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Transcript of Economic Policy
The Politics of Economic Prosperity
The Politics of Taxing and Spending
The Machinery of Economic Policymaking
- Around 65% of the federal Budget in 2010 was put towards Medicare/Medicaid, Social Security and National defense
- In Denmark as of 2008, the National tax rate was 28.8% which is extremely high compared the the US's 5.2% rate.
- Fun Fact, the highest tax rate ever in the US was 94% during WWII
The health of American economy creates majoritarian politics:
The President isn't the only one making decisions:
By Hollister VanNice and
Before 1980, annual deficit spending was minor, and was only a serious issue during times of war.
In 2011, the national debt was above $14 trillion, and is projected to be $20 trillion by 2015.
-Voters make decisions based on their current economic situation
-Voters worry about the nation as a whole
-Voters see the effects of an unhealthy economy indirectly, even if they're doing well
Politicians focus on the present:
-Officials know that trying to fix one problem in the economy often creates another
-Focusing on the short-term tends to help gain support
People want prosperity, but they don't want more taxes, and they don't want debt, but they do want the government to spend money on things like education, medical care, and the environment...
In all honesty, raising taxes is complex. The solution is to raise taxes on "other people," which are the minority of voters.
-Advocates increase in money supply about equal to economic growth
-Inflation occurs when too much money chases too few goods
-In a recession, the Fed should cut interest rates
-The health of the economy depends on what fraction of income is saved or spent
-The government must create the right level of demand
-The government should plan some part of the economic activity
-Price and wage controls
Supply-Side Tax Cuts:
-The government needs to interfere less, there should be fewer taxes and regulations.
-Also the Office of Management and Budget, and the Council of Economic Advisers
-OMB: Prepares estimates of federal government agencies; negotiates department budgets
-CEA: Forecasts economic trends, prepares annual economic report for president
-Secretary of the Treasury: Recommends tax changes; represents the nation before bankers and other nations
-The Fed: Sets monetary policy by controlling the amount of money/bank deposits and the interest rates
-Congress creates the nation’s fiscal policy
The United States has one of the lowest overall tax rates
1). Do you think that the top Federal Individual tax rates are too high or too low, and whats the highest tax rate that you think anyone, regardless of income should be required to pay?
2). How aware do you think most people your age are of either the economic problems facing the nation, or the governments problems with deficits of debt, or both?
3). If you were an economic policy maker, what would you do to reduce deficits, and how might you approach please some voters at the expense of displeasing others