Transcript Slide 1
CHAPTER 1 INTRODUCTION McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. Econ 4821 Public Economics Class Flow and Comfort Respect Ask Questions Not Neighbor One => Many Controversial Issues Environment Health Care Education Income Distribution 1-2 Econ 4821 Public Economics My story… Nebraska Iowa State University Engineering STUDY ABROAD Religion University of Minnesota MPP at the HHH PhD Candidate 1-3 Econ 4821 Public Economics Why Economics? Best Tool for Understanding the World Economics Models = Economic Petri Dish Ch.2 1-4 Econ 4821 Public Economics Partner (5 Minutes) Name, Major, Year, Hometown What interests you? Understanding the World, Art, Music, Baseball 1-5 Econ 4821 Public Economics Syllabus Website Presentations Timing News and Blogs Guest Speakers Intermediate Micro and Macro Tools 1-6 Econ 4821 Public Economics Review Market Expectations Government Expenditures Market Complements for Desirability Desirability? Government Revenue Taxes Tax Everybody Equally? Tax Everything Equally? 1-7 CHAPTER 1 INTRODUCTION McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. Defining the Field of Study Public Finance the field of economics that analyzes government taxation and spending policies Public Sector Economics Public Economics 1-9 Public Finance and Ideology Organic View of Government Organism Pros? Cons? Mechanistic View of Government Tool Pros? Cons? 1-10 The Legal Framework Federal government Federal Constitutional provisions Article 1, Section 8 Article 1, Section 9 Personal Tax 16th Amendment Taxes and Expenditures Income Tax 5th Amendment Eminent Domain “…just compensation.” 1-11 The Legal Framework State Governments Federal Constitutional Provisions 10th Amendment Tariffs Discrimination State Constitutions Local Governments Dependence and Independence to State 1-12 The Size of Government How to measure the size of government Number of Workers Annual Expenditures Government Expenditure Goods and Services Income Transfers Interest Payments Budget Documents Unified Budget $2.2 Trillion ($3.9 Trillion State) (1996) Regulatory Budget $700 Billion 1-13 State, Local, and Federal Government Expenditures (selected years) 1 2 3 4 2005 Dollars (billions)* 2005 Dollars per capita Percent of GDP 1960 Total Expenditures (billions) 123 655 3,627 24.3% 1970 295 1,201 5,858 28.4% 1980 843 1,749 7,679 30.2% 1990 1,873 2,574 10,289 32.2% 2000 2,887 3,237 11,461 29.4% 2005 3,876 3,876 13,066 31.1% *Conversion to 2005 dollars done using the GDP deflator Source: Calculations based on Economic Report of the President, 2006 (Washington, DC: US Government Printing Office, 2006), pp. 280,284,323,379 1-14 Figure 1.1: Government expenditures as a percentage of Gross Domestic Product (2005, selected countries) 0.6 0.5 0.4 0.3 0.2 0.1 United States 0 Sweden France Germany United Kingdom Canada Japan Australia Source: Organization for Economic Cooperation and Development [2006]. Figures are for 2005. Figure 1.2: Composition of federal expenditures (1965 and 2005) 100% Note increase in everything else and especially health. 90% 80% 70% Note decline in Defense Other Net interest 60% Social security Income security 50% Medicare Health 40% Defense 30% 20% 10% 0% 1965 2005 Source: Economic Report of the President [2006, p. 377]. Figure 1.3 Composition of state and local expenditures (1965 and 2002) Increase in public welfare 100% 90% 80% 70% 60% Other Public welfare 50% Highways Education 40% 30% 20% 10% 0% 1965 2002 Source: Economic Report of the President [2006, p. 383]. Decline in highways Figure 1.4: Composition of federal taxes (1965 and 2005) Social insurance and individual income tax have become more important Corporate and other taxes have become less important 100% 90% 80% 70% 60% Other Social insurance 50% Corporate tax 40% Individual income tax 30% 20% 10% 0% 1965 2005 Source: Economic Report of the President [2006, p. 377]. Figure 1.5: Composition of state and local taxes (1965 and 2002) 100% 90% Individual tax more important 80% Other 70% Grants from federal government Corporation tax 60% 50% Inidividual income tax 40% Sales tax 30% Property tax 20% 10% Property tax less important 0% 1965 2002 Source: Economic Report of the President [2006, p. 383]. Doing Research in Public Finance Public Finance journals International Tax and Public Finance Journal of Public Economics National Tax Journal Public Finance Public Finance Quarterly General-interest journals American Economic Review Journal of Economic Perspectives Journal of Political Economy Quarterly Journal of Economics Review of Economics and Statistics 1-20 Doing Research in Public Finance Other sources Journal of Economic Literature Brookings Institution’s Studies of Government Finance Congressional Budget Office reports National Bureau of Economic Research working papers Tax Foundation’s Facts and Figures on Government Finance U.S. Government Printing Office publications Statistical Abstract of the United States Economic Report of the President Budget of the United States U.S. Census of Governments Historical Statistics of the United States from Colonial Times to 1970 1-21 Doing Research in Public Finance Public Finance data available on internet Resources for Economists on the Internet U.S. Census Bureau University of Michigan’s Office of Tax Policy Research Urban-Brookings Tax Policy Center 1-22