“it’s the economy, stupid.”
Post on 09-Feb-2016
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A brief summary on the changing course of economic action in the US, leading to Trickle-down
Theory and Reaganomics.
“It’s the Economy, Stupid.”
Briefly discuss the basis of economic theory in American politics
Discuss the causes of stagflation and the recession of 1977
Discuss the different economic approaches to fiscal and monetary policy
Discuss Reagans economic views on government
Discuss how Reagans economic policy will effect his overall governmental policy
On the Agenda
Yes.Economic policy is by nature a major game
changer and a large factor by which to determine the success of a president.
Reagans divergent economic policy is a common target for AP MX questions and FRQ’s.
Economic Policy will undoubtedly effect you for the rest of your life, mine as well learn it now.
Does it Really Matter?
Where’s our Starting Point?John Maynard Keynes
Founder of modern macroeconomics
Believed that government needed control over the “commanding heights” of the economy
Dictates that government action is necessary at times to relieve high unemployment
Are There any Opposed?Friedrich Von Hayek
Austrian School of economics-Ludwig Von Mises
The Road to Serfdom I hate to burst your
bubble, but you can’t create wealth.
Life in Chicago and being awarded a Nobel Prize
John Maynard Keynes“Long run is a
misleading guide to current affairs. In the long run we are all dead.”
Relief from unemployment must come in the short-run, help those who are hurting now.
“I have arrived at the conviction that the neglect by economists to discuss seriously what is really the crucial problem of our time is due to a certain timidity about soiling their hands by going from purely scientific questions into value questions.”
Can Morals and Economics Mix?
Friedrich Hayek
Common Keynesians:
Who’s Who?Common Classicalists:
How does this even begin to effect us?Franklin D.
RooseveltFDR and the great
Depression.Alphabet soup sends
government spending through the roof.
“I ask Congress for a declaration of war, on the depression!”
Fiscal PolicyDecisions and actions
made by Congress which effect the US economy as a whole.Raising or lowering
taxes Increasing or lowering
spendingPrinting more moneyEnacting federal
regulation
Decisions and actions made by the Federal Reserve Board which effect the US economy as a whole. Increasing or decreasing
unemployment Increasing or decreasing
inflationChanging the Federal
rates of exchange
The Weapons of WarMonetary Policy
To Spend or not to Spend?Richard M. Nixon
Nixon runs on a campaign of fiscal and monetary conservatism
Promises to lower inflation
Ends up leaving the gold standard, uses Keynesian economic theory
The King of ClumsyJimmy Carter
Carter’s failing moral obligations in the middle east cause an oil embargo.
The beginnings of stagflation are then present in the economy.
High Unemployment + high inflation = disaster
What do we do?
A Drastic Answer, to a Drastic Situation.Paul Volcker
Appointed head of the Federal Reserve Board by Jimmy Carter
Wants to lower inflation as a means of escape from stagflation
Original target rate is far too high
Meeting with Reagan and hitting the Bullseye
An Actor Made PresidentRonald Reagan
The most terrifying words in the English language are: I'm from the government and I'm here to help.
Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
Republicans believe every day is the Fourth of July, but the democrats believe every day is April 15.
Fiscal Policy: ReaganomicsCut taxes, especially
for corporations and business owners.
Cut government spending to reduce the “crowding out” effect.
Stop regulating business and let the market do what it does best.
Encourage growth of aggregate supply
Keep inflation lowAppreciate US
currencyLet the trickle-down
effect create wealth for all people
Two Stones, One Bird.Monetary Policy: Supply Side Economics
A Victory for the Supply SideAt first times are
hard, inflation decreases but unemployment is at a stand still.
Monetary policy brings value to the currency.
Fiscal policy brings an end of stagflation.
Lessons which we should have learned.
“No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!”
One Little Bump in the Road
Side Effects of Taking ReaganomicsLaissez faire
governmentEnd of government
regulation on corporations
ATC strikeAn economic and
GDP boomNot much time for
other concerns: civil rights and women's concernsSandra Day
O’Connor
Tying the Knot Between Economics and MoralsJerry Falwell
Foundation of the Christian right
Born out of the “degenerate society”
Attaches to the moral principles found in Hayek's economic theory
All in Favor? Any Against?The election of
1984Bears out
Americans feelings on the economic policy
Reagan convinces Americans are over-taxed and then delivers on cutting taxes
Moral majority or economic boom?
Reagan’s compromise The debtor nation $200 Billion dollar increase in
national debtConsistency leads to complacency
The AIDS problem The War on drugs Immigration: Shifting Long Run
SupplyThe failures of Trickle-down theory
Works when businesses need to recover capital and labor.
Increasing the corporate profit margin
Stopping the fountain
A Few Black-Spots on the Record
Keynesian PresidentsUsed spending as a
tool to win re-election
Artificially lower unemployment
Use the tools of economics to influence current events without foresight for the future
Relinquishes the reigns on business to maximize profit and American economic growth
Cuts spending and reduces inflation with a mindset to help future generations
Low in practicality
The Overall DifferenceClassical Reaganomics
Economics and politics go hand-in-hand, economics will always shape the course of history, even in moral obligations
Prosperity always has a price; for us and for future generations
What looks good on paper doesn’t always work in real life
A successful president must have a good hold on economics
Lessons Learned
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