12.1

Party Ideology

Objective: Describe the different ideologies of the Republican & Democratic Parties.

Introduction

• u.s is a diverse society with public policies reflecting citizen attitudes

  • policymakers must balance competing ideologies due to the diversity of the population

  • preferences vary between policies emphasizing order and stability versus those promoting individual liberties

  • social and economic issues, such as welfare policies and immigration reform, reflect party differences

• party ideology: a party’s philosophy about the proper role of government and its set of positions on major issues

• party identification: an individual’s attachment to a political party

• republican party: associated w/ conservatism

  • conservatism: an ideology favoring more control of social behavior more, fewer regulations on businesses, and less government interference in the economy

  • republicans favor liberty in business, pro-life, order in immigration, and strong punishments for criminal offenders

  • republicans support tax cuts for businesses, fewer business regulations, and individual property rights

• democratic party: associated w/ liberalism

  • liberalism: an ideology favoring less government control over social behavior and more greater regulation of businesses and of the economy

  • democrats prioritize sexual and marital privacy, pro-choice, support less strict immigration policies, and civil liberties when determining criminal sentences

  • democrats favor tax increases for the wealthy, more business regulation, and restrictions on property use for community protection

• libertarianism: an ideology favoring very little government regulation and intervention

• beyond protecting private property and individual liberty

  • not the same as liberalism!!!!

• party ideology and identification are distinct, influenced by various factors such as family, education, and life experiences

• parties attract members by focusing on issues and policies aligned with specific ideologies

  • both parties display partisanship, emphasizing ideological contrasts and criticizing opponents

• right: something guaranteed, that the government cannot take away

• privilege: something a person may obtain or receive, but that the government can take away

12.2

Ideology & Economic Policymaking

Objective: Describe liberal and conservative perspectives on economic policymaking.

Government Intervention in the Economy

• 1776: adam smith wrote a book advocating for a free-market economy

  • smith argued that national economic prosperity is best achieved through individuals freely pursuing their economic interests in a competitive marketplace

  • laissez-faire economy minimizes government intervention in economic transactions, allowing individuals and businesses to operate freely; means "let us do it" or to leave alone

• governments have historically intervened in the economy for broad policy goals (ex. building the transcontinental railroad in 19th century)

  • command-and-control economy: economic policy in which government dictates much of a nation’s economic activity, including the amount of production and price for goods

    • u.s.s.r used command-and-control practices until its collapse in the early 1990s

    • china transitioned to a mixed market system in the 1980s

    • u.s. has a mixed economy, where individuals and businesses make many economic decisions, with government regulations in place

Monitoring the Health of the Economy

• gross domestic product (GDP), unemployment rate, & inflation rate are key indicators monitored by the federal government to assess the health of the economy

  • gdp: the total value of goods and services produced by an economy

    • decline or stagnation in GDP may signal an economic recession

      • economic recession: a period of decline in economic activity, typically defined by two consecutive quarters of negative GDP growth

  • unemployment rate: the percentage of people actively looking for work who cannot find jobs

  • inflation: the rise in the prices of goods and services

    • consumer price index (CPI):the cost of a fixed basket of goods and services over time, used to measure the cost of living

    • inflation can impact workers' purchasing power, and programs like social security may adjust based on changes in the CPI

  • often a trade-off between inflation and unemployment

    • republicans: usually more willing to accept higher unemployment for lower inflation

    • democrats: may tolerate inflation to reduce unemployment

Business Cycles & Theories of Economic Policymaking

• policymakers have diverse perspectives on defining and solving economic problems

  • even when they acknowledge an economic issue, policymakers may differ in explaining its causes and proposing solutions

• "business cycle": term used by economists to describe the cyclical nature of economic activity

  • despite a generally upward trend in positive GDP growth, economies may still experience periods of contraction and expansion

• monetary theory: gov’t should control the money supply to encourage economic growth and restrain inflation

Keynesianism

• keynesianism: the government can use monetary & fiscal policies to stabilize the economy and prevent recessions

• keynes, in his influential work ("the general theory of employment, interest, and money" (1936)), provided a theory of business cycles

  • published during the great depression

  • keynes argued that individual decisions regarding saving and spending drive business cycles

    • expansion: people get too confident, make risky investment decisions, making the economic boom worse

    • contraction: people get too pessimistic, cut spending and investment, making it worse and possibly leading to an economic depression

• keynes advocated for government intervention to counterbalance economic contractions by injecting more money into the economy

  • democrats often support keynesian policies, exemplified by the creation of public works projects during the great depression as part of the new deal

  • during the 2007–2009 recession: president obama proposed a massive public works project with the goal of creating 2.5 million jobs

Supply-Side Theory

• supply-side theory: emphasizes the demand for goods & services and the role of supply in fostering economic growth'

  • proposes lower taxes on individuals and businesses as the most effective tool to combat economic downturns

  • contrastst keynesian theory

  • often associated with "reaganomics”

• critics of supply-side theory use the term "trickle-down economics" to describe it

  • they argue that these policies primarily benefit the wealthy, and the benefits are unlikely to reach individuals not directly impacted by lower tax rates

• proponents argue that excessive taxation hampers economic growth by impeding business development

• republicans have generally supported supply-side economics

• december 2017: trump administration successfully enacted legislation to cut individual and business taxes to boost economic growth

• fiscal policy: government use of taxes and spending to attempt to lower unemployment, support economic growth, and stabilize the economy

Guiding the Nation’s Economy through Taxing & Spending Decisions

• republicans often support budgets that increase military spending and decrease taxes

  • ex. the bush tax cuts (2001 and 2003) reduced income tax rates for wealthy americans and those with below-average incomes, while military spending increased for the wars in iraq and afghanistan

• president obama's fiscal policy focused on tax increases for the wealthiest americans and government spending programs to stimulate the economy

• president trump's federal budget for 2018 projected a budget deficit exceeding $1 trillion

  • deficit was mainly due to a combination of tax cuts and increases in military and defense spending

• although democrats & republicans differ on how to use taxing and spending to influence the economy, managing the budget is challenging

  • deficits are likely to persist well into the future

12.3

Monetary Policy

Objective: Describe monetary policy and how the Federal Reserve uses the money supply to regulate the economy.

Introduction

• primary driver of monetary theory and business cycles is supply of money in an economy, including available credit for borrowing

  • more money availability can lead to inflation - too much money chasing too few goods

  • monetarists oppose fine-tuning the economy through Keynesian or supply-side policies

    • they advocate matching money access to economic productivity growth

• monetary policy can have powerful and destructive effects.

  • countries in financial distress may print money without financial backing

• germany, austria, and hungary post-ww1 misused monetary policy, leading to hyperinflation

  • people needed sacks of currency to buy food.

• monetary chaos in societies can lead to anarchy, violence, and political extremism

  • ex. hyperinflation in germany contributed to the rise of fascism before ww2

Federal Reserve System

• federal reserve system: a board of governors, federal reserve banks, & member banks responsible for monetary policy

  • consists of a 7-member panel of governors, 12 regional federal feserve banks, and 6000 member banks

  • governors appointed by the president, confirmed by the senate, serving nonrenewable fourteen-year terms (except the chair, who serves a four-year term)

    • governors, except for cause, cannot be removed, providing some independence in economic decisions

• the fed regulates the amount of money in the economy w/ 3 main tools:

  • buying and selling treasury securities

  • setting reserve rates, impacting the amount of money banks can loan

  • influencing interest rates banks pay to borrow from the federal government

• lowering the federal funds rate stimulates the economy by encouraging borrowing with lower interest rates

  • actions of the fed influence interest rates throughout the economy as banks and credit card companies adjust their rates accordingly

• monetary policy: a set of economic policy tools designed to regulate the amount of money in the economy.

  • policies encourage healthy economic growth without causing damaging inflation and aim to prevent economic depression

    • ex. fed lowered interest rates in 2008 during the economic crisis to prevent a downturn similar to the great depression (1930s)

Challenges & Risks with Conducting Monetary Policy

• criticism of the fed:

  • questions about true independence, especially when pressured by congress or the president

  • disagreement with the Fed's goal of maintaining a "moderate inflation" around 2%

• inflaiton concerns:

  • critics argue that persistent moderate inflation undermines Americans' spending power if wages don't risk

    • 2% rise in the price of goods and services over time can have a significant impact

• despite criticism, international governments, financial firms, businesses, and individuals at home and abroad maintain confidence in the nation's currency

  • the american dollar remains strong against other nations' currencies

12.4

Ideology & Social Policy

Objective: Describe liberal and conservative perspectives on social policy.

Federal Government & Health Care

• medicare: a federal program that provides health insurance to seniors and the disabled

• 1960s: pres. LBJ’s great society program amended the social security act

  • creates medicare for senior citizens (age 65+)

• 1972: president nixon extends medicare benefits to the disabled

  • medicare: a federal program that provides health insurance to seniors and the disabled

• 2003: president George W. Bush adds prescription drug benefit to medicare

• social security and medicare constitute the largest part of the federal budget

  • they are expected to increase in the next decade, then level off in 2030

• political forces have expanded the government's role in health care

• 2016: total medicaid spending around $553.5 billion

  • late 20th & early 21st centuries: both parties agree on the need for health-care system reform

  • 2012: u.s. has the highest medical care costs globally, spending $8,233 per person (more than 2.5 times the average in developed nations)

Patient Protection & Affordable Care Act

• 2010: approx. 48 million americans were uninsured, leading to the signing of the affordable care act (ACA) on March 23, 2010, by pres. obama

  • obamacare aimed to overhaul the american health-care system.

• key ACA provisions included:

  • employer health insurance requirements

  • individual mandates

  • medicaid expansion

  • health-care exchanges

  • coverage for young adults up to age twenty-six

  • prohibition of excluding preexisting conditions

• implementation challenges included website navigation issues, and by 2015-2016, some insurers raised premiums or left the ACA program

  • despite challenges, over 16 million americans obtained health-care coverage post-ACA

• republican attempts to overturn ACA during obama's second term were unsuccessful

  • supreme ccourt upheld the individual mandate and tax credits in 2012 & 2015

• ACA represents a study in liberal and conservative ideologies on health care, with debates over individual mandates, government involvement, and market forces

  • liberals: support widespread health care, arguing it should be available to all

  • conservatives: oppose ACA, favoring individual responsibility and market-driven health care

• republicans (including pres. trump) succeeded in eliminating the individual mandate through tax overhaul

  • they still seek further ACA repeal, claiming interference with the free market

School Choice, Competition, & the Markets

• republicans and democrats differ ideologically on public education reform, particularly on school-choice initiatives

• school-choice reforms allow parents to select their children's schools, fostering competition among schools

  • advocates (not all conservative) support vouchers, using taxpayer money for private and religious school tuition, blurring public-private school lines

    • argue vouchers promote competition, improving standards in traditional public schools and benefiting those not using vouchers

  • pponents fear draining funds from public schools, creating winners and losers

    • argue supporting religious schools violates the establishment clause

• school-choice debate reveals ideological tensions between equality of opportunity and support for individualism and the free market