Unit 3; Political Ideology and Economic Policy

Monetary Policy

Economic policy is controlled by the Federal Reserve Board and regulates the money supply and interest rates to control inflation and keep the economy stable

• philosophical differences between liberals and conservatives about monetary policy have led to a division between Keynesian and supply-side economic theories.

Most conservatives support which economy?

Supply-Side Economics

Most Liberals support which economy?

Keynesian Economics

Supply-Side Economics

• belief that economic growth is best when the government encourages investment in the economy by private businesses, through lower taxes and less regulations that impact businesses

• believe that wealth will 'trickle down' from the wealthy because they will use their extra profits to expand their businesses, thus creating more jobs and higher wages for the workers who will in turn buy more products which increases demand and helps the business sector to grow

Keynesian Economics

• says when demand falls and recession occurs the government should increase spending and use fiscal policy to increase hiring and invest in public works programs that will help to spur growth in the economy

• putting money back into the hands of the populace and giving them the ability to continue to buy products, it should increase demand and lower unemployment

Why do these policies depend on who is president?

• President appoints the Chairman of the Federal Reserve and Board of Governors

• who sits on the Board and who Chairs the Fed can make a big difference in the choice of the philosophy which will guide their actions.  

Fiscal Policy

• The way the government uses taxation and government spending to support or improve the overall health of the American economy.

• The government raises revenue through taxation and then uses this revenue to fund the policies or programs that have been favored by the party in power

• monetary policy pursued by the Fed may not have as immediate and obvious an impact on you personally as fiscal policy can.

This tug of war over resources is really what governing is all about…

Who gets what, when and how

Libertarians

• believe in little or no government intervention in either the economy or the social issues of the day.  

• Libertarian's believe that the government should not interfere in your personal, family or business decisions.  

• They believe in low or no taxes, charitable welfare instead of government welfare, and getting rid of most government regulations that impact business.

The budget every year is split between…

Discretionary and Non-Discretionary

Lawmakers have some choices when making decisions about _________ spending

discretionary

Non-discretionary

spending that is required by law or has already been mandated by the government, such as entitlement programs like Social Security, Medicare, and Medicaid, interest on the national debt, and veterans' pensions.