Economic Policy - PowerPoint Presentation by liwenting

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									POLICY 2010-11
                              ECONOMIC POLICY
                             ___________ __________ __________all
                             goods and services produced by the
                             nationals of a country. This means that
                             whatever Americans produce around the
                             world counts, even if it is in Japan or
                             France. We add that stuff in and subtract
                             out goods made by foreign nationals here
.                            in the States
 _________ ______ _______is the more up-to-date term. Its basic
meaning is the value of all final goods and services produced within a
national boundary (ie within our DOMESTIC borders) . For example,
the Toyotas produced by USA Toyota in KY.

Often expressed per capita or PPP or by annual growth
Economic and political systems are deeply entwined

At one end: ______________ A type of economic system where the
resources are state owned and their allocation and use is determined
by the centralized decisions of a planning authority –better at
industrializing than at providing __________ goods.

At the other:_______ _________ the French expression for "to
leave alone‖: argues that the government should have as little as
possible to do with the economy because private ownership,
market-based decision making, and free trade will optimize public
welfare and raise the standard of living; view was especially
popular between the Gilded Age and the Great Depression.
A period of general economic decline; specifically, a decline in GDP for
two or more consecutive quarters.
          Is It a Recession? Marketers Seem to Think So

                                                          An ad shows a
                                                          vacation paid
                                                          for with money
                                                          saved at Wal-
                                                          Mart. Jan 2008

Let the economists and politicians debate whether the American
economy is in a recession. Madison Avenue is already battening down
the hatches.
Measuring the Economy

Measures of the economy impact people differently
The Economy is
something voters
care about

                   2006 Midterm elections
__________POLICY: tries to control the size of the total supply of
money (and other highly liquid financial assets that are close
substitutes for money) available in the national economy in order to:
control inflation, and/or speed up/slow economic growth, and/or
manage the level of unemployment and/ or influence the exchange
rates at which the national currency trades for other foreign currencies
Done primarily by the Board of Governors of the federal reserve
It is made up of seven members who are appointed by the President
and confirmed by the Senate. The full term of a Board member is 14
years, and the appointments are staggered so that one term expires on
each even-numbered year. After serving a full term, a Board member
may not be reappointed. If a member leaves the Board before his or
her term expires, however, the person appointed and confirmed to
serve the remainder of the term may be later reappointed to a full term.

The Chairman and Vice Chairman lead the Board. They are also
appointed by the President and confirmed by the Senate. The
nominees to these posts must already be members of the Board or
must be simultaneously appointed to the Board. The terms for these
positions are four years, but the Chairman and Vice Chairman may be
reappointed for additional four-year terms, as long as their term as
Board member is active. Here they are:
         3 Things the FRB does to manipulate the _________ of

(1) It can set discount _______for money that banks borrow from the
Fed. Reserve banks--if rate down, more people can borrow, more
money available in economy but concern is ___________
(2) it can increase or decrease the _______requirements that banks
must keep--if lower, more money in economy, (also brings down
interest rates) but concern is _____________
(3) it can buy and sell govt._________ (bonds, treasury notes and
other govt. IOUs which are savings devises.) When the govt. buys, it
puts more money in circulation, and takes securities out of circulation,
With more money around, interest rates tend to drop, so more private
money is borrowed and spent. But concern is _______If the Fed sells
securities, it takes money out of circulation, (it is going into savings)
causing interest rates to rise by making borrowing harder.
_____Policy the
use of
expenditure and
revenue collection
to influence the
Income Taxes
If you work in the United States, you will probably incur some sort of federal income tax liability
each year. Most people will also owe state income taxes, A few cities and townships add another
layer to the mix of taxes you’ll pay; this list details what the various state and local governments
The amount you owe — for federal, state and local taxes — is determined by how much you earn
each year. The United States uses a progressive tax system, which means the more money you
earn, the higher your tax rate. The chart above lays out the different tax brackets and rates, which
depends on your filing status (single, married couples filing jointly, married filing separately,
a flat tax can be regressive . . . .
Suppose there is a 10% flat payroll
tax. Paying it will be a much bigger
sacrifice for someone who makes
$10,000 than someone who makes
$100,000. The marginal benefit of
an extra dollar of income has a
diminishing property and is non-
Among OECD countries only
Mexico, Turkey, Korea,
and Japan had lower taxes than
the United States as a percentage
of GDP. In many European
countries taxes exceeded 40
percent of GDP, but those
countries generally provide much
more extensive government
services to their citizens than the
United States does.

The United States relies less on
consumption taxes—17 percent of
total 2006 tax receipts—than any
other OECD country. Revenue
from such taxes averaged 32
percent of total taxes among the
30 OECD countries. Mexico, in
contrast, collected 56 percent of
its 2006 tax revenue from
consumption taxes.
Subsidy: Monetary assistance granted by a government to a person or
group in support of an enterprise regarded as being in the public interest.
                            January 26, 2009

     How the Government Dealt With Past
                                                 “This is an essential
                                                 short-term measure
                                                 to ensure the viability
                                                 of the American
                                                 banking system,”
                                                 President Bush said
                                                 Tuesday morning
OTHER ways the gov’t impacts the economy:
Regulation . . . Or deregulation
Trend since the 1980s is
market _______________
March 18, 2008                  More examples of regulation

                            Justices Take Up On-Air Vulgarity Again
                            WASHINGTON — March 18 2008The issue of vulgar
                            speech on the nation’s regulated airwaves, a flash point
                            for decades, reached the Supreme Court again on
                            The justices agreed to give the Federal
                            Communications Commission a chance to defend its
                            decision to start punishing broadcasters for the isolated
                            and fleeting on-air use of expletives, an abrupt change in
      By LINDA GREENHOUSE   the commission policy that a federal appeals court last
                            year found procedurally improper.
It has been almost exactly 30 years since the Supreme Court ruled in the ―seven
dirty words” case that the First Amendment did not bar the government from
regulating the broadcasting of speech that, while ―indecent,‖ was not actually
obscene. The broadcast at issue then was a 12-minute monologue by the comedian
George Carlin, titled ―Filthy Words,‖ that deliberately challenged federal regulators
by highlighting ―the words you couldn’t say‖ on the public airwaves.
Supreme Court Rules that Government Can Fine for 'Fleeting
By Robert Barnes, Washington Post Staff Writer
Wednesday, April 29, 2009

The Supreme Court said yesterday that the Federal
Communications Commission may penalize even the
occasional use of certain expletives on the airwaves but left for
another day the question of whether such a policy is
The court's narrow ruling said the FCC -- prompted by Cher's
use of the F-word during a 2002 live broadcast and similar
remarks by what Justice Antonin Scalia called "foul-mouthed
glitteratae from Hollywood" -- was justified in changing its
policy in 2004 to fine broadcasters up to $325,000 every
time certain words are allowed on the air.
 More ways the govt can impact the
EXPROPRIATION: seizing private property for
   public use:

done for highways, urban redevelopment, parks,

Process: Govt exercises the right of Eminent domain
    (subject to limits put on it by the 5th amendment
    ―takings clause‖ and applied to the states thru
    the 14th amendments DP clause)
___________ ______). A monthly measure of changes in the prices of goods
and services. It is the most widely accepted measure of inflation.
           Farm Bill
______________________The major agricultural legislation in the U.S., which
expires every four or five years. Outlines provisions on commodity programs,
trade, conservation, credit, agricultural research, food stamps, and marketing.
_____________________________The central bank of the U.S. consisting of
    Federal Reserve System
13 district banks and a centralized decision-making body, the Board of
Governors. : 1) provides currency upon demand to member banks, 2) provides
check-clearing services, and 3) regulates the money supply by buying and
selling government securities, changing the reserve requirement, and changing
the discount rate. Although a creation of government, with the Board of
Governors being appointed by the President, the System has generally
maintained independence in its own policy decisions and on wider economic
events and policies.
____________________A macroeconomic policy tool used by the government
    Fiscal Policy
to regulate the total level of economic activity within a nation. Examples include
setting the level of government expenditures and the level of taxation.
_________________A measure of the market value of goods and services
produced by the labor and property of a nation. Includes receipts from that
nation's business operations in foreign countries, as well as the share of
reinvested earnings in foreign affiliates of domestic corporations.
______________A sustained rise in the general price level, generally
measured by the Consumer Price Index (CPI).

   Monetary Policy
____________________. A macroeconomic policy tool used to influence
interest rates, inflation, and credit availability through changes in the supply of
money available in the economy. In the U.S., the Federal Reserve implements
monetary policy changes.

_________________A cyclical downward movement in the economy involving
at least two consecutive quarters of a decline in the real (inflation-adjusted)

   Reserve Requirement
_____________________________The amount of reserves (i.e., money) that
the central bank requires a commercial bank to hold (i.e., money that cannot be
used for loans).

___________A tax that a government assesses on goods as they enter (or
leave) a country. May be imposed to protect domestic industries from imported
goods and/or to generate government revenue.
________ when current expenditures exceed current revenues. Most
frequently used to describe the situation in which government revenues
(i.e., taxes) fail to cover government expenditures

__________When current revenues exceed current expenditures. Most
frequently, used to describe the situation in which government
revenues (i.e., taxes) exceed government expenditures

  Balance of trade
__________________The value of a nation's exports minus the value
of its imports. It is positive if exports exceed imports; negative if
imports exceed exports.
_________________ The interest rate the central bank charges on
     Discount Rate
loans to commercial banks

   Exchange rate
_________________ The price of one currency in terms of another
  Import quota
_______________The maximum quantity or value of a commodity
allowed to enter a country during a specified time period.

____________ism Tariff or nontariff trade barriers imposed by a
government to protect a domestic industry

   Trade barriers
_______ _________Regulations governments use to restrict imports from,
and exports to, other countries. Examples include tariffs, embargoes,
import quotas, and unnecessary sanitary restrictions

______________taking out of an owner's hands (especially taking
property by public authority)

_________ financial support

______________ ism political movement that espouses privatization and
other free market policies as a means of promoting economic developmen
and securing political liberty
1.Monetary policy—Point is to manipulate the __________ of money and credit in
the economy. Key player is the_Fed_Reseerve Board_______________. It can
decrease the cost to borrow money by __lowering___________ interest rates,
___lowering_______________ the reserve requirements and
__buying____________ securities, but it risks ___inflation____________.
2.__Fiscal_________ Policy A macroeconomic policy tool used by the government
to regulate the total level of economic activity within a nation. Examples include
setting the level of government expenditures and the level of taxation.
3.Practicing Keynesian economic theory where the key is to create the right level of
__demand___________ in the economy. If it is too ___low____________ you
stimulate with programs. If it is too great, you risk inflation so you cut (ha!).
President __FDR__________ is best example.
4.__antitrust__________ laws allow the __Justice________ Department to bring
suit against companies that have monopolized a certain product or service.
5.Consumer policy: The _F___________ _____T________ ___C_______________
regulates trade and advertising; the ___F____________ and ______D____
______A_________ monitors the health safety of food and approves new drugs for
Winners and losers in the American Economy . . . Do we do
anything about it?
Today's poverty rate is a bit less than
it was when there were 200 million
Americans in 1967 - 12.6 percent last
year, according to a Census Bureau
report last month.
But because the overall population has
increased, the number of those in
poverty has also grown - from 28
million to 37 million over the same
period. Whether an individual is likely
to be officially designated as poor
depends in large part on race. For
non- Hispanic whites the poverty rate
is 8.3 percent; for African-Americans,
24.9 percent; and for those of Hispanic
origin, 21.8 percent
Gini coefficients for the United States at various times, according to the
US Census Bureau:
   •1970: 0.394
   •1980: 0.403
   •1990: 0.428
   •2000: 0.462
   •2005: .469
   •2006: .470 (highest index reported)
   •2007: .463
   •2008: .466
                        •1929: . 450

The Gini coefficient is often used as an _______ ________metric. Here, 0 corresponds
to perfect income equality (i.e. everyone has the same income) and 1 corresponds to
perfect income inequality (i.e. one person has all the income, while everyone else has
zero income). While most developed European nations tend to have Gini coefficients
between 0.24 and 0.36, the United States Gini coefficient is above 0.4, indicating that
the United States has greater inequality
    Gini Coefficient World CIA Report 2009
                                        Human Poverty Index
                                                   Probability at birth of not   People lacking functional   Long-term unemployment   Population below 50% of
            Ranking     Country            HPI-2
                                                   surviving to age 60 (%)       literacy skills (%)         (%)                      median income (%)

            1           Sweden             6.3     6.7                           7.5                         1.1                      6.5

            2           Norway             6.8     7.9                           7.9                         0.5                      6.4

            3           Netherlands        8.1     8.3                           10.5                        1.8                      7.3

            4           Finland            8.1     9.4                           10.4                        1.8                      5.4

            5           Denmark            8.2     10.3                          9.6                         0.8                      5.6

            6           Germany            10.3    8.6                           14.4                        5.8                      8.4

            7           Switzerland        10.7    7.2                           15.9                        1.5                      7.6

            8           Canada             10.9    8.1                           14.6                        0.5                      11.4

            9           Luxembourg         11.1    9.2                           -                           1.2                      6.0

            10          Austria            11.1    8.8                           -                           1.3                      7.7
            11          France             11.2    8.9                           -                           4.1                      7.3
            12          Japan              11.7    6.9                           -                           1.3                      11.8

            13          Australia          12.1    7.3                           17.0                        0.9                      12.2

            14          Belgium            12.4    9.3                           18.4                        4.6                      8.0

            15          Spain              12.5    7.7                           -                           2.2                      14.2

            16          United Kingdom     14.8    8.7                           21.8                        1.2                      12.5

            17          United States      15.4    11.6                          20.0                        0.4                      17.0

            18          Ireland            16.0    8.7                           22.6                        1.5                      16.2
            19          Italy              29.8    7.7                           47.0                        3.4                      12.7

The Human Poverty Index is an indication of the standard of living in a country, developed by the UN. For
highly developed countries, the UN considers that it can better reflect the extent of deprivation compared to
the Human Development Index.
          The 2009 Poverty Guidelines for the48 Contiguous States and the
                               District of Columbia
                Persons in family                Poverty guideline
                        1                            $10,830
                        2                             14,570
                        3                             18,310
                        4                             22,050
                        5                             25,790
                        6                             29,530
                        7                             33,270
                        8                             37,010
            For families with more than 8 persons, add $3,740 for each
                                additional person.

The Department of Health and Human Services issues the poverty
guidelines for administrative purposes—for instance, to determine
whether a person or family is eligible for assistance through various
federal programs
"The _________ state generally refers to a set of government policies in
the areas of old age pensions (known in the United States as social
security), health, sickness and accident insurance, unemployment
benefits and the like. Over time _________ state policies have come to
include such benefits as housing subsidies, child and childcare benefits,
and other distributive policies . . .. During the twentieth century, most
industrialized states have adopted and greatly expanded _______ state
policies, particularly in the period from the Great Depression in the
1930s to the 1970s."

Which term best fits into the blanks above?
  History of Heath Care Reform
President Roosevelt signs Social Security Act, 14 August 1935. Standing with
Roosevelt are Rep. Robert Doughton (D-NC); Sen. Robert Wagner (D-NY); Rep.
John Dingell (D-MI); unknown man in bowtie; the Secretary of Labor, Frances
Perkins; Sen. Pat Harrison (D-MS); and Rep. David Lewis (D-MD).
_____and the budget . . . Remember?

___________ are government
programs providing
benefits to those who meet eligibility
requirements/ qualifications
                                              Families in Europe and Japan
                                              are not having enough children
                                              to keep their populations
                                              growing in the long term. That
                                              means their societies are aging
                                              rapidly. And it also stands in
                                              contrast to the US, which alone
                                              among the developed nations is
                                              expected to see its population
                                              surge in the coming decades.
                                              America's population growth is a
                                              function of three things: a
                                              fertility rate of just over two
                                              births per woman, a relatively
                                              high rate of immigration, and
                                              greater longevity
Would it be better privatized?
In a federal system, the welfare of the citizens is a shared responsibility
Welfare Reform was part of the ―devolution revolution‖
Food stamps are an entitlement program, with eligibility guidelines set by Congress and the
federal government paying for benefits while states pay most administrative costs.
Eligibility is determined by a complex formula, but basically recipients must have few assets and
incomes below 130 percent of the poverty line, or less than $27,560 for a family of four.
As a share of the national population, food stamp use was highest in
1994, after several years of poor economic growth, with an average of
27.5 million recipients per month from a lower total of residents. The
numbers plummeted in the late 1990s as the economy grew and legal
immigrants and certain others were excluded.
But access by legal immigrants has been partly restored and, in the
current decade, the federal and state governments have used advertising
and other measures to inform people of their eligibility and have often
simplified application procedures.
Because they spend a higher share of their incomes on basic needs like
food and fuel, low-income Americans have been hit hard by soaring
gasoline and heating costs and jumps in the prices of staples like milk,
eggs and bread.
At the same time, average family incomes among the bottom fifth of the
population have been stagnant or have declined in recent years at levels
around $15,500, said Jared Bernstein, an economist at the Economic
Policy Institute in Washington.
Responsibility and
Work Opportunity
Act of 1996
"Welfare to Work"

     people on welfare must find a job in 2 years, or lose benefits
     5 year life time limit
     ends federal entitlement status since it goes to states as fixed amount,
     regardless of how many are on welfare rolls
     money given to states in form of block grants
One of the places states most often “act as laboratories” . .
Which they can do in our ____________ system

                                 It’s a part of the ―__________

 ―welfare reform‖ starts in the states
Dems vs republicans on
the role of govt
The latest extension
of the Welfare state:
 Muhammad Yunus, left, the Nobel Peace Prize winner, and Mosammat
Taslima Begum, representing Mr. Yunus’s Grameen Bank, arriving for the
              award ceremony at Oslo Town Hall today.
Cleavages in America
Energy and Environmental Policy
                          Environmental Agency Tightens Smog Standards
                            March 13, 2008 By MATTHEW L. WALD

                             Tens of millions of people live in
                              counties that do not meet the
                               federal requirements for air
                             quality. Smog over Los Angeles

WASHINGTON — The Environmental Protection Agency announced a modest tightening of the smog
standard on Wednesday evening, overruling the unanimous advice of its scientific advisory council for a
more protective standard.
The administrator, Stephen L. Johnson, said that by law he was forbidden to consider costs in setting the
standard, but urged Congress to change the law so future administrators could do just that.
The standard, stated in terms of average concentrations of ozone at ground level over an eight-hour period, is
now 84 parts per billion. Mr. Johnson’s decision, if it survives court review, would lower that to 75, although
implementation could be decades away. Late last year a scientific advisory panel recommended 60 to 70 parts
per billion.
―I’ve made the most health-protective eight-hour ozone decision in the nation’s history,‖ said Mr. Johnson.
The Clean Air Act requires periodic review, and the announcement Wednesday updates a standard from 1997.
But John M. Balbus, a physician and the chief health scientist at the Environmental Defense Fund, said,
―Clearly at some point you get to a level where additional benefits just aren’t worth it, but I don’t think we’re
there at 75.‖
―The E.P.A.’s own risk estimates show that between 75 and 70, there will be hundreds more deaths and
thousands more visits to emergency rooms, and hundreds of thousands of more lost school days,‖ he said.
Remember this example of
statutory construction
  Car and truck tailpipe emissions account for about one-fourth of the
                 country’s greenhouse gas emissions.

Justices Say E.P.A. Has Power to Act on
   Harmful Gases NYT April 3 2007
For Pods of Whales, Celebrity Status and Now a Lawsuit
September 8, 2006

  A group of killer whales swimming near the shore of San Juan Island
. . . Last year, southern resident killer whales — the 90 current members of J, K and L pods — were added to
the endangered species list.
By November, the National Oceanic and Atmospheric Administration’s National Marine Fisheries Service,
an arm of the Department of Commerce, plans to establish boundaries for the ―critical habitat‖ the three
pods need to survive: 2,500 square miles in Puget Sound and the Strait of Juan de Fuca that also constitute
one of the nation’s busiest waterways for commercial shipping. (can you say . . . “the devil is in the details . .
.. . And discretionary power”)
Once that map is completed, federal agencies will be required to consider the killer whales’ well-being before
approving projects or policies that would affect these waters wherever they are deeper than 20 feet. Thus,
most areas close to the shoreline would not be affected, the fisheries service said.
Orca protection, though, has brewed its own legal battle in a region familiar with debates about endangered
salmon and the northern spotted owl. Washington’s homebuilders and farmers, assisted by a conservative
legal foundation, have sued the federal government to strip the killer whales of their endangered status.
(are you thinking . . . .litigious culture . . . . And amicus briefs. . . And regional cleavages . . . )
Lawyers for these groups say the government should not distinguish orcas in Puget Sound from a healthy
global population numbering in the tens of thousands. The state’s Farm Bureau and Building Industry
Association warn, in particular, that local governments (hmm would that be federalism) might react to
federal protection of the orcas by locking up land near streams or along the coast to improve water quality for
the orcas and for salmon, their main food source.
―Radical environmentalists‖ are using killer whale protection to block otherwise legal economic activity, said
Russell C. Brooks, a lawyer at the Pacific Legal Foundation, which is handling the case for the plaintiffs.
―It all comes back to limiting development, limiting land use, limiting whatever, from people that probably
want to run the nation’s economic policy out of a tree house,‖ Mr. Brooks said.
                   Air Pollution in


Mexico City


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