Date: 1/10/2012
To: Lead Economist Laura
From:
Subject: Voter Victor / Project Part 1 / U.S. Economic System

The information provided below is for Voter Victor. For an understanding of the of the US (United States) economic system and how the government is involved, one must have an understanding of what type of economy the US has, the three primary levels of US government (city/county, state and federal), what is expected of these governing levels and what must be provided to them to support their functions (funding). By definition (Definition below) the US has a Mixed Economy but due to the limited government involvement, it can be said that the US has a Market Economy (definition below). An example of this production of electricity by a coal burning plant. There is no limit on how much electricity can be made or how much coal can be used but the government has regulated how much pollution may be produced as a result of burning the coal.
Mixed Economy: An economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.
Market Economy: An economy in which the decision of households and firms interacting in markets allocate economic resources.

The three levels of government, local (city and county), state, and federal, will now be explained including what services they provide, how those services are funded and voter involvement. At the local level, the government provides the following services: Police and Fire protection, Court systems, education, sanitation (if not privatized), basic utility services (if not privatized), parks and recreation, libraries, property zoning, social services, and road building/maintenance. These services are funded by tax payers by means of property taxes, local sales tax, bonds and state funding. Representatives, who are elected and appointed (by an elected representative) determine the needs of the community. Many of these needs are simply voted on by these representatives and budgeted accordingly. Otherwise they will be placed on a ballot for voter approval/disapproval. At this level, the voter has the most influence on who speaks for them and what will be done with their tax money. At the state level, the government provides the following services: Emergency and Security response (State Police and National Guard), Resource allocation (forestry, mining, farming, ranching), Road building/maintenance and regulation, Social Services and programs, court systems, educational guidance and many more smaller programs. These programs are funded through state income taxes (corporate and individual) and/or sales tax, road/vehicle taxes and federal funding. The voter elects their country representative and governor. The Federal government is the largest of the governing bodies. It is responsible for national defense, law enforcement against crimes committed across state and federal borders (FBI, Dept. of Treasury, etc), setting financial regulation( through production of money, lending money and setting policy), resource allocation and protection (Dept of Interior, EPA, BLM, Forest Service, etc), interstate highways and transportation, international policy and diplomacy, constitutional law and interpretation, social security, welfare programs, funding distribution to support state programs, etc. The Federal government is funded through individual income taxes, corporate taxes, payroll taxes, excise taxes and other various means of taxation. At this level, the voter will vote for their state representatives directly but do not vote directly vote for the president and vice president. The president is elected by the electoral college, meaning that the state representatives vote for the president usually based upon the popular vote of the state that they represent. How do these government organizations affect/impact the economy? These government organizations pass laws and regulations that impact the economic market in many ways. Environmental regulations cause the cost of products to go up but protect the environment, they also encourage research into alternatives. How we deal with other nations (diplomacy) has an impact on the cost of products traded between nations. Taxation impacts the economy at all levels yet is required to support required programs. Taxation can be both good and bad for the economy. As an example, a tax on gasoline. This tax increases costs of goods to the consumer, yet is the source of funding to build and maintain roads allowing products to get to market in a timely manner and with less wear and tear on the transport vehicles, thus saving costs to the consumer. Another example is over taxation which will stymie growth, yet under taxation will leave vital government programs underfunded or not funded at all. At all levels of government, laws and regulations can be passed to encourage or discourage business, these laws and regulations are driven by what either the people or elected/appointed officials see is necessary or desired by their represented population. In the US we are close to a Market Economy, yet there are many laws and regulations that by definition make us a Mixed Economy Individuals in the US should learn about economics, our political system, and educate themselves on the representatives that they have the opportunity to vote for. They should then vote for the representative who they feel will do the best for what that individual believes in or is the correct direction that their community, state or nation needs to go.

Bibliography
R. Glenn Hubbard and Anthonly Patrick O'brien. "Microeconomics 3rd Edition." Pearson Education, 2010.