Standards for Party Platforms and Economic Issues

Standard: 20

Name: Fiscal and Monetary Policy

The U.S. federal government's taxation and spending policies, and the Federal Reserve System's monetary policies affect the nation's overall levels of employment, output, and prices. However, many government taxation and spending activities are undertaken for other reasons, as well. Government expenditures for national defense, human services, and other purposes are made to meet specific objectives and not primarily because of their fiscal policy effects. Other important objectives must be merged with the goals of full employment, price stability, and economic growth. Therefore, government programs may have contradictory effects upon employment and inflation. Understanding these effects is complicated also by the time lags that occur before action taken pursuant to a specific policy begins to affect overall levels of employment, output, and prices. In spite of these difficulties, policy makers and the general public continue to examine and debate the overall stabilization effects of public policy actions, because the consequences are so important. Citizens should understand the role of conflicting objectives and the limitations on the effectiveness of economic stabilization policies in order to develop realistic expectations about what can be accomplished with taxation, spending, and monetary policies.

• 4-12: Students will understand that: Federal government budgetary policy and the Federal Reserve System's monetary policy influence the overall levels of employment, output, and prices.
• 4-12: Students will be able to use this knowledge to: Anticipate the impact of the federal government and the Federal Reserve System macroeconomic policy decisions on themselves and others.

Standard: 17

Name: Government Failure

Do government officials try to promote the general welfare of the nation, or are they guided by their own self-interests? Businesses that fail to satisfy consumer wants go bankrupt; but how do we know when government programs fail, and how do we change or eliminate failed government programs? Why do some farmers receive large subsidies from the government, and why are many businesses protected from competition by tariffs or quotas even when only a small percentage of the U.S. labor force is employed in those industries? Why don't taxpayers rise up and put a stop to the favoritism accorded to certain industries and special interest groups? And why do so few people participate in the political process, and so many choose not to register or vote? It is important to realize that governments, like markets, also have shortcomings and imperfections. Citizens should understand the sources of these imperfections, including the distribution of costs and benefits of some programs that lead to special-interest problems, the costs involved in gathering and using information about different candidates and government programs, and the incentives that can induce government leaders and employees to act in ways that do not promote the general national interest. Understanding this allows citizens to compare actual with ideal government performance, and to decide about the appropriate role for federal, state, and local government.

• 4-12: Students will understand that: Costs of government policies sometimes exceed benefits. This may occur because of incentives facing voters, government officials, and government employees, because of actions by special interest groups that can impose costs on the general public, or because social goals other than economic efficiency are being pursued.
• 4-12: Students will be able to use this knowledge to: Identify some public policies that may cost more than the benefits they generate, and assess who enjoys the benefits and who bears the costs. Explain why the policies exist.

Standard: 16

Name: Role of Government and Market Failure

Why does government pay private construction firms to build roads and highways? Why do the firms that build the roads not own them themselves and charge tolls to users? All kinds of goods and services are produced and distributed through private markets, so why not roads and highways, too? In flipping through the pages of the telephone directory, we observe a vast array of businesses and government agencies. Why do markets work well to supply much of what we want, while failing to produce other things we want? Citizens should understand the limitations and shortcomings of markets and how some government policies attempt to compensate for market failures. Learning the economic as well as the political and social reasons for public sector services helps citizens make better choices about the appropriate size and scope of markets and government. It is also important that students be able to evaluate redistributive effects of government programs.

• 4-12: Students will understand that: There is an economic role for government in a market economy whenever the benefits of a government policy outweigh its costs. Governments often provide for national defense, address environmental concerns, define and protect property rights, and attempt to make markets more competitive. Most government policies also have direct or indirect effects on people's incomes.
• 4-12: Students will be able to use this knowledge to: Identify and evaluate the benefits and costs of alternative public policies, and assess who enjoys the benefits and who bears the costs.