Political Economy

1
Political Economy

• OConnor, Chapter 18
• 816-819

2
Political Economy

• Study of relationships among politics and
  economics and governments and markets (the
  relationship between the state and the markets).
• To paraphrase Calvin Coolidge, 1925
• The business of America is business.

3
Political Economy

• Laissez-Faire Let do
• Market Economy
• Command Economy
• State-Directed Economy

4
Political Economy Terms

• GDP
• Http//www.bartleby.com/151/a62.html
• Recession
• Unemployment Rate
• Why so important?
• Inflation
• Stagflation

5
Congress and Fiscal Policy

• Fiscal Policy
• Economic policies involving taxing, spending, and
  deficit levels.
• Mandatory Spending
• Minimum Wage

• 16th Amendment
• Progressive Taxation
• Ability-to-Pay Principle
• Regressive Taxation
• Proportional Taxation

6
Balanced Budget

• Government budget in which expenditures
  revenues are equal, so that no deficit or surplus
  exists.

7
In TexasBalanced Budget Requirement

• Biennial
• 2001, Texas had a 10 billion deficit.
• No taxes were raised, but
• Should we have a balanced budget amendment for
  the federal govt.?

8
If you dont balance the budget you get

• Deficit Spending
• When govt. expenditures exceed govt. revenue.
• National Debt
• Total current debt owed by the federal
  government 6.9 trillion.
• http//www.brillig.com/debt_clock/
• http//www.budgetsim.org/nbs/shortbudget04.html
• How do you finance the debt?
• Bonds
• Treasury Department Secretary John Snow

9
Federal Receipts

• http//a255.g.akamaitech.net/7/255/2422/02feb20041
  242/www.gpoaccess.gov/usbudget/fy05/pdf/hist.pdf
• http//www.truthandpolitics.org/2004-outlays-summa
  ry.php

10
Federal Outlays

• Tax Burden in US
• Tax Burden in Texas
• http//www.cppp.org/products/fastfacts/txgovt.html
  
• Comptroller States chief tax collector,
  auditor.

11
Texas Political Economy

• State Revenues
• Federal Funds (29)
• Sales Tax (28)
• Licenses
• Fees Fines
• Land
• Lottery
• Local Revenues
• Property Tax

• State Expenditures
• Education (44)
• Health and Human Services (30)
• Business and Economic Development (12)
• Public Safety and Criminal Justice (8)

12
Income Tax in Texas?

• Yes
• A broad-based tax structure helps alleviate the
  pressures of a recession.

• No
• Not having an income tax spurs business
  investment in Texas.

13
Monitoring the Economy

• Federal Reserve Board (the Fed)
• Independent agency of the executive branch
  charged with overseeing the nations monetary
  policy.
• Chairman Alan Greenspan

14
Economic Theories

• Keynesian Theory
• Fight recessions/ unemployment by
• Increasing government spending
• Incurring government deficits.
• Fight inflation by
• Curtailing government spending
• Take in a tax surplus.

• Supply-Side Theory
• Government taxing spending are detrimental to
  growth
• Tax cuts allow entrepreneurs to invest their tax
  savings, which creates higher productivity, jobs
  and profits.
• Allows the entrepreneur his new workers to pay
  even more taxes, even at lower rates.
• Laffer Curve