Download Chapters 17-18

Students, what are the
three types of public
policies?
•Distributive policies—target benefits to
very narrowly defined groups or individuals
•Redistributive policies—transfer
resources from one group or class to
another
•Regulatory policies are targeted at a
group or class of groups
So, why must the
government be
continuously involved in
keeping the economy on
the right path?
Natural problems of the business cycle
The hardships they create for nearly
everyone
Examples: demands that political leaders
do something about job shortages,
housing issues and the stock market
What tend to be the 6 goals of a
president’s economic policy?
Economic growth—increase in GDP
Control inflation
Positive balance of payments
Maintain budgetary discipline
Minimization of negative externalities
Provide firm economic foundations
Mine were better than Bush’s
were!
We presidents all have fiscal
policies. What are some of the
political issues associated with
them?
I am Ben Bernanke, the
Chairman of the Board of the
Federal Reserve Board of
Governors. What is our role
in creating the monetary
policy of the United States?
Federal Reserve Board is
responsible for monetary policy
Determines how much money is available
to businesses and individuals from
financial institutions; can increase or
decrease the money supply
More money: lower interest rates & more
consumer spending
Less money: higher interest rates & less
consumer spending (more savings)
Someone please define
macroeconomic
policy, fiscal policy and
monetary policy.
Macroeconomic policy is policy that
affects the performance of the economy
as a whole.
Fiscal policy pertains to government
efforts to affect overall output and
incomes in the economy through spending
and taxing policies
Monetary policy pertains to government
efforts to affect the supply of money and
the level of interest rates in the economy
Keynesians (John M. Keynes)
Government intervention in
the economy
If tools of production are not
being used to full capacity
(most of the time), government
must increase spending and/or cut taxes
Liberal Democrats
Monetarists (Milton Friedman)
Federal Reserve Board should
confine its activity so that it
closely tracks the growth in
productivity in the economy as
a whole, stimulating slow but
steady economic growth without inflation
Balanced federal budgets are
crucial
Conservative Republicans
The Federal Budget
Here is a good graphic
showing the magnitude of
the Federal Budget
Note the size of the national
debt
The U. S. Budget Process (p. 565)
For FY 2015
Feb-Mar 2013: President formulates
general budget and fiscal guidelines
Late Spring 2013: OMB issues
specific budget guidelines for federal
departments and agencies
Aug-Oct 2013: Executive branch
departments and agencies submit
budget proposals to OMB. OMB
reviews and directs refashioning
The U. S. Budget Process (p. 565)—p. 2
For FY 2015
Oct-Dec 2013: OMB formulates
department and agency budgets for
presidential review
Late Dec 2013: Following presidential
feedback, OMB prepares data and
final budget documents
First Monday in Feb 2014: President
submits budget to Congress (coincides
with State of the Union Address)
The U. S. Budget Process (p. 565)—p. 3
For FY 2015
15 Feb 2014: Deadline for CBO to make
recommendations to House and Senate
Budget Committees on overall shape of
budget
Mar 2014: Standing committees send
budget estimates to Budget Committees
1 Apr 2014: Deadline for House and
Senate Budget Committees to issue
a budget resolution on overall spending
ceilings, revenues and fiscal outlook
The U. S. Budget Process (p. 565)—p. 4
For FY 2015
15 Apr 2014: House and Senate
concurrent budget resolutions—guidelines
for committee and subcommittee actions
Mid-Apr to end of June 2014: House and
Senate authorization committee actions
House and Senate Appropriations
Committees consider 13-14 appropriations
bills and mark up for floor action
30 June 2014: Deadline for House
appropriations bills
The U. S. Budget Process (p. 565)—p. 5
For FY 2015
July to 15 Sep 2014: Senate completes
action on appropriations bills; HouseSenate conference committees meet to
iron out differences; Full House and
Senate vote up or down on conference
reports
25 Sep 2014: Deadline for second
concurrent resolution on overall budget,
specifying total spending in all bills, etc.
The U. S. Budget Process (p. 565)—p. 6
For FY 2015
July to Sep 2014: President signs
appropriations bills after passed by both
houses of Congress
1 Oct 2014: Fiscal Year 2015 begins
Students, how much did
the federal government
spend in 2010?
$3.7 trillion, about 25% of the GDP
Why has federal
government spending, as
a percentage of the GDP,
changed over the years?
1. Involvement in major wars—most
dramatic increases
2. Relative spending level increased
steadily 1930s to 1980s—decrease
due to decrease in defense spending
Please continue.
3. Wars in the Middle East and the
Medicare prescription drug program
4. Combination of massive stimulus
spending, contraction of GDP, and
falling tax receipts
Students, what is mandatory
spending?
The largest portion of the federal budget,
over which Congress and the president
exercise little real control (many are
entitlements such as Medicare and
Social Security)
Students, discuss
discretionary spending in
the 2010 federal budget.
Money not tied to a formula that
automatically provides money to some
program or purpose
61% in 2010: national defense
$719 billion—19% of total federal budget
$42 billion to homeland security
18%--all other federal programs
U. S. federal tax system contrasted with
tax systems of other wealthy world
democracies
Relatively low as a proportion of GDP
Taxes as a percentage of incomes has
been relatively constant for 30 years
Why is the American tax
system “uniquely complex?”
U. S. Tax Code is a
voluminous document
Numerous loopholes and exceptions to
rules and special treatment to certain
individuals and other entities
Few people understand the Tax Code
Progressive taxes—higher income people
are taxed at a higher rate
Regressive taxes—lower income
individuals are taxed at a higher rate
because taxes take a higher percentage
of their income (sales taxes)
U. S. tax system is relatively flat: most
people in the U. S. pay about the same
percentage of their income in taxes
OK, what
the U.OK,
S.
Wow!
I didwas
that???
government’s
budget
so
what is the national
deficit in 2010?
debt?
The 2010 budget deficit was $1.6 trillion
It is the total of what the government
owes in the form of Treasury bonds,
bills, and notes to American citizens and
institutions, foreign individuals and
institutions, and to itself.
Finally in this chapter, what
are government regulations
and why does the
government make and
enforce them?
Government regulations are
rules by government agencies
with the aim of reducing the scale of
negative externalities produced by private
firms. Private businesses and institutions
have difficulty solving many negative
externalities; it falls to government to
solve them
In many ways we
Republicans favor
deregulation. What is that?
The attempt to loosen the
hand of government in
a variety of economic
sectors including banking
and finance, transportation,
and telecommunications.
Why is the United States considered
an economic superpower?
Annual GDP: $14.3 trillion (equal to the
COMBINED economies of the next
four largest economies in the world)
Three times larger than China
First in the world in total imports
U. S.-headquartered companies are
prominent internationally
U. S. corporations increasingly global
Also, since the 1930s, the U. S. has
pursued the goal of establishing free
and open trade with the other nations
of the world.
Sometimes the
U. S. has used a
trade embargo
to punish
nations that
are involved in
actions or
policies with which the U. S. government
does not agree (South Africa, 19851991)
My dad and I
are both proud
to have
served in the
U. S. military.
What factors
make U. S.
military power
preeminent?
The U. S. armed forces are the most
powerful armed force in the world
Defense Budget: 6 x greater than Russia
9 x greater than China
12 x greater than UK
The U. S. defense budget is greater than
the combined spending of the next 25
largest national defense spending
nations
1.4 million active military
Naval, air and ground warfare capabilities
are unrivaled.
Electronic warfare
capabilities unrivaled
Strategic force: 1000
missiles/6000 nuclear
warheads (submarine
& ICBM)
Only nation with
permanent and often
sizeable military bases in every part of the
world
Example: Bosnia
“Only the U. S. military could get the
situation under control.”
U. S. forces stretched thin: Janston: 1 tour in
Iraq, one in Afghanistan; Niki: 1 tour in Iraq,
one in Qatar; Peter: 1 tour in Afghanistan;
Benny: in 2nd year of life, Mommy & Daddy
together only 6 weeks.
Why is the U. S.
military clearly
overstretched?
Partly the result of decreasing the size of
the military—2 million in early 1990s to
1.6 million in 2009
Multiple deployments with significant
psychological affects on military
personnel and their families
Why is combating terrorism a
significant challenge?
Terrorist is not a
country
Loosely organized
shadow cells
U. S. military cannot control events in
major oil-producing countries
Resourceful enemies using asymmetric
warfare tactics and weapons
American “soft power”
Cultural power of the United States
McDonalds
KFC
Theme parks
Hollywood movies
T. V. sitcoms
Example: anorexia in Fiji
Soft power is the attractiveness of a
nation’s culture, ideology and way of
life for people living in other countries
Example: English is the language of
business, the Internet, science, air travel
Throughout U. S. history, the basic goals
of U. S. foreign policy have remained
somewhat constant:
Maintain national security
Support democracy
Promote world peace
Provide aid to people
in need
Now we are going to
discuss contrasting
schools of thought
regarding using American
power.
For many years, the
foreign policy of the
U. S. was one of
isolationism—the view that the U.S.
should tend to domestic affairs rather
than get involved in international
affairs.
Unilateralists, believe that the U. S. should
“go it alone” in foreign affairs
The U.S. should act on its own
terms and use U. S. power
unilaterally
That was the way I did
business!!!
An alternative view is the internationalist,
or multilateralist, view: the belief that the
U. S. should take an active role in
international affairs to promote U. S.
Interests, but cooperate and collaborate
more with other nations
Internationalists believe that the U.S.
should try to gain allies that are
militarily strong and strategically
located
U. S. foreign policy since World War II
has been more internationalist
Throughout U. S. history, there has
been general acceptance that the
president has been the government’s
leader in foreign relations.
Some presidents have set foreign policy
through doctrines such as the Monroe
Doctrine (1823), the Roosevelt Corollary
(to the Monroe Doctrine), and the Truman
Doctrine.
Other presidents have conducted
foreign relations and made foreign
policy through summit conferences.
Examples of summit conferences are:
President Franklin Roosevelt’s Big 3
Conferences during World War II,
the Nixon-Brezhnev Summits (1970s),
and The Reagan-Gorbachev Summits
(1980s)
Now we are going to tell you
some of the highlights of U. S.
foreign policy history.
Since our beginning as a
nation, we’ve pretty much
always sought to trade with
foreign countries. But, I was
for being neutral in
international conflicts and I
cautioned Congress to not get
involved in European affairs.
Now we are going to tell you
some of the highlights of U. S.
foreign policy history.
The Monroe Doctrine of 1823
Highlights in U. S. Foreign Policy
The Spanish-American War of 1898—the
U. S. emerges as a world power
Highlights in U. S. Foreign Policy
The Roosevelt Corollary and the Great White
Fleet (1907).
Highlights in U. S. Foreign Policy
World War I (1917-18)—the U.S. becomes
a major player in world affairs but also
retreats back into isolationism
President Wilson takes a leading role
in the Versailles Peace process and
creates the League of Nations
Highlights in U. S. Foreign Policy
World War II (1941-45)—the U. S. leads
the effort to defeat the Axis Powers and
emerges, with the Soviet Union, as one of
the two most powerful nations in the world.
The U. S. emerges from a policy of
isolationism and becomes a leader in
the development of the United Nations
Since World War II, the U. S. has also
engaged in a foreign policy based on
providing foreign aid to other nations,
entering into defense alliances and
participating in international
organizations
Foreign Aid:
The Marshall Plan:
1948-1952,
$13 billion
16 W. Eur. Countries
President Truman
Secretary of State George C. Marshall
Foreign Aid
U. S. Agency for International
Development—part of State Department—
responsible for implementing foreign
aid
1961 President John F. Kennedy
Initiates the Peace Corps
Highlights in U. S. Foreign Policy
The Cold War: 1947-1989
The Truman Doctrine of containment
The Korean War (1950-53)
Eisenhower &
Kennedy:
Mutually Assured
Destruction (MAD)
The Cuban Missile Crisis (1962)
Highlights in U. S. Foreign Policy
Détente (relaxation of cold relations)
1972-early 1980s
Highlights in U. S. Foreign Policy
Glastnost (openness), perestroika
(economic restructuring) and the fall of
the Soviet Union, ending the Cold War
Reagan policies counter Soviet military
build-up; USSR becomes an economic
basket case. Mikhail Gorbachev signs
several treaties with Reagan and Bush
Highlights in U. S. Foreign Policy
G. H. W. Bush, Clinton and G. W. Bush
make U.S. the world’s policeman
G. H. W. Bush: Panama, Desert Storm
and Somalia
Clinton: Bosnia-Herzegovina & Haiti
G. W. Bush: War on Terror & Iraq
Notable alliances—collective security
The North Atlantic Treaty Organization
(NATO)—1949 multilateral treaty for
collective security against the Soviet
Union and the Warsaw Pact
International organizations for
peaceful resolution of international
differences
Since 1945, the U. S. has been a member
of the United Nations
One of 5 permanent members of the
Security Council with the power to
veto any resolution
Threats to American security today
Terrorism
Weapons of Mass
Destruction
•Aid to >100 countries
•Contributions to various U. N. development funds
•About $15 billion per year
•Most aid to a few countries considered of
strategic importance: Israel, Egypt, Ukraine,
Jordan, India, Russia, South Africa, Haiti
•Much of what is considered
foreign aid is actually spent in
the US where it pays for the
purchase of American services
and products being sent to
those countries
Now we are going to discuss
how the U. S. government
makes foreign policy.
Since the beginning of our
nation, the President and the
Executive Branch have had
the main role in formulating and
executing foreign policy.
The role of Congress is funding,
oversight and Senate approval of
treaties. The Judiciary traditionally
has only a minimal role in foreign
policy.
The key people in making U. S.
foreign policy are
the president (B. Obama)
The Vice President
(J. Biden);The
Secretary of State (H. Clinton),
the Secretary of Defense (L.
Panetta) , the Director of Central
Intelligence (D. Petraeus) and the National
Security Advisor (T. Donilon)
The primary cabinet department
responsible for foreign affairs is the
Department of State
The State Department maintains
diplomatic relations with about 180
countries throughout the world as well
as the United Nations and several
international organizations.
I am CIA director David
Petreaus. What is the role
of my agency?
Role: coordinate and integrate
intelligence products of the State
Department’s Bureau of Intelligence
and Research, the Defense Intelligence Agency (which
combines the intelligence operations of the Army, Navy,
AF and USMC), the National Security Agency (electronic
recon and code breaking), super secret National Reconnaissance Office (satellite intelligence programs), FBI,
and other agencies
John, what
is the role of
Congress in
foreign
affairs?
Nancy, it is
mainly
consultative.
•Has taken the initiative in some trade and foreign
economic and military assistance questions
•Is authorized to define the limits of presidential warmaking powers
•Budget-making powers
•Investigative powers
•Congress is often divided on a number of issues
Now we are going to
spend a few minutes
discussing my
department, the
Department of Defense.
Hey, I used to work there.
The Department of Defense (DOD)
employs 800,000 civilians and 1.4
million members of the armed forces.
James Madison here.
You may recall that
when my fellow
Founders and I wrote
the Constitution, we
feared a military that
was too strong.
Therefore, the U. S. military is led by
civilians: the president, the Secretary of
Defense, the Under Secretary and the
service secretaries (Army, Navy & A. F.)
Working under the civilian leaders,
the most senior military officers
comprise the Joint Chiefs of Staff—fourstar officers
Chairman (GEN Martin Dempsey, USA)
Vice Chairman (ADM James Winnefeld)
Chief of Staff, Army (GEN Odierno)
Chief of Naval Operations (ADM Greenert)
Commandant, USMC (GEN Amos)
Chief of Staff, USAF (GEN Schwartz)
Chief NGB (GEN McKinley)
The armed forces provide the “muscle”
to help the president carry out his or
her foreign policy.
When should the U. S. become involved
militarily in a regional hot spot or situation?
The (Caspar) Weinberger Six Tests
1. Is the engagement or occasion vital to
our national interest?
2. The commitment should only be made
with a clear intention of winning
3. It should be carried out with clearly
defined political and military objectives
4. It must be continually reassessed and
readjusted if necessary
5. It should have the support of the
American people
6. It should be a last resort
Students, I am former Secretary of
State, Colin Powell. The textbook
says I had a philosophy known as
the Powell Doctrine. I actually
adopted that doctrine from one held
by my former boss, President
Reagan’s Secretary of Defense,
Caspar Weinberger.
When the US goes to war, it should be for a
clear purpose, only when our vital national
security interests are threatened and our goal
should be overwhelming victory
The U. S. Catholic Bishops and Just-War
Criteria (Jus ad Bellum)
1. Just cause
2. Made by competent authority
3. Comparative justice—which side is
sufficiently right and are the values at
stake critical enough to warrant war
(justify killing)?
4. Right intention
5. Last Resort
6. Probability of success
7. Proportionality—costs must be
proportionate to the good expected
(today in the international community)