1. Copyright © 2011 Pearson Education, Inc. Publishing as Longman

3. STEPS IN POLICY MAKING Agenda Building – policies are formulated to address problems/needs. Sources include interest groups, court cases, and government officials. Policy Formulation – when enough people agree that action is required, plans are formulated with input from all interested and affected parties. Compromise is key!!! Policy Adoption – the government takes action in the form of legislation, executive or bureaucratic order, or court order.

4. Copyright © 2011 Pearson Education, Inc. Publishing as Longman STEPS IN POLICY MAKING Policy Implementation - The government must now apply the policy to real-life situations. The public must be informed and a means of enforcement devised, including who enforces and the consequences for non-compliance. Policy Evaluation – Judging the good or bad of policies takes time. Effects are evaluated and adjustments may be made. It is a cyclical process that can be affected by partisan politics.

5. Government, Politics, and the Economy LO 17.1: Assess the role that government plays in our mixed economy. Capitalism Individuals and corporations own the principal means of production and seek profits. Mixed Economy Government is deeply involved in economic decisions as regulator, consumer, subsidizer, taxer, employer, and borrower. To Learning Objectives Copyright © 2011 Pearson Education, Inc. Publishing as Longman

6. Government, Politics, and the Economy Multinational Corporations Businesses with vast holdings in many countries. Products flow between regions and jobs move to regions where they can be performed more cheaply. LO 17.1 To Learning Objectives

7. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Government, Politics, and the Economy Economic Policy at Work: Wal-Mart “It’s the Economy, Stupid”: Voters, Politicians, and Economic Policy Two Major Worries: Unemployment and Inflation To Learning Objectives LO 17.1

8. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Government, Politics, and the Economy Economic Policy at Work: Wal-Mart World’s 3 rd largest company with $406 billion in revenue in 2009. It has low prices – Negotiates with suppliers and has low wages. In U.S., it helps keep inflation rate low and had 12% of all productivity growth in 1990s. To Learning Objectives LO 17.1

9. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Government, Politics, and the Economy Economic Policy at Work: Wal-Mart (cont.) Securities and Exchange Commission (SEC) – Federal agency regulates stock market. Buyers of Wal-Mart stock are entitled to accurate knowledge from the company, and Wal-Mart is required to hire an auditor and publish an annual review. To Learning Objectives LO 17.1

10. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Government, Politics, and the Economy Economic Policy at Work: Wal-Mart (cont.) Minimum wage – The legal minimum hourly wage to which most workers are entitled. Wal-Mart’s employees are entitled to a minimum wage of $7.25 per hour. To Learning Objectives LO 17.1

11. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Government, Politics, and the Economy Economic Policy at Work: Wal-Mart (cont.) Labor union – An organization of workers intended to engage in collective bargaining. Collective bargaining – How labor union representatives and management negotiate pay and acceptable working conditions. To Learning Objectives LO 17.1

12. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Government, Politics, and the Economy Economic Policy at Work: Wal-Mart (cont.) Wal-Mart workers are protected by regulations governing worker safety and hiring and other employment policies. Wal-Mart cannot discriminate on the basis sex, race, or age in hiring, firing, and promotions. To Learning Objectives LO 17.1

13. Copyright © 2011 Pearson Education, Inc. Publishing as Longman To Learning Objectives LO 17.1

14. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Government, Politics, and the Economy Economic Policy at Work: Wal-Mart (cont.) Most of the merchandise in Wal-Mart comes from other countries. In 2002, Wal-Mart is estimated to have imported $12 billion in goods from China, one-tenth of China’s total 2002 U.S. exports. Wal-Mart’s low costs have forced many factories to move overseas. To Learning Objectives LO 17.1

15. Copyright © 2011 Pearson Education, Inc. Publishing as Longman To Learning Objectives LO 17.1

16. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Government, Politics, and the Economy “It’s the Economy, Stupid”: Voters, Politicians, and Economic Policy Economic conditions are the best single predictors of voters’ evaluation of the president. Democrats stress the importance of employment, and Republicans stress importance of inflation. To Learning Objectives LO 17.1

17. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Government, Politics, and the Economy Unemployment and Inflation Unemployment rate – Proportion of the labor force seeking work but unable to find jobs. 125,000 new monthly needed just to keep up with new entrants into the labor force. 10% unemployment rate in late 2009 with economic recession. To Learning Objectives LO 17.1

18. Copyright © 2011 Pearson Education, Inc. Publishing as Longman To Learning Objectives LO 17.1

19. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Government, Politics, and the Economy Unemployment and Inflation (cont.) Underemployment rate – Statistic that includes the unemployed, discouraged workers, and people who are working part- time that cannot find full-time work. In July 2010, the national unemployment rate was 9.5% and underemployment rate was 16.5%. To Learning Objectives LO 17.1

20. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Government, Politics, and the Economy Unemployment and Inflation (cont.) Inflation – A rise in price of goods and services. Consumer price index – Change in the cost of buying a fixed basket of goods and services. The annual inflation rate in the United States has consistently been below 4%. To Learning Objectives LO 17.1

21. Policies for Controlling the Economy LO 17.2: Identify the two main policy tools that American government can employ to address economic problems. Laissez-Faire Principle that government should not meddle in the economy. The 1929 stock market crash sent unemployment soaring, but Hoover clung to laissez-faire. Roosevelt’s New Deal involved the government in the economy during the Great Depression. Copyright © 2011 Pearson Education, Inc. Publishing as Longman To Learning Objectives

22. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Policies for Controlling the Economy Monetary Policy and the “Fed” Fiscal Policy: Keynesian Versus Supply-Side Economics Why It Is Hard to Control the Economy LO 17.2 To Learning Objectives

23. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Policies for Controlling the Economy Monetary Policy and the “Fed” Monetary policy – Affects supply of money in private hands. Monetarism – Too much cash and credit in circulation producing inflation. Federal Reserve System – Makes monetary policy and regulates the lending practices of banks. To Learning Objectives LO 17.2

24. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Policies for Controlling the Economy Monetary Policy and the “Fed” (cont.) Federal funds rate – What banks can charge each other for loans. Fed buys and sells government bonds to determine amount of money banks have to lend out. Borrowing is cheaper when banks have more money and expensive when they have less money. To Learning Objectives LO 17.2

25. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Policies for Controlling the Economy Fiscal Policy: Keynesian Versus Supply-Side Economics Fiscal policy – Use of federal budget to influence economy and is almost entirely determined by Congress and the president. Keynesian economic theory – That government spending and deficits can help the economy deal with its ups and downs. To Learning Objectives LO 17.2

26. Copyright © 2011 Pearson Education, Inc. Publishing as Longman To Learning Objectives LO 17.2

27. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Policies for Controlling the Economy Fiscal Policy: Keynesian Versus Supply-Side Economics Supply-side economics – Cutting tax rates will stimulate the supply of goods. Supply-siders – Lower tax rates stimulate supply of goods, as people are motivated to work longer, increase savings and investments, and produce more. To Learning Objectives LO 17.2

28. Copyright © 2011 Pearson Education, Inc. Publishing as Longman To Learning Objectives LO 17.2

29. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Policies for Controlling the Economy Why It Is Hard to Control the Economy Most policies must be decided a year or more before their full impact will be felt on economy. Budgetary process is dominated by uncontrollable expenditures mandated by law, and many benefits automatically increase with the cost of living. To Learning Objectives LO 17.2

30. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Policies for Controlling the Economy Why It Is Hard to Control the Economy Capitalist system make it hard to control the economy because the private sector is much larger than the public sector. Federal government spends about 25% of GDP, but consumers and businesses make the majority of our economic decisions. To Learning Objectives LO 17.2

31. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Understanding Economic Policymaking Democracy and Economic Policymaking One consequence of democracy for economic policymaking is that it is difficult to make decisions that hurt particular groups or that involve accepting short term pain in return for long-term gain. LO 17.5 To Learning Objectives

32. Copyright © 2011 Pearson Education, Inc. Publishing as Longman To Learning Objectives LO 17.5

33. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Understanding Economic Policymaking Economic Policymaking and the Scope of Government Government involvement in the economy – Liberals tend to want more and conservatives tend to want less. Democrats are more concerned with curbing unemployment, and Republicans are more concerned with controlling inflation. To Learning Objectives LO 17.5