1. Making Economic Policy Wilson 18B

2. Fragmented System  Troika  Chairman of Council of Economic Advisors  Director of the Office of Management and Budget  Secretary of the Treasury  Federal Reserve Board  Congress  Committees  Budget,  Appropriations  Finance  CBO Usually majoritarian politics Some interest group politics NAFTA/CAFTA Client group politics lead to mistrust – energy Entrepreneurial?

3. Budget  Conflicting incentives  Cut spending overall  Cut deficit  Support constituents favorite programs  Not a 0 sum proposal  Decide what will spend money on first  Congressional Budget Act of 1974 – budget resolutions  Mandatory spending  Entitlements like SS, Medicare Appropriations Authorizations

4. Spending  Procedures v. Policies  Budget Ceiling  Gramm-Rudman  Balance Budget Act – 1985  Sequester (summer 2012)  Hit 3/1/13  Budget Enforcement Act – 1990  Spending caps  Pay-as-you-go

5. Taxes  Good tax?  Fairness  Burden  Predictable  US rates low  Loopholes  Client politics  Debates of tax reform  Income Tax  16 th Amendment – 1913  Graduated  Tax Reform Act of 1986  Flip “20 th Century deal”  High rates with large loopholes Bush Tax Cut 6/7/01 Packaged with Stimulus 12/17/10 Passed first 2-year extension 1/1/11 Packaged with debt-ceiling deal 8/2/11 Extended with highest-rate increase 1/2/13