When economic issues are raised, the differences between Republicans and Democrats are great.
Republicans have been seen as favoring the rich and big business while the Democrats have been seen as sympathetic to labor and the poor.
Republicans have been accused of having failed economic policies that resulted in a recession and higher unemployment.
Democrats are accused of following a "tax and spend, regulatory" program that causes runaway inflation.
The conservative congressional coalition supports policies that aim to dramatically reduce the deficit, while liberals believe that government-sponsored economicStimulus programs result in a strong economy.
Politics, political parties, elections, and government have a direct relationship to economic policy.
Major political themes are translated into these differences.
The economic problems facing the nation have been the focus of the campaigns.
According to surveys, the economy is the primary reason for choosing one candidate over another.
Ronald Reagan asked voters if they were better off before Jimmy Carter became president.
Carter was not able to counter Reagan's argument because of runaway inflation.
One's personal situation is what determines voter selection.
If your family is out of work, you will probably vote for the Democrats.
If your business is growing and making money, you're more likely to keep the president in office.
The economic issues facing President George W Bush in 1992 and President Barack Obama in 2010 resulted in Clinton defeating Bush and the Democrats losing control of the House of Representatives in 2010.
Government is linked to the nation's economy.
It tries to keep the economy on the right track by measuring the economic status of the nation.
The Bureau of Labor Statistics, the Congressional Budget Office, and the Executive Office of the Council of Economic Advisers all report to the country vital economic statistics such as the monetary value of all the goods and services produced within the nation.
The stock market, consumer confidence, and inflation rate give a complete picture of the economy.
When the index rises over a defined period of time, it is a primary measure of inflation.
The GDP is the key economic measure analyzing an upward or downward economic trend, on a quarterly basis, of the monetary value of all the goods and services produced within the nation.
The stock market, consumer confidence, and inflation rate give a complete picture of the economy.
A healthy economic policy is the government's primary policy role.
Programs such as the New Deal's three Rs--Relief, Recovery, and Reform-- set in motion policies that have succeeded in preventing the country from experiencing a depression of the magnitude of the one that occurred in the 1930s.
Roosevelt's programs such as Social Security, the Securities Exchange Commission, and jobs program prototypes are still part of the economic fabric of the country today.
The control of the money supply and the cost of credit is what monetary policy is about.
Many leading economists feel that there is a direct relationship between the country's money supply and economic growth.
The Federal Reserve System was established in 1913.
The board of governors is made up of seven people who serve staggered 14-year terms.
The Fed's chairman is appointed by the president and confirmed by the Senate, and serves for four-year renewable terms.
The Federal Reserve Board is free of presidential or congressional control.
During the 1990s, its chairman, Alan Greenspan, was very influential in setting monetary policy.
More than 6,000 member banks that are affected by Fed policy influence monetary policies of other banks, ultimately having an impact on the interest rates consumers pay.
The Federal Reserve System regulates monetary policy.
It has been praised by its supporters as a key watchdog agency and criticized by its critics as too powerful.
The money supply and cost of money are affected by open-market operations.
Legal limitations on money reserves that banks must keep against the amount of money they have deposited in Federal Reserve Banks give the banks interest.
The ability of banks to loan money to consumers is affected by these limits.
The rate at which banks can borrow money from the Federal Reserve System is determined by discount rates.
Interest rates for consumers will rise if rates are raised.
This tactic is used by the Federal Reserve System.
This is the most publicized action taken by the Fed.
Ronald Reagan was inaugurated in 1981 and the Federal Reserve's monetary policy was used in conjunction with his fiscal policy.
Double-digit inflation was the country's number one economic problem.
The discount rate was raised by the Federal Reserve.
The immediate impact of the action was to reduce inflation.
Unemployment was still a problem.
Although Reagan's fiscal policies eventually created a long period of prosperity, they also saw the greatest increase in the deficit in the nation's history.
The Fed had to raise discount rates in 1999 after President Clinton's economic package reversed some of the nation's deficit and increased employment.
It was worried that inflation would increase because of the economy's improvement.
Many economists don't like the idea of an independent agency being the sole arbiter in important functions.
If the board had the inside track, they could influence the monetary policy of the Fed.
The way the Federal Reserve monitored the economy during the 1990s was praised by most economists.
Interest rates were lowered by the Federal Reserve during the economic recession that began in 2008.
The Federal Reserve launched a controversial program to buy $600 billion in Treasury securities by mid-2011 to support a weak economic recovery that was failing to generate jobs.
Fiscal policy is based on an economic philosophy that determines how the economy is managed as a result of government spending and borrowing and the amount of money collected from taxes.
Keynesian economics was developed by John Maynard Keynes and supply-side economics was developed by Ronald Reagan's economic team.
Keynes advocated for an increase in national income so that consumers could spend more money.
Increasing government spending was the best way to counter an economic recession.
Government would use regulatory, distributive, and redistributive policies as tools to ensure consumer enterprise.
The regulatory philosophy of Roosevelt is different from the laissez-faire philosophy of Hoover.
When the country was facing an economic downturn or too much growth, both fiscal policies tried to deal with it.
Finding the best way to balance the tools available to the government is the key to success.
Since the Great Depression, economists and presidents have been perplexed by these issues.
There is an active or passive government economic policy.
Government economic policy is categorized as regulatory, distributive, and redistributive.
Depending on the needs of the group and the economic conditions facing the country, the specific measures adopted vary from group to group.
The major areas of American life are agricultural, business, labor, and consumer.
The dust bowl disaster of the 1930s brought the farm industry's problems to the forefront.
The farm subsidy program was created by the Agricultural Adjustment Act of 1933.
The government guaranteed the prices of certain farm goods by subsidizing farmers not to grow certain crops, and by buying food directly and storing it, rather than letting the oversupply in the market bring the prices down.
The philosophy behind these measures is to protect the nation's farmers by artificially keeping prices up in the short term, thus keeping the farmers in business, which will help the rest of the economy.
In 1989 the government spent nearly $22 billion.
The plight of the farmer is desperate even though this program is criticized.
Between 1960 and 2000 a majority of American farmers were forced out of business because they had to borrow a lot.
As farm industry debts increased, so did the bankruptcies.
Big business is an essential area of economic life.
The balance of trade, the amount of business regulation, and the support the government has given to failing businesses are some of the economic policies affecting big business.
The United States faced a trade deficit in 1971 for the first time in more than a century.
We had a trade deficit of $29 billion by 2000.
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American business suffered by the end of the decade.
Business leaders called for higher tariffs.
Presidents Bush, Clinton, and Obama believed in free trade agreements.
Reducing the nation's trade deficit is one of the goals of the North American Free Trade Agreement.
The government watches potential monopolies that will hurt consumers.
As a result of government action, AT&T was forced to decentralize its holdings, allowing competing phone companies to come onto the scene.
The federal government made a loan to GM in 2010 that allowed the car manufacturer to stay in business.
The policy saved thousands of jobs and helped the economy.
The Food and Drug Administration, the Consumer Product Safety Commission, and the Federal Trade Commission are independent regulatory agencies that determine consumer policy.
The government should make it compulsory for automobile manufacturers to install seat belts.
The Consumer Credit Protection Act requires credit card companies to inform consumers of the status of credit card transactions.
The credit card reform act was signed into law by the president in 2009.
The Wall Street Reform and Consumer Protection Act was signed into law by President Obama.
A new consumer protection watchdog agency was established by the law.
During the Great Depression, labor economic policy began.
The Norris-La Guardia Act was passed in 1932.
Employers were not allowed to punish workers who joined unions.
The maximum work week was set in the Fair Labor Standards Act of 1936.
There are two acts that regulate labor unions.
The National Labor Relations Act of 1935 gave workers involved in interstate commerce the right to organize labor unions and prevented employers from discriminating against labor leaders.
The National Labor Relations Board is an independent regulatory commission.
The balance between labor and employer relations was struck when Congress passed the Taft-Hartley Act in 1947.
The act allowed states to adopt right-to-work laws, gave employers more rights regarding the establishment of union shops, and allowed the use of injunctions to stop union activities.
It created a cooling off period before labor unions could go on strike.
The act gave the president the right to prevent a strike by an entire industry, such as the steel or auto industry, if it would endanger the nation's health and safety.
Strikes by public employees were banned.
When the airline air traffic controllers walked out in 1981 in a dispute with the government, President Reagan set a deadline and fired the entire union.
The deregulation of the airline industry, trucking and railroads, and the banking industry was done by the government during the 1970s and 1980s.
During the 1990s and 2000s, the government continued on with its deregulation of the banking and housing industries.
As a result, abuses led to a housing bubble that burst in 2008 as well as a collapse of many major financial institutions.
Legislation signed by President Obama reversed the trend of regulatory reform for banks and Wall Street.
Both liberals and conservatives want deregulation of the economy to encourage more competition and decrease government involvement in key areas of American life.
The transportation industry has been involved in the movement to deregulate.
TheCAB, an independent regulatory agency, was established in 1938.
It was tasked with protecting airlines from unfair competition.
The nature of competition in the industry was determined by regulating airline rates.
Critics felt that consumers were hurt by having to pay higher fares and not having the scheduling advantages that would occur in a more competitive market.
The Airline Deregulation Act was passed in 1978.
The law gave the federal government the power to bail out certain airlines in order to keep them in service in unprofitable markets.
The act has had both positive and negative effects.
The consumer has had fewer options regarding scheduling.
Many new airlines went under in a short period of time.
Many of the established airlines such as Eastern and Pan Am went out of business, whereas others such as Continental had to restructure their businesses.
The price fixing by airlines has been claimed by consumers.
Consumers get the benefits of choice and lower fares under this reform.
Congress passed the Motor Carrier Act and the Staggers Rail Act in 1980 in order to deregulate the trucking and railroad industry.
Both laws gave the trucking and rail industries greater self-regulation.
The United States auto industry was transformed as a result of the economic recession.
Chrysler was forced into Chapter 11 and General GM had to downsize its operations.
Both auto manufacturers had to accept a government handout.
The deregulation of the banking industry caused one of the biggest scandals in banking history.
The savings and loan problems included consumers losing money that was not protected under the Federal Savings and Loan Insurance Corporation, banks closing, and heads of S&Ls under investigation for improprieties.
The federal government had to bail out the industry because of the inflated federal deficit.
After congressional oversight hearings took place, there was no doubt that the federal government would have to regulate that industry again.
After the country's worst recession since the Great Depression, a massive government rescue of the banking industry took place.
The largest banks were close to collapsing because of their investments in sub-prime mortgages.
Both the Bush and Obama administrations had to pump money into the failing banks.
Banking regulations were tightened.
We will trace the history of key legislation affecting the players and the process when we look at the federal budget.
The components of the budget will be analyzed, including where the government gets its income and how it is allocated.
We will discuss some of the reforms that have been proposed to keep the budget in check.
The House of Representatives has the power to start the process of passing appropriations.
Congress has the power to impose excise taxes in the form of tariffs.
Section 9 prohibits export taxes.
Congress is directed to impose taxes that are equally apportioned.
The income tax is the only direct tax that is levied.
All indirect taxes, such as gasoline, tobacco, and liquor, must be uniform.
The principle of not taxing the federal government was established by the Supreme Court.
The power to borrow money on the credit of the United States is given to Congress.
Congress can only appropriate money that is in the budget.
Key players in the political game are involved in the budget development and passage process.
After January 3rd, the president must submit a budget proposal to Congress.
Each federal agency submits detailed proposals for the next fiscal year for each department.
The budget requests are put together by the Office of Management and Budget after the spending plan is submitted.
The OMB revises many of the recommendations after a budget review and prepares a budget for the president to submit to Congress.
The president's budget is evaluated by the Congressional Budget Office by the middle of February.
The OMB is a staff agency of the president, whereas the CBO is a staff agency of the Congress.
The results of the analysis by each group may be different.
The appropriations committees of each house review the budget and send it to their respective chambers.
Estimates of expenditures and recommendations for revenues are included in these resolutions.
The budget direction must be passed by April 15th.
The following year's budget is based on this.
The fiscal year begins on October 1st and both houses must pass a budget by that date.
If any of these bills are not passed, Congress must pass a continuing resolution to keep the government open.
During the Reagan, Bush, and Clinton administrations, there have been shutdowns.
The 1995-1996 budget battle was significant.
It caused the longest government shutdown and created unique political consequences.
The Republicans assumed control of Congress in 1994 and were spurred on by the "Gingrich Revolution" to pass a balanced budget.
The Republicans' balanced budget, which included major social program reductions and an overall objective of reducing the size and scope of the federal government, would be vetoed by President Clinton by the end of the fiscal year.
The budget battle began after Clinton's veto.
Unless the president agreed in principle to their budgetary demands, the Republicans refused to pass continuing resolutions.
President Clinton, using his bully pulpit in a most effective manner, refused and went on the offensive by suggesting that the Republicans were holding the American people hostage.
The Republicans were forced to pass continuing resolutions and reformulate their budget proposal after the media focused on how the shutdown was affecting government workers.
The budget battle had a longer lasting impact on presidential politics, as well as losing public opinion.
After the defeat in Congress, it reestablished President Clinton's image.
The election issue would carry through the entire 1996 campaign.
Special interest groups, heads of bureaucratic agencies, the media, and the public are all involved in trying to influence the budget.
Lobbyists for the private sector argue for more funding for programs such as entitlements and federal aid, while bureaucratic chiefs attend congressional hearings to fight for their departments.
The media reports on the process.
Through its contacts with legislators, the public gives its opinion on issues such as a tax increase.
President Clinton's first budget was dramatic, as was the final passage of the budget.
He proposed a tax increase for the wealthiest individuals in the country.
The final budget was passed by a slim margin in the House and by a single vote in the Senate, which was a tiebreaker by Vice President Gore.
The problem of a nation going broke was suggested by Ross Perot during the 1992 campaign.
Deficit spending is when expeditures exceed revenues.
The United States has been in debt since the Revolutionary War.
After a domestic or foreign policy crisis, the debt usually increases.
The implementation of Roosevelt's New Deal programs resulted in one of the largest deficits in the country's history.
The extent of the deficit became unsustainable in the 1980's due to its size and the interest on the debt.
Key players face serious problems such as how to reduce the nation's deficit while maintaining social programs.
During World War I, we borrowed $23 billion; during the Depression, another $13 billion, and during World War II, $200 billion.
By the year 2009, the deficit was over $1 trillion.
The federal government is able to borrow more money than it gets.
State budgets have to be balanced.
The interest on the deficit increases the size of the debt.
Even if the government can reduce the size of the debt over time, it still has to repay the interest.
Congress sets limits on the debt because the Constitution doesn't place limits on the extent or method of borrowing.
Since the last time the country showed a surplus in 1969 the limit has been inching upward.
President Clinton assumed the presidency in 1992 and the deficit was reduced by half by 1997.
The 1998 proposed budget reflected a budget surplus because of the Balanced Budget Agreement and an economy that showed high economic growth.
The first decades of the new century were projected to see an increase in the surplus.
The effects of 9/11 and the war on terrorism caused the surplus to disappear and record deficits to return.
Reagan proposed a massive tax decrease that was passed by Congress without a corresponding cut in expenses, which led to the increase in the deficit.
The cost of entitlement programs continued to escalate while the defense budget showed a dramatic increase.
Bush made campaign promises to reduce the deficit but became frustrated with the Congress which refused to cut social programs.
Bush had to backtrack on his "read my lips, no new taxes" pledge in order to get a budget passed.
The country's runaway deficit and debt caused a recession that retarded the rate of economic growth and caused an increase in unemployment.
You can understand why Congress tried to find ways of setting budgetary limits when there is a huge trade deficit.
During the 1990s, President Clinton signed a balanced budget that resulted in a surplus in 2000.
After George W. Bush's election, there was a mild economic recession followed by the events of September 11th and the wars against Afghanistan and Iraq.
George W. Bush signed one of the largest tax cuts into law.
After President Obama took office, he signed an economic bill that he said would help end the economic recession that began in 2008.
The nation's unemployment rate was almost 10 percent and the national debt was over a trillion dollars in 2010 as Congress and the president faced mounting pressure from the American people.
A bipartisan debt commission made a number of recommendations that would have reduced the deficit.
Congress did not vote on these proposals, but leaders of both parties promised to address the economic issues facing the country.
The new Republican majority in the House of Representatives passed legislation decreasing government spending, and President Obama signaled that he was going to submit legislation that would reform the tax system.
Efforts to control the budget began with reforms of the process.
Prior to 1974 Congress had a disorganized budget.
Each house had subcommittees that reviewed every request on an agency-by-agency basis.
There was no certainty as to what the total budget would be until the bottom line was totaled.
Congressional efforts to create an equitable tax structure and reasonable limits on expenditures have been the result of the history of budget reform measures.
The Congressional Budget and Impoundment Control Act was passed in 1974.
Controls were placed on the president's ability to determine allocations without congressional checks.
Before the law was passed, President Nixon used his authority to cut off funds for programs he felt would increase the deficit.
The law that Congress passed placed an additional check on the president.
The president couldn't take previously passed allocations without congressional approval.
The creation of the Congressional Budget Office acted as a check on the OMB.
Congress had to follow a time line of procedural steps in order to pass the budget.
These included the passage of budget resolutions, budget reconciliation aimed at achieving savings from taxes, other revenue adjustments and authorization bills that established discretionary government programs, and finally appropriations bills that covered the budget year and gave final authorization for spending.
Congress was able to understand where revenue was coming from and where money was being allocated because of the fact that it was able to view the entire process from start to finish.