Governtnent's
Rofein theEconolny
In his first inaugural addressin 180L,
Thomas ]efferson expressedhis beliefs
concerning the role of government:
What more is necessaryto make us a
happy and prosperouspeople?Stitl one
thing more . . . a wise and frugalgovernment, which shatlrestrainmen from
injuringone another,which shattleave
them otherwisefree to regulatetheir
own pursuitsof industryand improvement, and shal[not take from labor the
breadit has earned.
jefferson was expressing an economic
policy called laissez-faire. In French,
this phrase means "let (people) do (as
they choose)." This idea became widely
known when Scottish economist Adam
Smith published his landmark book
The Wealth of Nations (1776).In it, Smith
explained and defended the laissez-faire
philosophy. He argued that an economy
will do best if government does not
.- ;
interfere. If left to pursue their own selfinterest, individuals will naturally act in
ways that will benefit society. To make
a profit, business people will provide
products that consumers want to buy.
Competition from other businesses offering similar products will keep prices low.
The laissez-faire philosophy is an
underlying principle of capitalism, even
today. Howev er, as in Jefferson's time,
economists and government leaders disagree about how much the government
should get involved in the economy.
Government today plays many
important roles in the economy. It passes
laws to maintain fair competition and
protect consumers from harm. It provides goods and services that benefit
society as a whole, such as parks and
a national military. It runs programs
such as Social Security, Medicare, and
Medicaid to help elderly people and
those living in poverty. The chart below
shows how the federal government
spent its money in zA0J..
Federal
Spending,2001
(TotalBudget$1,835
billion)
U)
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0.
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Other690
'r
I
Aidto Low-lncome
Families
690
3
Social
Security
2390
t-r
u
tJ
d
F
>\
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("
Education,
Housing,
Transportation,
Foreign
Aidl9?o
Ii
>.
Defense
16?o
U
Medicaid
790
onNational
Interest
Debtll9o
l29o
Medicare
35
Name
Governtnent's
Rofein theEconotny
Directions: Answerthe foltowing questions.
1. Using the quote from jefferson's 1801 inaugural address, sumrl:.arlze in your own words three important points he made
about the role of government
2. Basedon Jefferson'squote, how do you think he would feel
about a proposal to impose an income tax? Explain.
3.
According to laissez-faire philosophy, what role should
government play in the economy?
4.
Describe three roles the government plays in the economy
todav.
5.
According to the chart, the federal government spent the
largest portion of its money on what program in Z00I?
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6. The total budget in 2001was g1,835billion. How many dollars
did the federal government spend to pay the interest on the
national debt?
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7. Making Inferences Why do you think our economy today does
not run totally on the laissez-fairephilosophy?
Y
o
H
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-.
H
o
a
0
56