Government Regulation: Crash Course Government and Politics #47

Summary

In this Crash Course Government and Politics episode, Craig discusses the broad goals of economic policy, including promoting stable markets, economic prosperity, business development, and protecting consumers and employees. He explores government actions like national regulations, financial market oversight, and subsidies, as well as the historical evolution of government's economic role from minimal intervention to an active regulatory state. The episode highlights the complexity and interrelation of these goals in shaping the U.S. economy.

Takeaways

• 📈 Economic policy aims to achieve broad goals through various government actions, though not all goals are consistently met.
• 🚗 The government promotes stable markets by structuring market systems, maintaining law and order, and regulating industries like automobile fuel efficiency.
• 🏦 Economic prosperity is supported by the government through positive investment climates, financial market regulations, and public investments in infrastructure and research.
• 💰 The Federal Reserve is the primary tool used by the government to control inflation, though it is a complex institution.
• 🏭 Business development is fostered by the government through tariffs, subsidies, and policies that encourage competition and growth.
• 🌾 Subsidies can be controversial, with indirect subsidies like infrastructure investments generally accepted, while direct subsidies to businesses can be seen as unfair advantages.
• 🛡 The government's role in protecting consumers and employees has evolved, with past actions including making unionization easier and setting labor standards.
• 👷‍♂️ The federal minimum wage and regulations by the Occupational Safety and Health Administration (OSHA) are examples of current government efforts to protect workers.
• 🛡️ Consumer protection is ensured by numerous regulations, including those by the FDA, USDA, and the Consumer Product Safety Commission, aimed at preventing harm from products and ensuring safety.
• 📚 The government's role in the economy has expanded over time, with significant regulatory changes occurring during the Gilded Age, the New Deal, and the 1970s.
• 🔄 Despite periods of deregulation, the administrative regulatory state persists, reflecting the complexity of modern economic concerns and the belief in government's role in addressing them.

Q & A

What is the primary focus of the video script?

The primary focus of the video script is to discuss the broad goals of economic policy and the various actions the government takes to achieve those goals.

What are the four main goals of economic policy mentioned in the script?

The four main goals of economic policy mentioned are promoting stable markets, promoting economic prosperity, promoting business development, and protecting consumers and employees.

How does the government attempt to maintain a stable market system?

The government attempts to maintain a stable market system by maintaining law and order, minimizing monopolies, and implementing national regulations such as automobile fuel efficiency standards.

What is the role of the Securities and Exchange Commission in promoting economic prosperity?

The Securities and Exchange Commission plays a role in promoting economic prosperity by regulating financial markets to build confidence and ensure a positive investment climate.

How does the government contribute to national prosperity through public investment?

The government contributes to national prosperity through public investment by funding projects like highways and the internet, which were initiated through government programs.

What is the main tool the government uses to control inflation as mentioned in the script?

The main tool the government uses to control inflation is the Federal Reserve.

How does the government promote business development?

The government promotes business development through tariffs and subsidies, which can provide indirect or direct assistance to businesses.

What is the purpose of subsidies according to the script?

Subsidies serve to provide financial support to businesses, either indirectly through grants for infrastructure like highways or directly through assistance programs, to help them grow and compete.

How does the government protect consumers and employees?

The government protects consumers and employees through various regulatory bodies and laws such as the National Labor Relations Act, Fair Labor Standards Act, Occupational Safety and Health Administration, and the Consumer Products Safety Commission.

What historical event marked the beginning of the federal government's active role in regulating the economy?

The New Deal under President Franklin Roosevelt marked the beginning of the federal government's active role in regulating the economy.

How has the role of the federal government in the economy evolved over time?

The role of the federal government in the economy has evolved from a more laissez-faire approach in the early 20th century to an active regulatory role, especially with the advent of the New Deal and the creation of various regulatory bodies.

Outlines

00:00

📈 Economic Policy Goals and Government Actions

This paragraph introduces the topic of economic policy, highlighting the broad goals that governments aim to achieve. Craig, the host, humorously sets the stage by comparing his personal goal to the government's more significant objectives. The main goals discussed include promoting stable markets, which involves maintaining law and order and minimizing monopolies, as well as national regulations like automobile fuel efficiency standards. The paragraph emphasizes the importance of these goals and the government's role in shaping the market system to ensure stability and predictability.

05:03

🚀 Government's Role in Economic Prosperity and Business Development

The second paragraph delves into the government's efforts to promote economic prosperity, including maintaining a positive investment climate and building confidence in the economy. It mentions the role of the Securities and Exchange Commission in regulating financial markets and the government's investment in public infrastructure, research, and workforce development. Additionally, the paragraph discusses the government's role in promoting business development through tariffs and subsidies, with a historical perspective on how these policies have evolved since the Great Depression. The mention of controversial subsidies, such as those for corporations and farms, underscores the complexity and debate surrounding these economic measures.

🛡 Protecting Consumers, Employees, and the Evolution of Economic Regulation

This paragraph focuses on the government's responsibility to protect consumers and employees, detailing various regulatory bodies and acts that have been established to ensure safety and fair labor practices. It covers the establishment of the National Labor Relations Act and the Fair Labor Standards Act, as well as the setting of federal minimum wage and the role of the Occupational Safety and Health Administration. The paragraph also highlights consumer protection agencies like the Food and Drug Administration and the Consumer Product Safety Commission. Furthermore, it provides a historical overview of the government's evolving role in economic regulation, from the laissez-faire approach of the early 20th century to the regulatory state that emerged with the New Deal and continued through the 1970s, emphasizing the enduring nature of the administrative regulatory state despite calls for deregulation.

Keywords

💡Economic Policy

Economic policy refers to the strategies and actions taken by a government to influence the economy's performance. It is central to the video's theme as it sets the stage for discussing the government's role in shaping economic outcomes. In the script, Craig introduces economic policy as the focus and delves into its various goals and instruments, such as promoting stable markets and economic prosperity.

💡Stable Markets

Stable markets are a key goal of economic policy, indicating a predictable and orderly market system. The video explains that the government's role in structuring the market system contributes to its stability. For example, maintaining law and order and minimizing monopolies are actions that ensure market stability, as illustrated by the mention of national regulations on automobile fuel efficiency standards.

💡Economic Prosperity

Economic prosperity is a broad goal of economic policy, aiming to improve the overall economic well-being of a nation. The script discusses how the government attempts to foster prosperity through various means, including regulating financial markets, public investment, and supporting research and workforce development. The concept is integral to understanding the government's efforts to enhance national wealth and quality of life.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. The Federal Reserve is highlighted in the script as the main tool the government uses to control inflation, which is crucial for maintaining economic stability and prosperity. The video implies that managing inflation is a critical aspect of economic policy.

💡Business Development

Business development in the context of economic policy involves government actions to support the growth and success of businesses. The script mentions tariffs and subsidies as tools used by the government to promote business development. This concept is essential for understanding how government policies can influence the competitiveness and health of the business sector.

💡Tariffs

Tariffs are taxes imposed on imported goods, which can protect domestic industries by making foreign goods more expensive. The video script discusses how tariffs have historically been used to shield American businesses from foreign competition, contributing to the U.S.'s rise as an industrial power. The concept is key to understanding trade policy and its impact on domestic businesses.

💡Subsidies

Subsidies are financial assistance provided by the government to support certain industries or activities. The script differentiates between indirect subsidies, like grants for infrastructure that benefit businesses, and direct subsidies, which are more controversial. Subsidies are a point of contention in the video, as they can provide an unfair advantage to certain businesses.

💡Consumer Protection

Consumer protection involves government actions to ensure that products and services are safe for consumers. The script highlights various agencies and acts that protect consumers, such as the Food and Drug Administration and the Consumer Product Safety Commission. This concept is vital for understanding the government's role in safeguarding public health and safety.

💡Regulatory State

The regulatory state refers to the system of government regulation that controls corporate activity and protects the public interest. The video script traces the historical development of the regulatory state in the U.S., from the Interstate Commerce Act to the creation of agencies like the EPA and OSHA. This concept is central to the video's narrative on the evolution of government involvement in the economy.

💡Deregulation

Deregulation is the process of removing or reducing state regulations. The script mentions the efforts since the 1980s, particularly under President Reagan, to deregulate the economy. This concept is important for understanding the shift in government policy towards reducing regulatory oversight in certain sectors.

💡Administrative State

The administrative state encompasses the network of government agencies that implement and enforce regulations. The video script discusses the permanence of the administrative state despite deregulation attempts, highlighting the enduring role of bureaucracies in achieving economic goals. This concept is key to understanding the ongoing presence of government regulation in economic affairs.

Highlights

Economic policy has broad goals and the government uses various means to achieve them, sometimes successfully.

The government's economic goals are larger and more important than personal goals, such as the humorous example of punching an eagle.

The first goal of economic policy is promoting stable markets, which includes maintaining law and order and minimizing monopolies.

National regulations, such as automobile fuel efficiency standards, help keep markets predictable.

The second goal is promoting economic prosperity, which can involve government intervention contrary to the belief of some individuals.

Regulating financial markets through the Securities and Exchange Commission is a way to build confidence in the economy.

Public investment, such as in highways and the internet, is another method the government uses to promote prosperity.

Research funding and education policy contribute to the workforce and national prosperity.

The Federal Reserve is the main tool the government uses to control inflation.

Promoting business development is a third goal, with policies such as tariffs and subsidies.

Tariffs have historically allowed American businesses to develop without foreign competition.

Subsidies can be indirect, like those for transportation infrastructure, or direct, such as assistance to specific businesses.

Farm subsidies, initially meant to help during the Great Depression, are controversial due to their current recipients.

The fourth goal is protecting consumers and employees, with the government setting labor standards and regulating workplace safety.

The federal minimum wage is a debated method of protecting workers.

Agencies like the FDA and USDA protect consumers by ensuring the safety of products and food.

The government's role in the economy has evolved significantly from the 19th century to the present day.

The advent of the administrative and regulatory state began with the New Deal and has continued despite deregulation efforts.

The federal government's belief in its role to achieve economic goals has persisted despite the complexity of modern economic issues.

Transcripts

Hello, I’m Craig and this is Crash Course Government and Politics and today I’m going

to talk a bit more about economic policy. Ran into the table there a little bit. Whoo!

Economic policy can be dangerous.

Specifically, we’re going to look at some of the broad goals of economic policy and

some of the things that the government does to try to accomplish those goals.

And we may even provide some examples of times when the government DID accomplish them, so

take that, skeptics. But, I have to admit, a lot of the time the goals are just goals.

[Theme Music]

So all people have goals and aspirations (except me) and the government, since it’s made

up of people is no different. Well I do have one goal: to punch the eagle again. And I did it. Accomplished.

Well, actually the government's different because it’s economic goals are much bigger

and more important than, say my goal of punching the eagle again. Although I would argue my

goal is pretty important. So what are these, goals of economic policy?

The first goal is promoting stable markets. We talked about how the government structures

the market system in the last episode, so I probably don’t need to repeat it.

At least I hope I don’t. You should’ve been paying attention.

But since nobody wants a malfunctioning market, most of the things the government does to

create a market system also work to make the system stable and predictable.

Maintaining law and order and minimizing monopolies are examples of government actions that make

the market system stable. I didn’t know the government maintained Law and Order – oh not the tv show, OK.

One of the more interesting ways – ok interesting to me – that the government keeps markets

predictable is through national regulations of things like automobile fuel efficiency standards.

If there were no national regulations, and states were allowed to set the rules, then

it might be possible for car makers in Detroit to build cars that live up to the mileage

standards in Michigan, but not in California, and that would be anarchy.

Well, maybe not anarchy exactly, but it wouldn’t be good, and it’d make it much more difficult

for manufacturers to know what kind of cars to make. Also, do you really want California,

the state with the biggest population, making rules for the rest of us? Of course you don’t.

The second major goal of economic policy is promoting economic prosperity. Here’s another

example of a situation where many people will tell you that the best way for the government to promote

prosperity is to get out of the way, and they may have a point, but the government doesn’t stop trying.

So what does the government do to promote prosperity? For one thing, it tries to keep

a positive investment climate and build confidence in the economy.

One way the federal government can accomplish this is through regulating financial markets

through the Securities and Exchange Commission since people won’t want to invest in the

securities markets if they think the game's fixed.

Another thing the government can do, if it’s feeling particularly Keynesian, is to spend

money on public investment in things like highways and the internet. While not actually

built by Al Gore, it did begin with a government program out of the Defense Department.

The government also pays for research through the National Institutes of Health and the

National Science Foundation, and enhances the workforce through education policy and

immigration policy, all of which contribute to national prosperity.

Another, and by no means the last, way that the government can try to make the country

more prosperous is by keeping inflation low. You can find out more about inflation from

Crash Course: Economics, but the main tool the government uses to control inflation is

the Federal Reserve, which is so complicated that it gets it’s own episode.

A third goal of government economic policy, one closely related to the first two, is promoting business development.

Many people would probably argue that promoting business development and promoting prosperity

are the same thing but policies aimed at helping businesses are slightly different and more

focused than those targeting the broader goal of promoting prosperity.

The main ways that the federal government promotes business development are through

tariffs and subsidies. Since the Great Depression, the U.S. has pretty much pursued a policy

of free trade, which means lowering tariffs on most things, which by forcing them to compete

can hurt businesses, at least in the short run.

In the past, however, high tariffs allowed American businesses to develop free from foreign

competition and this helped to make the U.S. the most powerful industrial nation in the world!

Can we use that Libertage from US History? I think Yes!

[Libertage]

Subsidies are very controversial and they come in two forms. Grants in aid for things

like transportation – building those superhighways again – provide an indirect subsidy to businesses

who don’t have to pay for the roads they use to ship the goods they make.

Most people don’t complain about this type of subsidy, because they can also be looked at as a public good.

Direct subsidies are another issue. These include direct assistance to businesses through

the Small Business Administration and government investment in firms like Sematech and, more

recently and more controversially, Solyndra.

Many people don’t think that the government should be in the business of investing in

business and that these subsidies provide the businesses that receive them with an unfair advantage.

Farm subsidies are probably just as controversial. They were put in place to help farmers during

The Great Depression, but these days, critics worry that most of the subsidies go to corporate farms.

The fourth goal of government economic policy is to protect consumers and employees. A lot

of people will tell you that the federal government doesn’t do much to protect employees these

days, and those people are probably right, but in the past it certainly did.

The government made unionization easier with the National Labor Relations Act and setting

labor standards, especially overtime rules with the Fair Labor Standards Act.

Both of these were passed in the 1930s, by the way.

Probably the most notable thing that the government does to protect workers these days is set

the federal minimum wage, but since that topic is being hotly debated as this episode is

being produced in 2015, I can’t really comment on how it’s going to turn out.

On the other hand the Occupational Safety and Health Administration does set up regulations

to prevent workers from breathing in hazardous fumes and protect them from other potentially

life threatening workplace conditions, and that’s a good thing.

As far as consumers are concerned, there are thousands of regulations that protect us to

make sure that the things we buy don’t kill or maim us. The Food and Drug Administration

makes sure that our medicines aren’t poison, and the Department of Agriculture inspects

meat, which I think is really good a idea, actually.

The National Traffic and Motor Vehicle Safety Act of 1966 made cars safer, and the Consumer

Products Safety Commission helps keep lead paint out of our toys and saves us from exploding

toasters. I like explosions as much as the next guy, but not with breakfast.

All of these goals of economic policy, promoting stable markets, promoting economic prosperity, fostering

business development and protecting employees and consumers are interrelated and important.

I’ll leave it up to you to decide if one is more important than the other three, because

that makes for excellent dinner conversation. If your dinner parties are mostly about the

role the government plays in our economy. Please invite me to those dinner parties.

I’m hungry, for roast beef and political debate.

So, to shift gears a little, let’s talk history, and how the government’s role in

regulating the economy has changed in the last 240 years or so.

So you probably remember from back when we talked about the transition from congressional

to presidential government that began with Teddy Roosevelt and really came into its own

with Franklin Roosevelt, that before the 20th century the federal government didn’t really do that much.

A lot of that has to do with fiscal policy and taxation, which we’re going to discuss

in another episode, and maybe that dinner you’re going to invite me to, but some of

it was certainly because of the way that the Supreme Court had interpreted the Commerce Clause

to mean that government regulation was suspect, and by suspect, I mean generally not allowed.

But by the end of the 19th century the Federal government’s regulatory power had begun

to change, and a lot of that has to do with one of my favorite subjects - no not Star Wars.

And no not the protection of endangered species. (punches eagle)

I’m talking about railroads (Yeah!). Let’s go to the Thought Bubble.

So, with the completion of the transcontinental railroad in 1869, travel and communication across

the U.S. became much easier and it was possible for the first time to have a national market for goods.

If you raised cattle in Kansas, you could now easily ship beef to New York or San Francisco.

Railroads were, almost by definition, interstate entities, so it was pretty clear that Congress

could regulate them. And they needed regulation because railroads had a nasty habit of discriminatory

pricing, charging much, much more for some shippers than for others. Something had to

be done and Congress stepped in with the Interstate Commerce Act in 1887, which created the

Interstate Commerce Commission to regulate railroads.

The period of time around the turn of the 20th century in the U.S. is known as the Gilded

Age and is associated with runaway capitalism and the creation of modern corporate structures

and industrial capitalists like Andrew Carnegie – or Carnegie, if you will – and John

D. Rockefeller who are heroes to some and villains to others. In response to some of

the abuses of the Gilded Age, Congress passed its first wave of regulatory legislation.

In addition to the ICC, Congress created the Federal Trade Commission to regulate trade

and the Sherman and Clayton Acts to try to counter the problem of monopolies. These anti-trust

laws are the basis of modern anti-trust regulation and have been used against Standard Oil and Microsoft.

This first wave of economic regulation didn’t have huge effects on the economy, certainly

not greater than the effects of, say World War I. In the 1920s the federal government

returned to a more traditional laissez faire approach, which lasted until the Great Depression

swept Herbert Hoover and the Republicans out of office and Franklin Roosevelt into it.

And with Franklin Roosevelt came the New Deal and the advent of what law schools sometimes

like to call the administrative and regulatory state.

Thanks Thought Bubble. We’re not going to get into details about the various laws and

regulations of the New Deal here, but luckily I think John talked about them in Crash Course: U.S. History.

John, he talks about stuff.

But in general, those regulations meant that the federal government would take an active

role in regulating certain sectors of the economy, like agriculture and transportation.

Sometimes technology played a part. There really wasn’t a need for a Federal Aviation

Administration until there were airplanes.

The next big wave of government regulation happened in the early 1970s under, of all people, president Nixon.

These new regulatory laws were different from their New Deal predecessors in that they focused

on the economy as a whole. For example the Occupational Safety and Health Administration

dealt with ALL occupations, or at least most of them, and the EPA was created to protect

the whole country’s environment.

Beginning in the 1980s with Ronald Reagan, or actually before him under Carter, the federal

government has undertaken various initiatives to de-regulate the economy, but we already

talked about deregulation in our episode on taming the bureaucracy so we don’t need to re-hash that here.

The point to remember is that, despite attempts at deregulation, the administrative regulatory

state appears to be here to stay.

So why do we have an administrative regulatory state now, even though so many people complain

about it? Part of the reason has to do with the remarkable staying power of bureaucracies,

which are harder to kill than Wolverine.

Nowadays the federal government not only has economic goals, goals like increasing prosperity

that most of us agree upon, it also has a sense, maybe even a belief that it should

try to achieve those goals.

This is a long way from the view of the federal government that persisted through the 19th

century, one which many people say was handed down by the framers. But times change, and

the world and the U.S. has gotten much more complex.

Economic concerns take up an increasingly large part of our lives and many of them,

especially big macroeconomic policies require big solutions. And for many Americans, but

certainly not all of them, the best solution we have is government.

Thanks for watching. See you next time.

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