Question

1. Under which President's administration were there multiple years of the federal budget running a surplus?

Richard Nixon (1969-74)

Ronald Reagan (1981-89)

Bill Clinton (1993-2001)

George W. Bush (2001-09)

2. In the March/April 2013 issue of Dollars and Sense, Gerald Friedman shows that the increases in the federal deficit during the G. W. Bush (Bush 2) and B. Obama administrations was primarily due to:

the Wall Street bailout.

decreases in federal revenue.

increased federal spending on the stimulus.

A and C.

3. Which of the following is NOT part of Gerald Friedman's Progressive Tax-Reform Agenda?

Elimination of Federal Income Tax on income below the Poverty Line.

Elimination of the exemption from the Social Security payroll tax of income above $118,500.

Taxing capital gains at the same rate as earned income

. Restoration of a tax on financial transactions.

4. Which is not part of the "Golden Straightjacket?"

Privatize pensions

Increase research and development

funding Reduce corruption

Privatize state-owned enterprises

5. Ha-Joon Chang argues that modern developed countries usually achieved their high level of development by practicing:

Most of the prescriptions in the Golden Straightjacket.

Most of the policy prescriptions known as the Washington Consensus.

Protectionism.

All of the above.

Answer 1

Ans.1- c) Bill Clinton (1993-2001)

The U.S. government suffered budget deficits every year from 1970 through 1997.  In 1998 Bill Clinton was president, the government finally recorded a surplus. There also were surpluses in 1999, 2000 and in 2001. The United States had a budget deficit in 2002, and it has recorded budget deficits every year since.

2. b) decline in federal revenue

Gerald Friedman shows that the increases in the federal deficit during the G. W. Bush (Bush 2) and B. Obama administrations was primarily due to "Declining Revenue". He argues that contrary to “out of control” spending, it is the decline in revenues, not rising spending, that accounts for the swelling federal deficit under Presidents Bush and Obama. Revenues fell dramatically due to the Great Recession because laid off workers and shuttered businesses.

Ans 3.a) Elimination of Federal Income Tax on income below the Poverty Line.

Solution- Gerald Friedman's Progressive Tax-Reform Agenda includes:

Taxing capital gains at the same rate as earned income. Restoration of a tax on financial transactions. Eliminate the tax preference for high wage income.  The retirement payroll tax that funds Social Security only applies to the first $118,500 of income so about 6 percent of wage and salaryearners only pay the tax. Restoring the Social Security payroll tax for the richest 1 percent would raise over $50 billion.  Taxing low-wage employers would encourage higher wages while raising more than $14 billion in revenue.

Ans4.c) funding to reduce corruption

Solution-Thomas Friedman refers to the Washington Consensus as the ‘Golden Straitjacket’. He argues that it is a straitjacket because it ‘narrows the political and economic policy choices of those in power to relatively tight parameters'. The Washington Consensus calls for a neoliberal state and privatization of industries as well as pensions. It also calls for private research and development. However, it does not call for state funding to reduce corruption.

Ans 5. c) Protectionism.

Solution- He argues that the  the WTO rules should allow the developing countries to use tariffs and subsidies for industrial development. This is the call for protectionism where they should also be allowed to have less stringent patent laws and other intellectual property rights laws.

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