Download Modern US Economics

Modern U.S. Economics
Reaganomics v Keynesian
Today’s Objective
 Analyze opposing opinions on the role that government plays
in the life of the people through economic policy.
The Role of Government
 National Security
 Public Education
 Public Safety
 Economic Stability?
National Security
 The Government should maintain a military that can protect
and defend us against threats, “foreign and domestic.”
Public Education
 There is much debate these days over whether or not the
Government should have such a heavy hand in public
education as they do now.
 If the Government pulled out of the business of providing
public education, what would happen to Wingfield?
Public Safety
 The Government should make laws that discourage crime
and maintain a police force to enforce those laws and keep
order.
Economic Stability
 How much of this is the role of the Government?
 In different situations the government plays a role in
maintaining the stability of the American economy.
 How much of this is the role of the People?
 The people should be proactive in making economic progress
for themselves and their communities.
Two Differing Opinions on the Role of
Government in the economy.
Reaganomics
 Ronald Reagan
 U.S. President(1981-1989)
 Believed that government
should get out of the way
of business so that it can
thrive on its own.
Keynesian
 John Maynard Keynes
 Economist (1883-1946)
 Believed that private
business decision has a
negative impact on the
economy that requires
Government intervention.
Reaganomics
 Reaganomics takes a Laissez Faire stance on the
economy.
 The idea is that Government should get out of the
way of business and allow them to grow and
produce.
 The Government lowers income tax so that
people have more money to spend.
 Deregulation of businesses is a major pillar of
Reaganomics.
 Trickle Down Theory
Potential Problem with Trickle Down Economics
-Corporations may maximize profits at the cost of jobs and wages.
George H.W. Bush and his son George W. Bush tried to emulate
Reaganomics in their own administrations.
George H.W. Bush
 Continued Reaganomics
 George H.W. Bush was
President when the
economic boom of the
1990s began.
 This boom continued
as Bill Clinton
bridged the gap
between Democrats
and Republicans in
Government.
George W. Bush
 George W. Bush was
President when that
economic boom crashed.
 The same deregulation of
businesses that led to the
economic boom of the
1990s led to the steady
decline during the 2000s.
o Major corporations
used questionable
business practices that
led to a breakdown in
U.S. economic
structure.
Keynesian
 John Maynard Keynes
 Economist (1883-1946)
 Believed that private business decision has a negative impact
on the economy that requires Government intervention.
Keynesian Economics
 Keynesian Assumes that private sector
businesses will make decisions(take risks) that
lead to inefficient outcomes in the overall
economy.
 These outcomes will require a government
response in policy to guide the economy.
 That response comes in the form of stimulus
and regulation of business to ensure fair
practices.
The Keynesian Model
CONSUMERS(People) do work and make moneyThey spend that
money in the ECONOMY and are taxedThe GOVERNMENT then
spends tax dollars to fulfill its role in maintaining the welfare and stability
of the country.
Examples of Keynesian
FDR and the New Deal
 FDR’s response to the
Great Depression was the
New Deal
 Roosevelt developed new
policies and government
initiatives to supplement
the economy in a time of
great need.
Barack Obama
 Obama entered office
during a period of
economic recession in
America.
 He has also used the
Keynesian model to
provide relief to the
economy.
Obama’s use of Keynesian
 The American Recovery and Reinvestment Act of 2009
distributes funds in three ways. Since its enactment in
February 2009, $750B has been paid out.
 Tax Benefits= $299.8 Billion
 Contracts, Grants and Loans= $228.0 Billion
 Entitlements(S.S., Medicare, Medicaid)= $222.2
Billion
Potential Pitfalls of Both
Reaganomics
 Big businesses may take
Keynesian
 Huge government
advantage of deregulation
and tax cuts.
spending can result in
massive national debt.
 This can cause instability in
 If economic growth does
the market if huge
companies fail.
 What happens to the
unemployment rate and
wages if the money saved
on taxes does not “Trickle
Down”?
not match government
spending then we become
more of a debtor nation
than a leader.
 Also, more power for the
government can result in
less power for the people.