ECONOMICS 3

2/9/2012

Learning Objectives

• Critically analyze social problems by identifying value perspectives and applying concepts of sociology, political science, and economics;

• Use knowledge and analyses of social problems to evaluate public policy, and to suggest policy alternatives, with special reference to questions of social justice, the common good, and public and individual responsibility.

Opportunities to discuss course content

• Today- 11:00-2:00

• Monday 10-2

Readings

• Required – Tax Policy (Chapter 8) Dye

– Health and Welfare (Chapter 5, pp 88-96)

– International Trade and Immigration (Chapter 9, pp 198-199)

– American Dilemmas Handbook, pp 9-15, 89-100

Goals of a Sound Economic Policy

• GDP Growth

• Low Unemployment

• Low Inflation

• Positive balance of Trade

• Sound Tax Policy

Goal 5: Sound Tax Policy

• A sound tax policy should collect as much at it spends

• A sound policy does not disrupt the functioning of the economy

The National Debt

• What is it?

• Why do we have it?

The Debt

• Disadvantages

• Advantages

What to about it

• Raise Taxes

• Cut Spending

• Some Combination of both

Changing the Tax System

• Tax Cuts

• Tax Reforms

Raising Taxes

• A Political Albatross

• We like Tax Cuts instead

• We Like sin taxes- but we are running out of these

Raising Taxes on the Wealthy

• The lowest 50% of Americans pay 3% of all federal income tax

• The Wealthiest 1% pay 39% of all income Taxes

Raising Taxes on Who?

• Make the Poor Chip in

• Close Loopholes

Change How We Tax

• Add a consumption or VAT Tax

• Add a Flat Tax

• Try A “Fair Tax”

Cut Spending

• There is No Political Gain to do so

• Cut Back on Entitlements

• Reduce Discretionary Spending

Cut Defense Spending

We Love to Spend

The Easiest Solution is to Pay the Light Bill

Economic Inequality

AKA Poverty

What is Poverty

• Absolute Deprivation

• Relative Deprivation

The Role of Social Class

• What is Social Class

• How the United States compares to other nations

• Why social class is not as important in the United States

The Components of Social Class

• Wealth

• Status

• Political Power

The Wealthy

• About 3% of the Population

• Old vs. New Money

• An Endogamous culture

The Middle Class

• Most of us claim to be in here

• Upper-Middle

• Lower Middle

Working Class• About 30% of the Population

• Not as identifiable in the United States as other Nations

• Tend to be Hourly rather than salaried

The Poor

• Between 15% of the Population

• Low Wage Jobs or do not Work full time

SOCIAL CLASSThe Political Impact

Why not social class

• The Parties do not try to exploit social class

• We have never had an appreciable socialist movement

• People identify with other groups before class

Measuring Social Class

• We ask people which class they belong to– We are very likely to say middle class

• Within Social classes there are great variations in income

• Our partisanship doesn’t change with rising or lowering class.

Social Class and Partisanship

Republicans• Do better with poor whites

in the South

• Do better with Upper Middle Class voters

• Historically have done better with Middle Class voters

Democrats• Do better with poor and

working class

• Do better with the very wealthiest

• Do better with Union Members

Social Class and Voting

• Wealthy people vote at higher Rates

• Related to education

• Lower Information Costs

The Wealthy are More Likely to join Interest Groups

WHO ARE THE POOR

The Poor

• Historically Between 12-13% of the Population

• Recession has caused this to increase (15%)

• Low Wage Jobs or do not Work full time

The Poor over Time

Who are the Poor: Age

Race and Ethnicity

Who are the Poor

• Employment

• Family Composition

• Region

Consequences of Poverty

• Lower Quality of Life

• Less access to health care

• Higher Crime Rates

Why are the Poor, poor?

• There are Multiple Causes, which makes Policy difficult- which one do you address?

• Low Social Mobility

• Educational inequalities

• The Transformation of the Economy

• Family Structure

Solutions to Poverty

• The national government provides two types of benefits

– Means-tested benefits: conditional benefits provided by a government to individuals whose income falls below a designated threshold

– Non-means-tested benefits: benefits provided by government to all citizens, regardless of income; Medicare and social security are examples

Social Insurance Programs

• Usually Non-Means Tested

• Prevent People from Falling into poverty

Public Assistance

• Usually Means Tested

• Commonly referred to as welfare

• Many Receive it

Cash Assistance

• Monetary Transfers

• Temporary Assistance for Needy Families Act:

Families on Welfare

Non-Cash/ In-Kind Assistance The Transfer of a tangible benefit

Food Stamps

Subsidized Housing

Medicaid

The Problem of Poverty Too Many root causes

Solving the Problem would require broad social reform

Those harmed by the problem do not have a voice

States do not want to become Welfare Magnets

Federal and State Governments have no money

Benefits of Poverty?