United States United States EconomyEconomy

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The Least You Need to The Least You Need to Know…Know…

Difference between theory and Difference between theory and practicepractice

Keynesian economics/demand-side Keynesian economics/demand-side econ.econ.

The importance of changeThe importance of change Reaganomics/Supply-side economicsReaganomics/Supply-side economics

History of United States History of United States EconomyEconomy

Limited Intervention (to 1929)Limited Intervention (to 1929)– Government intervened very little in the Government intervened very little in the

economy.economy.– All the government did was maintain All the government did was maintain

public order, develop laws, provide public order, develop laws, provide roads and education, etc.roads and education, etc.

– Government did not spend a lot of Government did not spend a lot of money and taxes were kept relatively money and taxes were kept relatively low.low.

Great Depression (1929-Great Depression (1929-1939)1939)

Tuesday October 29, 1929—Stock Market Tuesday October 29, 1929—Stock Market CrashCrash– Stocks were bought on borrowed moneyStocks were bought on borrowed money– People tried to get their money back by selling People tried to get their money back by selling

stocks quicklystocks quickly– People went bankruptPeople went bankrupt– Individual consumption of goods decreased.Individual consumption of goods decreased.

In 1932, Franklin D. Roosevelt, Democratic In 1932, Franklin D. Roosevelt, Democratic presidential candidate campaigned on “Relief, presidential candidate campaigned on “Relief, Recovery, Reform.” Roosevelt was elected.Recovery, Reform.” Roosevelt was elected.

New Deal (1933-1939)New Deal (1933-1939) ““Hundred Days”Hundred Days” Congress enacted legislation to help alleviate Congress enacted legislation to help alleviate

the economic crisis.the economic crisis.

ABBA – Money, Money, ABBA – Money, Money, MoneyMoney

Mixed Economy in America Mixed Economy in America (1939-1975(1939-1975))

The entry of the United States into The entry of the United States into WW II marked the beginning of WW II marked the beginning of unprecedented government unprecedented government intervention in the economy.intervention in the economy.

After the war was over, the After the war was over, the government continued many of the government continued many of the New Deal ideas such as road building, New Deal ideas such as road building, damn building, regulating banking, damn building, regulating banking, etc.etc.

During this time, Cambridge During this time, Cambridge University professor, John Maynard University professor, John Maynard Keynes, influenced American Keynes, influenced American Economic philosophy.Economic philosophy.

After 1945, the American government After 1945, the American government adopted many of Keynes’s fiscal policy adopted many of Keynes’s fiscal policy instruments, seeking to provide instruments, seeking to provide stability to the economy and even out stability to the economy and even out fluctuations in production and fluctuations in production and employment caused by the business employment caused by the business cycle. It was hoped that government cycle. It was hoped that government spending on goods and services, as spending on goods and services, as well as its transfers of income to the well as its transfers of income to the poor, would stabilize the economy.poor, would stabilize the economy.

In bad economic times, government In bad economic times, government would increase spending and reduce would increase spending and reduce taxes. Governments may have to run taxes. Governments may have to run deficits to achieve these goals.deficits to achieve these goals.

Neo-conservatismNeo-conservatism variant of the political ideology of variant of the political ideology of

conservatism that combines features of conservatism that combines features of traditional conservatism with political traditional conservatism with political individualism and a qualified individualism and a qualified endorsement of free markets. endorsement of free markets. – Neoconservatism arose in the United States Neoconservatism arose in the United States

in the 1970s among intellectuals who shared in the 1970s among intellectuals who shared a dislike of communism and a disdain for the a dislike of communism and a disdain for the counterculture of the 1960s, especially its counterculture of the 1960s, especially its political radicalism and its animus against political radicalism and its animus against authority, custom, and tradition.authority, custom, and tradition.

Retreat of Government Retreat of Government from the Economy from the Economy (1975-2001)(1975-2001)

Early 1970s expenditures of the Vietnam Early 1970s expenditures of the Vietnam War were mounting. Also, the world War were mounting. Also, the world economy was not thriving.economy was not thriving.

In 1981, newly elected President Ronald In 1981, newly elected President Ronald Reagan announced an economic policy Reagan announced an economic policy that would return the country to that would return the country to

prosperity.prosperity.

Reagan’s policies later became Reagan’s policies later became know as supply-side economics know as supply-side economics or Reaganomics. These policies or Reaganomics. These policies called for lower government called for lower government spending on social welfare spending on social welfare programs, lower personal and programs, lower personal and corporate income taxes, less corporate income taxes, less regulation of business activities, regulation of business activities, and lower increases in the and lower increases in the growth of money supply.growth of money supply.

Reagan lowered income tax, Reagan lowered income tax, reduced limitations on business.reduced limitations on business.

Increased military spending.Increased military spending. Bush Sr. kept the same direction.Bush Sr. kept the same direction. ClintonClinton1993—had to balance 1993—had to balance

the budget.the budget.

Post 911 AmericaPost 911 America

?????????????? Bush Jr. has reduced taxes, but Bush Jr. has reduced taxes, but increased spending, especially military increased spending, especially military spending (I think there is a war on)spending (I think there is a war on)

The USA has been spending their future The USA has been spending their future Social Security (like the CPP in Canada) Social Security (like the CPP in Canada) in order to finance the spending.in order to finance the spending.

At least until 2008 . . . . At least until 2008 . . . .

SS 62-1 1-4 minutesSS 62-1 1-4 minutes

How to Slay “The Great How to Slay “The Great Recession” –> Stimulus vs. Recession” –> Stimulus vs.

RegulationRegulation THE U.S. SOLUTION - STIMULUS: THE U.S. SOLUTION - STIMULUS:

For the Americans, the priority is to get For the Americans, the priority is to get credit flowing again. Their Job One is to free credit flowing again. Their Job One is to free up the movement of money - preferably up the movement of money - preferably through co-ordinated stimulus efforts that through co-ordinated stimulus efforts that can kick-start a recovery. More regulation can kick-start a recovery. More regulation for the financial system can come later. for the financial system can come later. Treasury Secretary Tim GeithnerTreasury Secretary Tim Geithner has has urged other countries to join the U.S. in urged other countries to join the U.S. in making bold moves to pump more money making bold moves to pump more money into their economies. into their economies.

WHAT DO YOU THINK?WHAT DO YOU THINK?

THE EUROPEAN SOLUTION - THE EUROPEAN SOLUTION - REGULATION: REGULATION: Better regulation is the key, Better regulation is the key, counter the Europeans. Their hope is to create counter the Europeans. Their hope is to create an international body with cross-border power. an international body with cross-border power. They also want action to cut down on tax They also want action to cut down on tax havens and make private equity more havens and make private equity more transparent. European politicians, such as transparent. European politicians, such as German Finance Minister Peer German Finance Minister Peer SteinbrueckSteinbrueck, have resisted U.S. calls to ramp , have resisted U.S. calls to ramp up their stimulus packages, saying they are up their stimulus packages, saying they are doing enough.doing enough.

““Rockin in the Free World”Rockin in the Free World”

Q: What criticisms exist of the Q: What criticisms exist of the American, market economy?American, market economy?

Canadian GDP in the 2000sCanadian GDP in the 2000s

EvaluationEvaluation

Q: Based on what you have seen in Q: Based on what you have seen in the news; is it possible for the the news; is it possible for the government to stop the recession government to stop the recession through intervention?through intervention?

Q: Should we, in Canada, be laissez-Q: Should we, in Canada, be laissez-faire or socialist in our government faire or socialist in our government intervention?intervention?

Work BookletWork Booklet

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Dragons Den SS 45-3Dragons Den SS 45-3 The Cost of Cool SS 13-8/9The Cost of Cool SS 13-8/9 The Age of Walmart SS 38-4The Age of Walmart SS 38-4