling the money supply and thus interest rates

4. Copyright 2009 Pearson Education, Inc., Publishing as Longman Economic Performance Business cycles Inflation/stagflation Unemployment Gross domestic product (GDP)

5. Copyright 2009 Pearson Education, Inc., Publishing as Longman Fiscal Policy: Federal Revenues

6. Copyright 2009 Pearson Education, Inc., Publishing as Longman Fiscal Policy: The Federal Deficit

7. Copyright 2009 Pearson Education, Inc., Publishing as Longman Fiscal Policy: The Budget Process

8. Copyright 2009 Pearson Education, Inc., Publishing as Longman Fiscal Policy: Federal Spending

9. Copyright 2009 Pearson Education, Inc., Publishing as Longman The Budget Process The Executive Branch –Office of Management and Budget The Legislative Branch –Budget and Impoundment Control Act (1974) –Congressional Budget Office

10. Copyright 2009 Pearson Education, Inc., Publishing as Longman Types of Taxes Income tax –Progressive (or graduated) Sales tax Value-added tax Excise tax

11. Copyright 2009 Pearson Education, Inc., Publishing as Longman Monetary Policy: The Federal Reserve System Created by Congress in 1913 12 regional banks supervised by Board of Governors Tools: –Federal funds rate –Buying/selling federal debt –Reserve requirements

12. Copyright 2009 Pearson Education, Inc., Publishing as Longman The Prime Interest Rate, 2003- 2008

13. Copyright 2009 Pearson Education, Inc., Publishing as Longman Government and Economic Policy Laissez-faire economics Theory that opposes governmental interference in economic affairs beyond what is necessary to protect life and property Keynesian economics Economic theory based on the principles of John Maynard Keynes stating that government spending should increase during business slumps and be curbed during booms Should the government stimulate the economy?

14. Copyright 2009 Pearson Education, Inc., Publishing as Longman Promoting the Economy Goals: –Maintain U.S. global leadership in terms of quality of life –Ensure fair domestic competition –Protection of U.S. intellectual property Key players: –Department of Commerce –Department of Agriculture

15. Copyright 2009 Pearson Education, Inc., Publishing as Longman Promoting International Trade Protectionism Trade deficit Dumping Subsidies

16. Copyright 2009 Pearson Education, Inc., Publishing as Longman Promoting International Trade World Trade Organization International organization derived from the General Agreement on Tariffs and Trade (GATT) that promotes free trade around the world GATT An international trade organization that seeks to encourage free trade by lowering tariffs and other trade restrictions North American Free Trade Agreement (NAFTA) Agreement signed by the United States, Canada, and Mexico in 1992 to form the largest free trade zone in the world

17. Copyright 2009 Pearson Education, Inc., Publishing as Longman Regulating Business Antitrust Legislation Sherman Antitrust Act (1890) Clayton Act (1914) Monopoly Domination of the industry by a single company; also the company that dominates the industry

18. Copyright 2009 Pearson Education, Inc., Publishing as Longman Regulating Business Preventing corporate abuse

19. Copyright 2009 Pearson Education, Inc., Publishing as Longman Corporate regulation Antitrust legislation –Monopolies –Trusts –Sherman Antitrust Act (1890) –Clayton Act (1914) –Federal Trade Commission (1914)

20. Copyright 2009 Pearson Education, Inc., Publishing as Longman Regulating Labor Public Contracts Industrial Safety and Occupational Health Wages and Hours Child Labor Federal regulations protect workers in the following areas, among others:

21. Copyright 2009 Pearson Education, Inc., Publishing as Longman Other Types of Regulation Regulating corporate markets Protecting the environment

22. Copyright 2009 Pearson Education, Inc., Publishing as Longman The Deregulation Movement TransportationTelecommunications In 1978 the Civil Aeronautics Board was abolished and aviation deregulated Trucking and railroads have also been granted more freedom in recent decades Telecommunications Act of 1996 –The “V-chip” requirement –Regulation of Internet content