Economic and Economic and Environmental Policy: Environmental Policy:

Contributing to ProsperityContributing to Prosperity

Chapter 15Chapter 15

Government as Regulator Government as Regulator of the Economyof the Economy

Efficiency through government interventionEfficiency through government interventionPromoting competitionPromoting competitionMaking business pay for indirect costsMaking business pay for indirect costsDeregulation and underregulationDeregulation and underregulation

Equity through government interventionEquity through government interventionThe politics of regulatory policyThe politics of regulatory policy

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The Main Objectives of The Main Objectives of Regulatory PolicyRegulatory Policy

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Opinions on the EnvironmentOpinions on the Environmentand Economic Growthand Economic Growth

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Government as Protector Government as Protector of the Environmentof the Environment

Conservationism: the older waveConservationism: the older waveEnvironmentalism: the newer waveEnvironmentalism: the newer wave

Environmental protectionEnvironmental protectionGlobal warming and energy policyGlobal warming and energy policy

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Average Temperature of the Average Temperature of the Earth’s Surface, 1850-2010Earth’s Surface, 1850-2010

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Government as Promoter of Government as Promoter of Economic InterestsEconomic Interests

Promoting businessPromoting businessGovernment promotion of businessGovernment promotion of business

Government-provided loansGovernment-provided loansSpecial tax breaksSpecial tax breaksTraditional services: education, transportation, and Traditional services: education, transportation, and

defensedefense

Tax burden has shifted from business to Tax burden has shifted from business to individualsindividuals

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Government as Promoter of Government as Promoter of Economic InterestsEconomic Interests

Promoting laborPromoting laborNational Labor Relations Act of 1935National Labor Relations Act of 1935Minimum wageMinimum wageMaximum work weekMaximum work weekUnemployment benefitsUnemployment benefitsNondiscriminatory hiring practicesNondiscriminatory hiring practices

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Government as Promoter of Government as Promoter of Economic InterestsEconomic Interests

Promoting agriculturePromoting agricultureHomestead Act of 1862Homestead Act of 1862Farm programs to eliminate some farming riskFarm programs to eliminate some farming riskFederal payments account for more than a fourth Federal payments account for more than a fourth

of net agricultural incomeof net agricultural incomeAmerican farmers among the most heavily American farmers among the most heavily

subsidized in the worldsubsidized in the world

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Fiscal Policy as an Economic ToolFiscal Policy as an Economic Tool

Demand-side policyDemand-side policyJohn Maynard KeynesJohn Maynard KeynesGovernment spending to alleviate economic Government spending to alleviate economic

depression or recessiondepression or recessionCan result in budget deficit and increased national Can result in budget deficit and increased national

debtdebtGenerally preferred by Democratic lawmakersGenerally preferred by Democratic lawmakers

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Fiscal Policy: A Summary of the Fiscal Policy: A Summary of the Government’s RoleGovernment’s Role

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The Federal Budget Dollar,The Federal Budget Dollar,Fiscal Year 2011Fiscal Year 2011

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The Federal Budget Deficit/SurplusThe Federal Budget Deficit/Surplus

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Fiscal Policy as an Economic ToolFiscal Policy as an Economic Tool

Supply-side policySupply-side policyEmphasizes the business (supply) component of Emphasizes the business (supply) component of

the supply-demand equationthe supply-demand equationPresident Reagan’s and President George W. President Reagan’s and President George W.

Bush’s response to economic downturnBush’s response to economic downturnCan also increase deficitCan also increase deficitGenerally preferred by RepublicansGenerally preferred by Republicans

Controlling inflationControlling inflation

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The Annual Rate of Inflation, The Annual Rate of Inflation, 1979-20101979-2010

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Monetary Policy as an Monetary Policy as an Economic ToolEconomic Tool

The FedThe FedControl over money supplyControl over money supply

Raise or lower the cash reserve that member banks are Raise or lower the cash reserve that member banks are required to deposit with the Federal Reserverequired to deposit with the Federal Reserve

Raise or lower interest rate on member banksRaise or lower interest rate on member banks

The politics of the FedThe politics of the Fed

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Monetary Policy: A Summary of Monetary Policy: A Summary of the Fed’s Rolethe Fed’s Role

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