Exam #2 Flashcards
What is the economic policy ?
-Economic performance is extremely important to political outcomes.
-Incumbents at every level are punished when the national economy does poorly.
-Rewarded when it does well.
EX: Oil price increase due to Israel situation
People say economic policy is one of the things that moves the needle on public opinion. Why does this happen?
Imagine the economy touches everybody. Policy or issue that affects everybody. Everybody notices & large amount of media coverage
What is the role of economy in the govt?
-Traditionally thought of as separate spheres that define a country.
-how much of a role does the national govt have in the economy?- depends on the system of govt
Communism v Socialism v Capitalism
-High level of govt involvement typically associated w/ undemocratic systems
why?- people typically vote to get themselves more economic freedom when given the option.
-what we call socialism in the US is fully compatible w/ democracy (healthcare)
What is communisim?
high level of control, government control over the economy which means most GDP is controlled by govt.
What are foundational policies that in some areas overlap in govt & economy?
-Federal Reserve (money supply)
-Taxes
-Social Security
-Guarantee currency
-enforce contracts/ patents (sign into a business)
-regulating stack markets-> pause trading
-Trade agreements (who will be in business)
-Infrastructure
(baseline thing govt is doing)
Great Depression in economic policy?
-1930 when economic performance becomes a clear responsibility of govt
-obvious need for govt w/so much poverty & misery
What are the 2 levelers to influence economy?
Monetary
Fiscal policy
what is monetary policy?
(federal reserve) Controlling the money supply via the Central Bank
(Everybody wants the same thing in the economy)
what is fiscal policy?
(where we argue alot) Spenfing & taxing (happens in congress)
What is the economic business cycle?
Boom & bust cycle- where we see expansion or contractions
-> we want to see expansions
-> we want to see steady growth over time
-> want to avoid runaway
What causes Contractions?
happening for a long time, and no one was really clear that govt had any role or responsibility
-Economic contractions blamed on laziness, immigrants, drunkeness (temperance movement), acts of god
Who is John Keynes and why is he important?
Famous economist, suggest that contraction is caused by a demand spiral
1) An exogenous shock to the market (housing market collapse)
2) People have less wealth than they thought, afraid of uncertainty, etc so they spend less
3)business make less money so they hire and invest less
4) fewer jobs= less money to spend
5)and cycle gets worse
What is the government response to demand spiral?
Keynes argues spending can help reak out of demand spiral
How?- tax cuts (on everyone but mostly on low income) & Direct spending (Ex: infrastructure, public edu, healthcare)
What are the consequences of the govt response of demand spiral?
Govt debt (maybe a lot)
What about during expansion (economic)?
Economic expansion is a good but too rapid expansion can be worrisome
-inflation is process by which purchasing power of money becomes worthless overtime
->stuffing money in mattress is bad idea
-> Savvy peopleinvest their money in funds that will appreciate at higher than inflation rates
->when inflation outpaces actual GDP growth, you can have a problem.(want 2-5%)
what is the government response to expansion?
Fiscal Policy repsonse to increase level of inflation is to try to reduce spending.
1) raise taxes
2) Cut spending
Idea is to slow down the rate at which money is cycling through the economy
what is counter cycle spending?
intellectual centerpiece of modern fiscal policy
- add money to economy during downturns, subtract money during periods of overheating
- also called demand-side or keynesian economics
What is monetary policy?
is what the central bank (federal reserve) does
- even more important than fiscal policy
-we don’t hear as much about it bc it is a rare area that isn’t so political
What is control money supply?
like fiscal policy, goal is to control the rate at which money is circulating through economy
-balancing inflation w/demand problems
Big mechanism is to control lending rates
What is the lender of last resort?
Federal reserve is the bank of last resort (insures & lends to other banks)
Charge other banks interest on these loans which is prime rate
Banks then loan money to people & business and charge them an interest rate is prime + whatever appropriate based on credit history
Why would we adjust prime rates?
If federal reserve is worried about inflation, they will rise lending rates thus arresting the flow of money
- cooling effect
EX: inflation reduction act-> goes through treasury as fiscal policy
What is cooling effect?
cooling down the economy
What is the chair person?
-most powerful positions in the world.
-rarely make public statements bc every utterance can affect the stock market
-long tradition of appointing serious economic/ banker types
What is the politicization of economy?
economy is extremely partisan
-liberals comfortable w/ demand side bc involves gov spending programs and redistributing money to low income people
what is the conservative answer to these issues?
1)Tax cuts (can be both sides) (Rep. want it Dems choose a side)
2)Deregulation
-To correct downturns you cut taxes (& regulations) for wealthy people & companies
-Idea is to boost up investment (encourage)
-Supply side: (derisively) trickle down economics
what is public partisan evaluations?
one day, one side of this line to the other, it is the same economy. Trending in the same direction.
Can see a profound reversal in how people view the economy.
What are the deficits?
govt spending more money than what they have
Parties usually care most about deficits when they are out of power
Complaining about deficits is another way of saying I don’t like how this party is budgeting
-But increase interest payments are obviously not good
What is the green lantern theory?
strong tendency to overestimate the ability of presidents (or govt)
-Economic policy can have a long effect on economic performance
- In practice the effects are often small and hard to isolate.
What is trade policy?
Area where the pres. has most of the leverage
- Chied diplomate
-> gets to negotiate trade agreements
->Congress can agree or disagree but not amend
What is open trade?
Free trade agreements are usually good economies (EX: make countries richer)
-trend since ww2
-EU is based on this principle
-> created euro to help in trade
-> UK left EU so now facing consequences
-NAFTA one of our huge traders
(North Atlantic Free Trade Agreement)
What are some consequences to having open trade?
environmental consequences
-agreements sometimes shield multinationals from legal consequences
-unequal gains
->US: consumers gain, manufactures lose
-> some areas lose out
What are the policy solutions?
Simply redistribute gains form free trade to losers
-Biden mentioned manufacturing cars in US to help w/ this issue
-Redistribution is what govt does
-We actually have these policies in place but constantly underfund them
What is economic inequality?
is the consequence of economic competition.
levels of economic inequality are not constant over time
Do we see an increase of unequal country?
Yes
dimensions of inequality:
income & wealth (vertical)
race ethnicity gender (horizontal)
what are economic and social consequences of inequality?
economic stagnation
health & other social consequences
political polarization
lobbying; election influences of money
exclusion, unfairness, & unequal application of the law
(social unrest)
what is income inequality?
all income in that year distributed. # continue to increase. (rich of rich taking most of the income)
what is wealth inequality?
highly skewed distribution. We start to see society become more and more unequal.
poor at negative wealth while the 1% continue to gain money
what is the distribution of household income?
bottom 80% hold only 7% of total wealth and top 1% own 40%
median household income in US: low in south high in north dakota since no one lives there
What can a survey tell you about the distribution of wealth is?
most people thoughts on distribution is wrong. When they make their ideal distribution we have equality view point
What does the income inequality and redistribution do?
The US does less than many other rich countries to reduce market generates income inequality
- other countries try to move ginex down
-how? by increasing taxes (affordable health care)
what are income gains widely shared early postwar decades?
rich people getting richer
low income staying the same
-known as power law
what is power law?
think of it as a way to gain social media followers
have wealth easy to get more wealth
what are the causes of inequality?
early 1980s
-income and wealth inequality is a direct consequence of capitalism & free enterprise
-increase inequality today is function of economic factors & political factors
what are economic factors?
globalization & tech that tends to eliminate lower skill positions
(can find it way into politics & thus into public policy , thus making inequality worse)
What causes of post 1980s rise?
Globalization
lower taxes for the wealthy
-(marginal rate=pay rate based on income )
-(more progressive/ more brackets more rate
decline of union
What are tax marginal tax rate?
Increase on tax on rich leads to lower inequality
decrease tax on rich leads to increase inequality
How would inequality matter for policymaking?
if we believe that money is related to political influence then it might matter a great deal.
-unequal democracy thesis
what are the roles of public policy in inequality?
Public policies sometimes makes inequality worse
policies sometimes reduces inequality
policy uninteded affects can sometimes make things less=
Ex: Criminal justice
What is public policy lawmaking?
most laws classified as landmark legislation move syste, in a liberal direction
Ex: medicare ACA no child left behind
many public goods benefit less well off disproportionally (ex edu)
1 major set of exception : tax rates
what are the race, ethnicity& gender : compounded inequality?
for blacks much initial inequality was caused by public policy & it was buttressedby custom and violence
-slavery
-black codes in the south after reconstruction
-vigilante action (kkk, white citizens council)
In texas and south mexican american met a harsh and often segregated reality
Public policy were used to segregate?
In class he mentioned the story buying a house and in the contract it says to never sell a house to black person. never changed since no on pays attention to it.
Having a house showed wealth
What plays into horizontal inequality?
causal stories and we want to know what does it mean on policies we support
what are the perspectives (inequality)?
Economics: distribution of wealth is a consequences of market forces
-problem definition of inequality under this framework
Political scientist: distribution of wealth consequences of policy
(not one side is right or wrong)
What is the health care & policy cycle?
Problems-> agenda-> decisions-> output->implementation-> outcomes<- social & individual factors
What are some healthcare?
access to care
insurance reform
Medicaid solvency
cost control
medicare solvency
cost of drugs
chronic care
promoting R&D
Medical malpractice
public
environmental health
How does health policy affect the health of the Population?
nature of health problems= contagious disease
committed to solve problems ($$)
-solution applied to the problem
- public provision
-market and society
- mixed system
When was the health care reform?
health care been 1 of the biggest areas of policy attention since around 1950s
what is the motivating frames in health care?
can those with means (insurance, wealth,ect) acces the best possible care?
can those w/out means access any care at all?
-health care a right & it is a right like to acces to clean water, safe neighborhoods
What started the war on poverty?
LBJ
National poverty rate of 19%
economic opportunity act of 1964
food stamp act of 1964
elementary & secondary edu act 1965
amend social security to create medicare & medicaid
dual federalism is how states spend money on that program (payroll tax-> social security & medicare)
What is the policy background (healthcare)?
Medicare 1965
single payer healthcare
expanded to provide health for elderly citizens
originally for military families
most expensive federal program
Medicaid 1965
health care for poor adults and children
costs shared between state and federal govt
What are 3 main spending (health)?
medicare, social security, discretionary (military defense)
how does Health care look today?
Govt is an insurance comapany w/ an army- peter fisher
Is spending slow recently (healthcare)?
see program becoming more expensive
start to worry how we are going to afford this
Why are we seeing a decline on spending?
when govt has concern on health they put pressure to lower it. put pressure cute cost (hypothesis)
good thing that america is being overtested. Bad if we cut cost by not testing
What is private insurance?
compare health services to other services
lots of money & industry happening
1 reason why health industry is massive
Where do americans get health insurance?
1st-from employer
might havt to pay some of that
2nd-medicare/ medicade/ uninsured
what is the problem stream for health care?
lots of people dont like about the US health care
very expensive
worse outcomes than we might like (bad value)
What is the per capita health care spending 2023?
US spends more than other countries
both out of pocket & govt
What is the spending?
1970-7.2% healthcare cost-> 18% in 2010
2.6 trillion to 4.6 trillion in 2020
5% of pop responsible for almost half of health care spending
What is per capita on health?
invest in public health. does increase life expectancy
See implementation when spending money
Random things happen (ex covid)
No linear bc we can’t live forever
US bad value since spending a lot but low life expectancy
Can we compare US to other wealth countries?
OVertime US is moving up but than we start to move away. MOre spending but declining life expectancy
Why are we seeing low life expectancy compared to other weatlhy countries?
Gun violence
Covid 19
scaled back the generosity of health care
mental health
inequality in wealth/ health
inequality to acces health care
what are the 3 reasons we see this happening (compared to wealthy countries)?
not everyone is covered
market mechanism fail us somewhat w/ health care
Transparency & competition needed
Why did most democratic move from this?
struggle w/ end of life care
What are things we do will (health)?
thriving pharmaceutical industry
on the cutting edge of developing new drugs
other countries free ride off this
but expensive in US
What are the implementations (health)?
spending more than peers
less time @ doctors in US
Japan spend time @ doctors all the time
What does the health care system like?
most nations either a system of public provision (UK Canada) or a single payer system (switzerland, France, US medicare system)
what is a single payer?
a monopoly but in reverse, so govt has lots of bargaining power to keep costs low
plus everyone gets covered
but concerns of stifles innovation & wait time can be longer for non essential things
what is the ACA?
most controversal law
does 2 things
-tries to get everyone covered. Need beyond people to get it
-tries to establish baseline level of insurance coverage
Is ACA working?
Yes, # of uninsured Americans is down substantially & down further in states that adopted Medicaid
Health care cost curve is bending
No American can be denied care bc of pre existing conditions, nor can cost be raised bc of them
CBO lowered the cost of the system several times
who was helped the most w/ ACA?
lower income countries that were helped
they had increase of people who can benefit from it
Who has the right to health care?
increasingly becoming a central part of Dem Party platform
- 1 idea is medicare for all
-expensive in short run but but potentially w/ long term savings
- disruptive to majority industry
What is the partisan split (health)?
wording plays an important role in polls
Ex: medicare for all vs public option means same thing but Republicans wont vote for medicare for all
What do we know about wars historitcally?
Great powers= big countries w/ more military stuff
# now reduced in war w/ great powers
Have more people been killed lately due to war?
have decreased compared back to WW1 & Vietnam
Now not near the WW2 result
Have we seen progress?
Global life expectancy 1800-2020
killing people at young age will bring down life expectancy
Is the situation better today then before w/ war and conflict?
Yes, NATO creates allies argeement, prevent conflict among themselves, & prevents others to attack them
Trade will decrease conflict
Why no war and conflict?
Technological developments
Rise of demoncracy
Rise of international organization
what does democracy do in foregin policy?
We see challenges to democracy but overtime democracy has increased. We have more democracy
What is US foreign policy?
Motivating ideas:
unilateralism advocates for the US to make its own decisions on foreign policy
Multilateralism seeks the cooperation of other countries in foreign policy actions
Foreign policy has increased bureaucracy
What are the history lesson for foreign policy?
US grows quite dramatically in power (econ & military)
-like china (today) in 1800
hesitant to become deeply involved in world politics
monroe doctorine 1823
-got indepencence, euope has no interest in trying to get our control
Spanish American war example of fighting a war to protect Monroe
What is the panama canal
US gets involved sent troops. helped then become free. In return they can build the panama canal and control it
What significant about WW1?
Devastating for Europe
An old fashion war of complex alliances but w/ modern weapons
brutal war w/ lots of casualties
west was not involved
fear they were going to be involved
germans sunk submarine shocks president as we lost some Americans
german scared US was joining, so proposes a telegram to Mexico to distract the US. Promised to help later, Once it came out, US said they will join
What is the inter war period?
Multiculturalism: league of nations
Unilateralism/ isolationism: disarmament & isolationsim
-good neighbor policy franklin d roosevelt
What is significant of ww2?
initially US, this is European problem
-europeans try to avoid fighting
things looking really bad so start sending money & weapons to UK
japan boom pearl harbor
US join war
what are the 3 major fronts?
Pacific- US vs Japan
Eastern Europe- Germany vs Russia
Western Europe- Germany vs UK vs US
what was the aftermath of ww2?
2 big developments
nuclear weapons
large parts of europe destroyed
-major inflection point in US foreign policy bc we r in position of great power
what is marshall plan?
Marshal is Truman’s secretary of state
-plan loans of dollars to help rebuild europe
-US going to be leader in world affairs
(US helped japan reconstruct)
-developed international org
-nuclear unbrella
what significant of cold war?
Bipolar world (US vs USSR)
nuclear deterrence, arms race, space race, areas of influence, proxy wars
played out in latin america
-US couldnt allow 2nd cuba
- support/ participation
what are 2 tenets of modern american foeign policy
International security through alliances & international orgs
nuclear non proliferation
what happened post cold war?
post colt war: unilateral power
-soft power: economic buying power, diplomatic corps, loans to foreign govt
-hard power: military or weapons
describe the world economy?
China & US main economic power
US has trade network
what are the nuclear powers?
Russia had most than US
America influences Latin America, strong agreements on them not having it
what is the great powers regional powers (small countries)?
Foreign policy very salient bc of the role as unilateral power
-topic does not raise nearly as much attention in smaller countries & regional powers
-foreign policy the optimal choices depend on country’s position
Does it consider a tough decision?
policy streams is not always clear
politics can be highly polarizing but in less obviously partisan ways
when should we intervine & how?
with great power comes great responibility
What is no intervention (book on slides)?
by Rwanda 1994
US (clinton) refuses to call it a genocide
ignores UN peacekeepers calling for troops & support
Around 1 mil killed w/ machetes in 100 days
what is the bad intervention- bombing cambodia?
Called operation Menu 1969-70
Kept secret from Congress & public (ie illegal)
Extensive bombing of Laos, Cambodia, & vietnam during Vietnam war
most bombed area ever
destabalizing region, leading to takeover of Cambodian govt by Khmer Rouge
Brutally kill 1.5 -2 mil of pop