Chapter 16

Chapter 16 - David McHugh Chapter 16: Economic Policy I....

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David McHugh Chapter 16: Economic Policy I. The Federal Deficit A. In 1999 and 2000, the government spent less money than it took in, for the first time since 1969. B. Two approaches to getting rid of the federal deficit: 1. Cut spending (Republicans) 2. Raising taxes (Democrats) C. The surplus is 1999 and 2000 was caused by an economic boom, resulting in higher tax revenue. 1. Republicans want to give some of the surplus back to the people (Bush: Economic Growth and Tax Reconciliation Act of 2001). 2. Democrats want to spend the surplus on more government programs. D. The Office of Management and Budget (OMB) and the Congressional Budget Office (CBO) have historically done a terrible job with their economic forecasts. II. Economics and Politics A. Voters are influenced by their immediate economic situation, and also by the economy of the nation – but voting tends to go along with the national economy more B. Politicians tend to focus more on short-term economics to keep voters happy 1. Democrats try to reduce unemployment 2. Republicans try to reduce inflation C. Politicians will use “minority” or “other people” taxation to keep voters. 1. Example: Cigarette tax 2. Example: Tax on the wealthy D. Tax cuts or more/bigger government? Politicians are re-elected by spending money. III.
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Chapter 16 - David McHugh Chapter 16: Economic Policy I....

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