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Poli 1223 - Economics and Politics

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Tony Litherland

on 28 April 2016

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Transcript of Poli 1223 - Economics and Politics

Economics in my lifetime (1953-)
1993 - for you twenty year olds
2013
Stock market sets record
Unemployment above 7%
Underemployment erodes the middle class' ability to gain upward mobility
2012
Huge amount of debt
Mr. Obama takes over in the worst economic recession in the post WWII Era.
The Beginning of the Reagan Era
Supply Side Economics
Trickle down promises
The Promise of Trickle Down taxation
1953
I was born at night but not last night
Keynesian Era
1933 to 2013+
1929- 1933
Great Depression
US Economic Lifetime
Colonial Mercantilism
Dark Ages
Feudalism
Roman Empire
The Age of Emperors
Early Bartering and agriculture
The Double Coincident of Wants
Two people must want the same thing. Otherwise, there is no deal.

It takes a tremendous amount of effort to make deals.

Productivity is low.

Scarcity is a constant threat.
Economics and Politics
Where are we headed?
What reasons can you provide for why we are headed up or down economically?
What are the political solutions?
America was born in 1787 and so was its national debt. An Agricultural economy, along with fur trade and fishing created economic growth.

Each colony was limited by contracts, royal laws and government authorized monopolies.
Age of Boom and Bust
Work Hard, Save a lot, be exceptionally generous and invest wisely and always do what is right
1- Borrow from Americans not foreigners: 2- only borrow in order to be more productive
You must delay your gratification and save. Otherwise, we all fall into consumerism and foreign debt.
Debate the return to the gold standard: What will be the result?
47th major economic panic, recession or depression
2007 to 2009 - the great recession (18 months)
47th
2001 - 8 months
1990-91 - 8 months
40th - episode

2001 - 8 months
46th episode
The Recession of 2001 lasted 8 months
45th Episode
The recession of 1990-91 came in the middle of Mr. GHW Bush's term.
1990-91 - 8 months
1981-1982 - 15 months
44th episode
The recession of 1981 - 1982 - 15 months long
WWII
Keynesian economic theory asserts that the government can borrow money in an economic downturn and stimulate the economy back into growth; thus reducing the length and severity of a panic or recession.
28 separate episodes of panics, recessions, and depressions from 1789 to 1929
There was a central bank from 1789 through 1833; no central bank until the Civil War.
The Great Depression
Mercantilism: allowed the government to disperse trading monopolies and limit economic competition. It had the benefit of reducing economic violence but kept industrialization low and prices high.
Feudalism -- is the notion that a man's labor is owned by his landlord. The highly structured series of rents and obligations greatly limited the versatility of labor and capital.
Budget --
The US has rarely balanced its budget since 1928. 6 out 85 times
The Budget has been out of control since the 1970s and the two oil embargoes.
Every president since Ford has borrowed more money that his predecessor (Except Clinton)
Study the chart below
What is the best measurement for judging the impact of the US Budget and the national debt have on the economy?
What applications do you see?
How much more money can we borrow?

What if China quits buying our debt? Americans long ago quit saving money.

Taxes are at historically lows in 2013. Should we raise taxes?

Future spending obligations are astronomical, how are we to pay for these future mandatory outlays?
A look at the economy in per capita terms
Budget terms:
Revenues or TAXES
MANDATORY expenditures (80%)
DISCRETIONARY expenditures (20%)
Deficit is when expenditures exceed revenues
National debt is the accumulated deficits
Balanced Budget amendment forces the government to balance its books
Laisseze-fare economic theory
Globalism and free trade

Key Players
FDR adopted Keynesian economic theory
Conservatives prefer Hayak
Reagan adopted Supply side economic theory
Reagan promoted "trickle down"

47th economic episode of negative economic growth
The Long Depression
1873-1879
Economics: Origins, Ethics, History, and Current Conditions
Biblical Ethics regarding money
Work hard
Give unto God and the Poor
Honesty
Wealth is a blessing and comes with huge obligations (Job defended himself, "I indeed took care of the poor like I was supposed to (implying that he did not sin)
The well-to-do are to take care of the poor
Ezekiel 16: 48 lists the five sins of Jerusalem as
lazy
gluttonous
ignoring the poor
wasting your liesure time

No "workie, no Eatie"
No "Savie, no ever be Richie"
Lazy people are condemned
Obligated to take care of your family
Forbids going into debt
The LOVE of MONEy is the ROOT of ALL Evil
Indebtedness is a form of slavery
Strict rules about loans
Not allowed to charge interest to fellow believers or the poor
Cannot sell land (leased only)
YEAR of JUBILEE
1992
2000
2012
2008
1988
1976 & 1980
End of Mr. Bush # 41 - 1992
Total National debt = 4,177 trillion
% increase = 49.2%
Amount borrowed = 1,493 trillion
Population in Millions = 255 m
Debt per Capita = $16,379
annual ave increase = 10.5%
Income per Capita = $14,847
debt as % of income = 110%
End of Mr. Clinton - 2000
Total National debt = 5,662 trillion
% increase = 22.5%
Amount borrowed = 1.485 trillion
Population in Millions = 282 m
Debt per Capita = $20,067
annual ave increase = 2.6%
Income per Capita = $22,346
debt as % of income = 90%
End of Mr. Bush #43 - 2008
Total National debt = 10,700 trillion
% increase = 75.2%
Amount borrowed = $5,038 trillion
Population in Millions = 304 m
Debt per Capita = $35,153
annual ave increase = 7.3%
Income per Capita = $26,964
debt as % of income = 130%
Midpoint Mr. Obama - 2012
after 4 and currently
Total National debt = 16,434 trillion 17,700 trillion (approx)
% increase = 48.4%
Amount borrowed = 5,732 trillion and 7 trillion (approx)
Population in Millions = 315 m
Debt per Capita = $52,152
annual ave increase = 10.4%
Income per Capita = $27,554
debt as % of income = 189%
End of Mr. Ford and Mr. Carter
Total National debt = 654 billion
% increase = xxx
Population in Millions = 218 m
Debt per Capita = $2,997
annual ave increase = xxx
Income per Capita = $5,271
debt as % of income = 57%
End of Mr. Reagan 1988
Total National debt = $2,684 Billions
% increase = 168.2%
Mr, Reagan borrowed = 1,554 trillion
Population in Millions = 244 m
Debt per Capita = $10,979
annual ave increase = 13.1%
Income per Capita = %13,123
debt as % of income = 84%
Total National debt = 930 billion
% increase = 36.6%
Mr. Carter borrowed = __276 B___
Population in Millions = 227 m
Debt per Capita = $4,097
annual ave increase = 8.1%
Income per Capita = $7,787
debt as % of income = 53%
Careful study reveals that Republicans borrow more than Democrats; Every president borrows more than the previous one; Mr. Clinton has done the best job statistically
Mr. Ford through 4 years of Mr. Obama
What measurement is the least political? Thus more honest?
Turn to your neighbor:
What does the budget look like?
% spent on foreign aid?

% spent on welfare?

Agriculture radically changed the economies;
Cities developed along waterways; Governments were created for self-defense and to protect property;
Coinage appears and radically changes the economy
Strong leaders keep order, establish justice and then cause troubles: such as over-taxation, abuses, and diseases
Empires facilitated the accumulation of wealth
Rome was brutal in its enforcement of law and order. The security of the Roman Empire promoted substantial wealth for a few. The Republic allowed for upward mobility but the Empire reduced a large percentage into a servile existence.
The Republic succumbed to the flood of slaves from Carthage and the flood of wealth reserved for those at the top.
1st century BC
The Roman Senate failed to represent all economic sectors
On one hand, the government created a monopoly which allowed for venture capital formation, it also led to price gouging
Feudalism took the labor value of many workers and trickled the power upward into the hands of the few.
As technology advanced, it became less useful for holding onto agricultural labor and manufacturing labor became far more productive and lucrative.
The political right to own property was critical to the development of democratic self-government.
The new Republic took on the old debt accrued under the revolution. The economy experienced many business cycles which is normal.
#19 --- Panic of 1873 and the Long Depression 1873-1879
#15 -- Panic of 1857 - Recession followed - 1857 to 1858
Recessions of 1869 (#18), 1865 (#17), and 1860 (#16)
Recessions of 1853 (#14), 1847 (#13), 1839 (#12), and 1836 (#11)
Free banking begins in 1836 -- Jackson ends the national banking system
#10 -- Recession of 1833
#6 -- 1815 -1821 a long depression
#5 -- 1812 recession
COPPER PANIC: First Recession started immediately in 1789 and lasted 4 years
#2- Panic of 1797
#3 - 1802 - 1804 recession
#4 -- First depression - 1807 to 1810
#7 -- recession of 1822 - 1823
#8 -- Recession of 1825 - 1826
#9 -- Recession of 1828 - 1829
#20 - the recession of 1882-85, #21 - Recession of 1887-88; and #22 - the recession of 1890-91
#23 - the panic of 1893; #24 - the panic of 1896
#25 -- The recession of 1899 -1900; #26 -- the recession of 1902 -04;
#27 -- the panic of 1907; #28 -- the panic of 1910
#29 - The recession of 1913; #30 - the recession of 1918 - (the Post WWI recession)
#31 - The Depression of 1920-1921
#32 -- The Recession of 1923 -24
#33 - the recession of 1926-27
Economic Episode #34
The worst case of economic cancer: millions of Americans were unemployed, underemployed, and starving.

Many Americans joined the Socialist and Communist Parties.

President Hoover believed that everything would work out OK if we just gave the system time to heal itself.

Instead, FDR won the 1932 election with the mandate to use the government to move economic recovery along faster.

The Debate has never ceased as to which theory is best.
#35 - The Recession of 1937-38
For sure, borrowing huge sums of money in order to win WWII pumped up the economy - 1.2% unemployment and built a huge industrial machine
#36 - as soon as WWII ended, the US economy went into a recession. 1945 - 8 months long
Notice that since WWII, the US has had 12 recessions, no panics, and no depressions
We have had a recession on an average of once every 5 and 1/2 years
#37 - Recession of 1949 - 11 months
The 12 recessions averaged 10.6 months long
#38 - the Recession of 1953 - 10 months long
#39 - the Recession of 1958 - 8 months long
#40 - the Recession of 1960-61 - lasted 10 months
Note: this recession played a part in helping JFK beat Nixon in the 1960 election.
#40
#41
#41 - the Recession of 1969-1970 - lasted 11 months
#42 - the Recession of 1975-76 - 15 months
The Oil Embargoes
This recession hurt Gerald Ford's re-election effort
#43 - The recession of 1980 - 6 months
This recession damaged Mr. Carter's effort for re-election
Mr. Reagan won while declaring that Mr. Carter was borrowing far too much money.
The combination of huge tax cuts, increased military spending, and the recession dictated that Mr. Reagan borrow huge sums of money. He borrowed more money than all the previous 39 presidents combined (1.7 trillion vs 930 billion)
#44
Supply-side Economic Theory advanced by Mr. Reagan argues that if you increase the quantity of goods, the price falls and more people can afford to purchase more things with the same amount of income. Hence, deregulate business and let it produce more. And, lower taxes.
The promise of Supply side tax cuts is that as the wealthy get richer, they will spend their new wealth and the lower classes can find more and better jobs
#45
The Democrats in Congress forced Mr. Bush to raise taxes. Mr. Bush forced the Democrats in Congress to cut spending. This led to a long period of economic growth.
The economy eventually recovered and grew for a long stretch.
Mr. Bush was roundly criticized for breaking his promise not to raise taxes.
The 9-11 tragedy played a role in this recession
I have lived through 10 recessions
#46
??????
We have averaged an episode once every 4.75 years
The Huge difference is that the ones since 1933 have been shorter and less severe.
1%
less than 6%
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