Congress and Economic Policy

Congressional Powers

Enumerated Powers

• Defined: Powers explicitly granted to Congress in the Constitution.

• Examples:

  • Borrowing money.

  • Regulating interstate commerce and foreign nations.

  • Coining money and collecting taxes.

  • Establishing post offices and post roads.

  • Declaring war - Article I, Section 8

  • Raising and supporting armies.

  • Creating and passing a budget - Article I, Section 7

  • Raising revenue - Article 1, Section 8

Implied Powers

• Defined: Powers not explicitly listed but inferred as necessary to carry out enumerated powers.

• Source: Necessary and Proper Clause (Article I, Section 8).

• Examples:

  • Creating a national bank to levy taxes and coin money.

  • Calling a draft to declare war and raise armies.

  • Creating the IRS to collect taxes.

  • Creating a national minimum wage using the commerce clause.

  • Congressional oversight and hearings.

  • Legislation on healthcare (general welfare) (collective taxes).

  • Regulating firearms using the commerce clause.

Power of the Purse

• Defined: Congress's ability to control government spending and revenue.

• Origination: Revenue bills must originate in the House - Article I, Section 8

• Accountability: The receipts and expenditures of all public money should be registered from time to time.

Economics

Fiscal Policy

• Defined: The government’s ability to tax and spend.

• 16th Amendment established the federal income tax.

• Congress created the IRS.

• Budget Process:

  • The President initiates the budget process in consultation with the Office of Management and Budget.

  • Congress passes the annual budget in consultation with the Congressional Budget Office.

  • The budget process has become increasingly partisan.

• Tax Systems:

  • Progressive tax: An individual’s tax rate increases as their income increases.

  • Flat tax: The individual’s tax rate is the same as all other individuals, regardless of income.

• State Income Taxes:

  • More populous states tend to have higher income tax rates because the state governments have to spend more money on public utilities.

  • Therefore, more revenue is needed to pay for these necessities.

Monetary Policy

• Defined: How the government manages the supply and demand of its currency and the value of the dollar.

• Inflation: Too many dollars in circulation leads to rising prices and the devaluation of the dollar.

• Federal Reserve System:

  • Congress created the Federal Reserve System in 1913.

  • Structure: Board of seven governors appointed by the president and approved by the Senate.

  • Purpose: Created to insulate economists from political pressures.

  • Responsibilities: Sets monetary policy, determines money supply, interest rates, and the discount rate.