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