Ch. 15
What?
Fiscal Policy
Who?
Congress & The President
How?
Taxing & Spending (laws)
Sect. 1 – Types of taxes
1. Progressive
2. Proportional
3. Regressive
Desc:
Ex:
M.A. – TOD #1
Sect. 2; Fiscal Policy Strategies
Fiscal Policy is…5 tools that the Congress & President use to manage our
economy.
2 Attitudes:
a) Supply-Side Economics - Jean-Baptiste Say (~1800) said supply can create
its own demand. Advocates laissez-faire gov’t; lower taxes leads to more personal
investments & a better economy, so gov’t still gets enough revenue.
b) Demand-Side Economics – John Maynard Keynes (1936); gov’t should
spend lots during recessions to pull economy back up; and save for bad times
during the good.
Ch. 15
Expansionary F.P.
to  growth (& unemployment)
5 Tools
1. Tax Rates
lower (SSE)
2. Tax Incentives (to bus.)
increase (SSE)
3. Government Spending
increase (DSE)
4. Public transfer Payments
increase (DSE)
5. Progressive Income Tax
lower (brackets – DSE)
Restrictive F.P.
to  inflation
* Unlike Monetary Policy w/ “The Fed”, political disagreements constrain fiscal
policy efforts:
Restrictive Fiscal Policy =  taxes &  gov’t spending
Expansionary Fiscal Policy =  taxes &  gov’t spending, but…
{Republicans like  taxes &  gov’t spending
Democrats prefer  taxes &  gov’t spending}
Sect. 3;
If I borrow $20 from my mom for 4 weeks in a row…
My Deficit is $20 per week
My Debt is $80
US deficit is per year
US debt is ridiculously large