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Economic Policy

Economic Policy. Public Policy Project Dan Ozizmir, Andrew Ma, Patrick Feuerman, Ethan Stroud, Griffin Tiedy , Nic Caridi , Oliver Ostriker. Source 12. Overview of Federal Government’s Economic Policy. Goals Maximize GDP growth Control inflation Fund government

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Economic Policy

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  1. Economic Policy Public Policy Project Dan Ozizmir, Andrew Ma, Patrick Feuerman, Ethan Stroud, Griffin Tiedy, Nic Caridi, Oliver Ostriker Source 12

  2. Overview of Federal Government’s Economic Policy • Goals • Maximize GDP growth • Control inflation • Fund government • Regulate private economy • Build public infrastructure • Tools (Budget and Laws) • Tax policy • Spending policy • Regulations • Tariffs U.S. Federal Government has become more involved in the economy over time. Sources 6, 14, 18

  3. Legislation Shaping the Field • Revenue Act of 1913 • Implemented following the ratification of the 16th amendment. • 16th amendment allowed federal government to levy income taxes. • Greatly increased federal tax revenue . • Progressive tax: • High income earners are required to pay higher rates. Sources 9, 15, 17

  4. Legislation Shaping the Field • New Deal (1933-1938) • Greatly increased government involvement in economy as a response to the Great Depression. • Population looked to government for assistance and guidance. • Some programs include: • Social Security Act • Securities and Exchange Commission (SEC) • Federal Deposit Insurance Corporation (FDIC) • Public Works Administration (PWA) Sources 2, 8

  5. Biggest Issue: National Debt Current debt: over $17 trillion. Increases in national debt generally occurred during wars. The Great Depression was a notable exception due to large amounts of public spending on infrastructure and job programs. Our National Debt reached 103% in 2013, which is the highest level besides WWII. There is a large disparity between entitlement spending costs and available tax revenue. Sources 17, 19

  6. Why is our Long-term Structural Deficit a Problem? • Interest cost on debt will crowd out funding for other programs. • Less expensive to pay off debt before interest accumulates. • Citizens will depend on future promises of entitlements that are unsustainable. • Excessively high taxes will slow growth. • There is a risk of lower credit ratings and eventually default. Source 19

  7. Drivers of debt are as simple yet inexorable Discretionary spending has been falling since the 1950s. From approximately 15% to a long-term projection of around 8% of GDP. Entitlements programs are expected to reach 25% of GDP due to: Expansion of benefits over time. Demographics: longer life expectancy. Sources 11, 14

  8. Long-term Impacts of Bills Passed During the New Deal and Great Society Social Security Act of 1935: Benefits expanded over the years. Disability insurance added. Medicare Act of 1965: Expanded over time. Part B Prescription Coverage. Medicaid Act of 1965: Expanded by Affordable Care Act in 2010. Source 17, 18

  9. Demographics Life Expectancy has increased from 53 to 78 since 1935 when the social security act was passed… …creating a increased burden on Future workers Source 5, 13

  10. No Easy Way to Increase Revenue:-Growth is falling and total tax take is at historical highs- Due to various factors, US GDP growth has fallen in the Post-War era Total tax take has increased over time Sources 5, 7

  11. President Obama created the Simpson Bowles Commission in 2010; they proposed the following ideas: Increase Social Security retirement age and then index to life expectancy. Means-tested Medicare. Increase Medicare premiums. Reform disability program. Tax reform to raise revenues and reduce rates. Simpson Bowles Commission Sources 3, 4

  12. Limited Public support for hard decisions The Public doesn’t make it easy for for politicians to make hard decisions. Source 3

  13. Political Choices-Prisoners Dilemma Democrats support spending, particularly entitlement programs. Republicans support lower taxes. Stalemate Source 10

  14. Only Long-Term Solution is to Run Budgetary Surplus • Compromise solution between Democrats and Republicans: • Higher taxes. • Lower spending. • Increased revenue and decreased costs can bridge the gap between current deficits and our target of financial solvency. Sources 7, 10

  15. Proposed Implementation Immigration Reform: increasing growth and population will partially address demographic challenges. Review labor laws and practices that often push out older workers who may be willing to work part time or in reduced roles. Change budget scoring so that future liabilities are better accounted for. • Increase retirement age and then index to life expectancy. • Means-tested Medicare. • Increase Medicare premiums. • Broaden tax base and reduce rates while increasing revenues. Source 10

  16. Bibliography 1. "16TH AMENDMENT." Legal Information Institute. Accessed January 14, 2014. http://www.law.cornell.edu/constitution/amendmentxvi. 2. A&E Television Networks. "New Deal." History. Accessed January 14, 2014. http://www.history.com/topics/new-deal. 3. Alan Simpson and Erskine Bowles during a News Conference. Photograph. Center for American Progress. November 15, 2012. Accessed January 13, 2014. http:// www.americanprogress.org/wp-content/uploads/2012/11/simpsonbowlescharticle.jpg. 4. Ayres, Sarah, and Michael Linden. "How Much Revenue Was in Simpson-Bowles?" Center for American Progress. Last modified November 15, 2012. Accessed January 13, 2014. http://www.americanprogress.org/issues/budget/news/2012/11/15/45043/how-much-revenue-was-in-simpson-bowles/. 5. "Declining Old-Age Support Ratio." Chart. JURONG GROUP REPRESENTATION CONSTITUENCY. Accessed January 14, 2014. http://www.juronggrc.sg/sites/default/files/images/ Declining%20old-age%20support%20ratio.png. 6. "Economic Policy." U.S. Department of the Treasury. Accessed January 14, 2014. http://www.treasury.gov/about/organizational-structure/offices/Pages/Economic-Policy.aspx. 7. "Economic Regulation in the United States: The Constitutional Framework." University of Richmond Law Review. Accessed January 14, 2014. http://lawreview.richmond.edu/ economic-regulation-in-the-united-states-the-constitutional-framework/. 8. Franklin D Roosevelt New Deal pin. Photograph. Encyclopedia Britannica. Accessed January 14, 2014. http://www.britannica.com/EBchecked/media/72254/Franklin-D-Roosevelt- New-Deal-pin-1932. 9. "History of the US Income Tax." The Library of Congress. Accessed January 14, 2014. http://www.loc.gov/rr/business/hottopic/irs_history.html. 10. Levine, Peter. "Game Theory and the Fiscal Cliff." Table. Peter Levine. Accessed January 14, 2014. http://peterlevine.ws/images/FiscalCliffChicken.png. 11. Ludwig von Mises Institute. "ECONOMIC POLICY." Ludwig von Mises. Accessed January 14, 2014. http://mises.org/etexts/ecopol.asp. 12. Parker, Jeff. "Debt Flood." Cartoon. Florida Today (FL), November 20, 2009. Accessed January 14, 2014. http://www.floridatoday.com/content/blogs/jparker/uploaded_images/ 091120-720844.jpg. 13. Perry, Mark J. "U.S. Life Expectancy Rose to Record High in 2009." Chart. CARPE DIEM. Accessed January 14, 2014. https://lh5.googleusercontent.com/-cVRVVfthw8M/ TYFTV9Cox_I/AAAAAAAAPGA/DBDpRSXmNNo/s1600/le.jpg. 14. "The 10 most important American economic policy issues of 2010." Keith Hennessey. Accessed January 14, 2014. http://keithhennessey.com/2010/12/31/the-10-most-important- american-economic-policy-issues-of-2010/. 15. "Trivia Tidbit Of The Day: Part 437 -- Taxes Are Too High." Willisms. Accessed January 14, 2014. http://www.willisms.com/archives/2007/04/trivia_tidbit_o_438.html. 16. U.S. Const. art. I-VII. 17. Whitehouse.gov. "Historical Tables." Office of Management and Budget. Accessed January 14, 2014. http://www.whitehouse.gov/omb/budget/historicals. 18. Whitehouse.gov. "Office of Management and Budget." The White House. Accessed January 14, 2014. http://www.whitehouse.gov/omb/budget/historicals. 19. Whitehouse.gov. "Us National Debt." The White House. Accessed January 14, 2014. http://www.whitehouse.gov/infographics/us-national-debt.

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