How the Government Promotes Economic Interests

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  • 0:01 Protecting Economic Interests
  • 0:58 Promoting Business
  • 3:25 Promoting Labor
  • 4:38 Promoting Agriculture
  • 6:08 Lesson Summary
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Lesson Transcript
Instructor: Christie Rowe
The following lesson will cover how the government promotes its economic interests through businesses, labor, and agriculture. There will be a short quiz following the lesson to check your understanding.

Protecting Economic Interests

Wouldn't it be nice if money grew on trees, so that anytime we needed to buy something, we could just go outside and pluck off a few dollars? While this sounds like a wonderful world to live in, it's just not the case. In fact, even if it was the case, having too much money in the economy can actually be a bad thing.

On the other hand, if people have no money to spend, then that too is a bad thing. How then do we keep the machine that is our economy up and running while walking that delicate tightrope of having enough money in the economy to provide long-term economic growth? Well...let's give a hand for our very own U.S. government! YAY!

Our government does its best to promote our country's economic interests. Business is the major beneficiary of the government's efforts. However, labor and agriculture also receive support as well. Let's go ahead and take a look at how the government promotes the economic interests of these three areas.

How the Government Promotes Business

As we said earlier, business is the major beneficiary of the federal government's efforts to promote economic interests. The government does a number of things to help businesses. First, the government can provide any number of programs, such as loans and research grants, to help businesses prosper. When businesses prosper, it's win-win for our government as well because those loan repayments also boost the economy.

Second, the government also gives incentives to businesses in the form of favorable tax laws. Nobody likes to pay taxes because that just means having to pay more for something. However, taxes are a necessary burden. In order for the government to give out loans and provide programs for people to partake in, it needs money, and that money comes in the form of the tax revenue that it collects.

The government realizes that lower taxes encourage people to spend more because buying things will cost less overall, and so the government often offers businesses tax credits for capital investments and tax deductions for certain costs of running a business.

A tax credit is a dollar-for-dollar subtraction off a tax bill's total. For example, if a business commits to investing in something that might help the economy - say, a car manufacturer that promises to build more energy-efficient cars - then that company may get a portion of their tax bill forgiven. For example, if a company received a tax credit of $1,000, it would be a straight subtraction from the company's total tax bill. So if that bill started at $3,000, the company's new tax bill would only be $2,000 after receiving the credit.

Conversely, a tax deduction limits the amount of taxable income a company has. Deductions often come in the form of partial debits for certain things that a company has to pay for in order for their business to operate efficiently. For example, say a business CEO has to travel many miles a month for work. The CEO may be able to deduct some of the expenses from his trips from his total taxable income. And let's say this deduction was $1,000. Thus, if his total taxable income before the deduction was $10,000 and the tax rate was 30%, this CEO's tax bill would be $3,000. However, with the deduction, his taxable income now becomes $9,000 in the eyes of the government, and so his total tax bill is now only $2,700.

How the Government Promotes Labor

While businesses are big entities, the people that work for those businesses drive the economy just as much. If we didn't have people working for businesses or buying the goods that businesses produce, then we wouldn't have businesses. Labor, for its part, gets government assistance through laws concerning such matters as worker safety, minimum wage laws, and collective bargaining laws with unions.

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