>US system: free trade system (economic system with governmental involvement)
-when it started, government taxed some...then it started getting involved with regulation
-uh oh! communism... but not really...cause some regulation is good
>first hundred years of US - states made economic policy
-states had different ways of doing this (especially differences between North and South)
-each state promoted their own industrial ideas (North: roads, canals, etc. South: farms)
-business cycles: expansion and recession
>leading up to the Great Depression
- we were in favor laissez-faire (leave it alone economics)
-this helped big businesses to grow
>gov. involvement (Progressive Era)
-Inner state commerce act of 1887: regulated the railroad industry and monopolistic practices
-if you allow free trade to keep growing and growing --> monopolies will form
-Roosevelt used this act to get the gov. involved
-Sherman Anti-Trust Act: prevented monopolies from being the only companies in their business which allowed an increase in trade
-Upton Sinclair: The Jungle --> created the Food and Drug Administration
-The Federal Reserve was also created
-how can we pay for these new agencies? INCOME TAX
-this was ruled unconstitutional by Congress
-So...Congress said we are going to make this a part of the constitution (1913)
>gov. involvement really began after the Great Depression
-laissez-faire --> interventionist state
-when something goes wrong, our country makes a policy to adjust it
-we intervene! (fiscal and monetary policy)
Examples of Policies
-After World War II - Employment act of 1946 - for the country to reach maximum employment (fiscal)
-Taft-Hartley Act - Unions have gotten out of control and are too powerful - some allied with mafia/mob - this act states that you can't be denied a job if you aren't a member of a union. -Ralph Nader - a consumer advocate - things are consumer advocacy regulations (car seats, toys, recalls, etc.) - our cars have improved! (cars take the impact instead of the driver)
-De-regulation - 80s and 90s - "we don't want regulation of competitive companies or corporations" - this may be responsible for some of our present problems (banks, credit card companies, airplanes)
Monetary Policy-gov’t uses the Fed Reserve Board to control the supply of money, and set interest rates
è Federal Reserve Board—Head of Federal Reserve is the Federal Reserve Chairman
--very powerful board
--before 1913 (founding of Fed) banks worked internally, and the gov’t would not get involved—if a bank failed, it failed. è 12 Federal Banks è Federal Reserve Market Committee
--the gov’t got involved to add an extra security blanket for the economy
--originally had the Bank of the United States—but Jackson hated it and got rid of it, resulting in a depression
--1921—office created to help the President with his budget deregulation time in 1990s
-only time we have had a balanced budget—Clinton—they completely shut down the gov’t in order to rework the country’s budget
-1990’s was one of the best budgets we have ever had
-during the Bush admin. then, the mentality of America—is this a good thing?
--Bush established the Economic Growth and _ Act
-if the wealthy have more money---and have less taken from them, then they will have more money to spend, meaning that they can stimulate the economy
-With the Obama admin. he asked what we thought about the tax cuts, should we all pay the same percentage of what they make? (currently 30%)
Chapter 18 - Economic Policy
know all the key terms>US system: free trade system (economic system with governmental involvement)
-when it started, government taxed some...then it started getting involved with regulation
-uh oh! communism... but not really...cause some regulation is good
>first hundred years of US - states made economic policy
-states had different ways of doing this (especially differences between North and South)
-each state promoted their own industrial ideas (North: roads, canals, etc. South: farms)
-business cycles: expansion and recession
>leading up to the Great Depression
- we were in favor laissez-faire (leave it alone economics)
-this helped big businesses to grow
>gov. involvement (Progressive Era)
-Inner state commerce act of 1887: regulated the railroad industry and monopolistic practices
-if you allow free trade to keep growing and growing --> monopolies will form
-Roosevelt used this act to get the gov. involved
-Sherman Anti-Trust Act: prevented monopolies from being the only companies in their business which allowed an increase in trade
-Upton Sinclair: The Jungle --> created the Food and Drug Administration
-The Federal Reserve was also created
-how can we pay for these new agencies? INCOME TAX
-this was ruled unconstitutional by Congress
-So...Congress said we are going to make this a part of the constitution (1913)
>gov. involvement really began after the Great Depression
-laissez-faire --> interventionist state
-when something goes wrong, our country makes a policy to adjust it
-we intervene! (fiscal and monetary policy)
Examples of Policies
-After World War II - Employment act of 1946 - for the country to reach maximum employment (fiscal)
-Taft-Hartley Act - Unions have gotten out of control and are too powerful - some allied with mafia/mob - this act states that you can't be denied a job if you aren't a member of a union.
-Ralph Nader - a consumer advocate - things are consumer advocacy regulations (car seats, toys, recalls, etc.) - our cars have improved! (cars take the impact instead of the driver)
-De-regulation - 80s and 90s - "we don't want regulation of competitive companies or corporations" - this may be responsible for some of our present problems (banks, credit card companies, airplanes)
Monetary Policy-gov’t uses the Fed Reserve Board to control the supply of money, and set interest rates
è Federal Reserve Board—Head of Federal Reserve is the Federal Reserve Chairman
--very powerful board
--before 1913 (founding of Fed) banks worked internally, and the gov’t would not get involved—if a bank failed, it failed.
è 12 Federal Banks
è Federal Reserve Market Committee
--the gov’t got involved to add an extra security blanket for the economy
--originally had the Bank of the United States—but Jackson hated it and got rid of it, resulting in a depression
--1921—office created to help the President with his budget
deregulation time in 1990s
-only time we have had a balanced budget—Clinton—they completely shut down the gov’t in order to rework the country’s budget
-1990’s was one of the best budgets we have ever had
-during the Bush admin. then, the mentality of America—is this a good thing?
--Bush established the Economic Growth and _ Act
-if the wealthy have more money---and have less taken from them, then they will have more money to spend, meaning that they can stimulate the economy
-With the Obama admin. he asked what we thought about the tax cuts, should we all pay the same percentage of what they make? (currently 30%)
à EPA