SOLUTION AT My Australian Academy
explore the economy, including the impact that governments have upon economic
explore the economy, including the impact that governments have upon economicLesson: Economics
This week we will explore the economy, including the impact that governments have upon economic matters and the cost of welfare programs.
The US BudgetIn February of each year, the President submits around a $3.8 trillion budget proposal to Congress for approval. This proposal is based on the President’s priorities, and what he believes will pass in the Congress. Once the plan is made public, interest groups, citizens, scholars, political scientists, and pundits begin to scrutinize it to see what spending will go where.
The American economic system is very complicated. It is considered a laissez-faire economy, but this does not mean that it operates in an entirely free market. There are rules and regulations in place to protect the market, and the businesses and people working within it. Some of these safeguards developed during a period known as the New Deal, under President Franklin D. Roosevelt, as a means of lessening the impact of the Great Depression. These protections are referred to as the social safety net or welfare programs.
Welfare is a term applied to social programs that contribute to the overall well-being of the citizens, and these types of programs usually develop when there is a great need within the populace. For example, during The Great Depression, inflation rates made the dollar lose its previous value. The Great Depression resulted in the suffering of a large portion of the population because many could not pay their bills, or buy necessities such as food which was in short supply to being with. Eventually, technological advances, spurred by the Industrial Revolution, made the farming process less difficult, allowing for larger and larger amounts of crops to be produced. Although this produced more food for a while, it also dropped the price of food, given the fundamental law of supply and demand. If the supply of a product rises above the demand for the product, prices will fall.
Supply and DemandWith the fall in crop prices, farmers who had mortgaged their homes and land to afford new farming equipment lost it all because they could no longer earn enough to pay off their loans. Also, the new technology contributed to overfarming much of the land, which stripped needed nutrients from the soil, making it unfarmable for some time, developing The Dust Bowl. With the upper layer of soil missing from much of the farmland in the Midwest, the large amount of dust caused great dust storms as severe as blizzards. Food production suffered because of limited farmland, causing supply to decrease, raising the price of food again. However, given the state of inflation during this time, the average person could not keep up with these costs forcing the government to step in to provide for the people and stabilize prices.
Although welfare programs serve purposes, they are not free. The problem of paying for them falls on every nation that offers them, which is why there is always much deliberation regarding these programs. The United States offers far fewer social programs than its European allies—based upon its laissez-faire approach—and yet there is always much discussion about their existence. American conservatives tend to support a reduction in the funding of such programs, whereas liberals usually argue for an increase in their funding.
Cargo containers with Chines and American flags on them
From the US budget to negotiating with China on tariffs, it is no doubt economics is essential. Economics has become even more critical as our society has globalized, making the world smaller. It is harder to find specific products with the “Made in the USA” label as businesses are outsourcing many manufacturing jobs to other nations to provide lower prices. The US, the only superpower, continues to be part of the global political economy.