Comprehensive Exam - Public Finance Section

Choose one of the following 2 scenarios and answer all of the parts a-j for that scenario.

 

1. The state government of California plans to close as many as 70 of its 279 parks because of a severe budget deficit. The state has cut the parks budget by over $22 million in the last 2 years, and by over $75 million over the last 10 years.

(http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/05/14/MNL61JG0QO.DTL&ao=2)

 

Note this question has 10 parts intended to guide you in analyzing some aspects of this issue. If you think carefully each part can usually be concisely explained in a few sentences using concepts and principles developed by public finance economists.

 

a. In designing a benefit cost analysis of whether to close a park what are some of the key data or information you would want to gather and why? Feel free to use a list with some notes on reasoning for this part.

b. Once you have the information you would use in a benefit cost analysis how would you handle benefits and costs that occur in different periods of time?

 

c. How might you weigh the value of unique historical features?

 

d. Briefly explain a public finance rationale for government provision of parks.

 

e. Does it matter that some benefits or costs may be on-budget or off-budget items? Be sure to give an example of each to illustrate your explanation.

 

f. What are some alternatives you might consider for funding a park if you wanted to keep in open, and why?

 

g. Suppose a general sales tax is used. What would be the likely incidence of such a tax?

 

h. Suppose a tax on lodging (hotels, motels, recreational vehicle parks, houseboats, and campgrounds) is used. What would be the likely incidence of such a tax? Would it be fair?

 

i. Would the socioeconomic characteristics of the people that tend to visit a park matter in evaluating the benefits?

 

j. Does it make more sense for park funding to be handled at the federal, state, or local level? Why?

OR2. As a part of President Obamas Blueprint for a Secure Energy Future new tax incentives to raise building energy efficiency would provide about $ 1 billion in incentives in 2012. According to Obama this will help promote employment, reduce our energy dependence and help the environment. (http://www.whitehouse.gov/sites/default/files/blueprint_secure_energy_future.pdf)

 

Note this question has 10 parts intended to guide you in analyzing the proposed policy. If you think carefully each part can be concisely explained in a few sentences.

 

a. In designing a benefit cost analysis of the proposed incentives for energy-efficiency building investments what are some of the key data or information you would want to gather?

b. Once you have the information you would use in a benefit cost analysis how would you handle benefits and costs that occur in different periods of time?

c. Briefly explain an externality related economic rationale for this policy.

d. How might you prioritize incentives for alternative energy-efficiency investments?

e. Briefly explain the difference between social costs, on budget costs, and off budget costs using examples for this policy.

f. What would tend to determine the economic incidence of the benefits of this policy?

g. What factors would influence whether there are multiplier effects from a policy such as this?

h. Concerned about the budget deficit someone has suggested instead putting a tax on heating oil and natural gas. How might this have similar effects? How might it differ?

i. What factors would influence the equity of the redistribution effects of a tax on heating oil and natural gas?

j. Does it make more sense for this project to be handled at the federal, state, or local level? Why?