Chapter 7: Economic and Budgetary Policy
Study
Chapter 7 is the
book’s first substantive (topical) policy chapter. It begins by exploring how
economic policy attempts to address such questions as federal deficits,
economic growth, and unemployment and goes on to assess U.S. economic policy
through a broad review of the government’s power to influence the economy. The
chapter concentrates on the major goals (economic growth, low unemployment and
inflation levels, positive trade balances, and deficit and debt management)
that policymakers attempt to promote while coping with value conflicts and
policy choices. Students discover that the tools and approaches of policy
analysis are as appropriate to assessing economic policy as they are to the
other policy areas covered in subsequent chapters.
The
fiscal (taxing and spending decisions) and monetary tools used by the Federal
Reserve Board are discussed, as are other tools employed by the government to
affect the economy. Tax policy is addressed, along with the choices
policymakers evaluate and approve to raise revenue. The tax policy discussion
is a good example of how different policy analysis criteria are used.
A review of the federal budget process is provided, as is a look at how the budget affects economic policy. Examples of the policy successes and failures discussed throughout the chapter, as well as future issues and challenges, are included. The changing budget deficit situation is monitored, and the focused discussion examines alternatives that the government may weigh as it tries to solve the nation’s deficit problem.