PUBLIC POLICY

Five Steps in the Policy Making Process agenda building – identifying a problem and getting it on the agenda policy formulation – the debate that occurs between government officials, between the public in the media, and in campaigns policy adoption – the selection of a strategy for addressing a problem policy implementation – the administration of the selected policy (by bureaucrats, the courts, etc.) policy evaluation – when the public, officials and groups determine if the selected policy has the desired impact

Defining Poverty low income poverty threshold in 2000 was $17,500 for a family of four the poverty level has changed since then to account for changes in the consumer price index, which enables the government to adjust the poverty level by taking into account changes in prices of goods and services the official poverty level is based on pre-tax income, but does include in-kind subsidies, like food stamps and subsidized housing

Major Government Assistance Programs Temporary Assistance to Needy Families (TANF) –replaced AFDC in 1996, this program uses federal funds which are administered by the states to help needy families. Supplemental Security Income (SSI) – provides a minimum income to the elderly and disabled who do not qualify for Social Security benefits. Food Stamps – these coupons that can be used to purchase food are now distributed to more than 28 million Americans with little or no income Earned Income Tax Credit (EITC) – a tax credit used by low income workers who get back part or all pf the their Social Security taxes

Economic Policy Making: How much responsibility should the government have for keeping the U.S. economy healthy? Fiscal Policy – the use of changes in government spending or taxation to change national economic variables, like the unemployment rate Keynesian Economic Theory: using fiscal policy can alter economic variables (increasing government spending during economic turn downturns, for example) Monetary Policy – the use of changes in the money supply to change credit markets, unemployment and the inflation rate (inflation vs. deflation) Monetary policy is determined by the Federal Open Market Committee (FOMC), part of the Federal Reserve System

Budget Deficits and the Public Debt the deficit is when the government spends more money than it receives in any given year the public debt is the total amount of debt carried by the federal government, also called the national debt

Public Policy Basics

COSTS vs. BENEFITS Cost = any burden that a group must bear Benefit = any satisfaction that a group will enjoy from a policy

COSTS vs. BENEFITS Costs and Benefits can be widely distributed or narrowly concentrated o Widely-distributed costs: Income tax, Social security tax o Narrowly-concentrated costs: Factory air emission standards o Widely-distributed benefits: Social Security benefits, national defense o Narrowly-concentrated benefits: farm subsidies

4 types of Policies Majoritarian: Widely distributed costs and widely distributed benefits o EX: Social Security, National Defense Interest Group: narrowly concentrated costs and narrowly concentrated benefits: o EX: Tariffs on imports and exports

4 types of Policies Client: Widely distributed costs and narrowly concentrated benefits o EX: Pork barrel pet projects for Senators states (Alaska’s Bridge to nowhere) Entrepreneurial: narrowly concentrated costs and widely distributed benefits: o EX: Consumer product safety legislation

4 Types of Policies Widespread Costs Narrow Costs Narrow Benefits Widespread benefits Majoritarian Ex. Soc. Sec., Nat Defense Interest Group Ex. Tariffs Client Politics Ex. Pork Barrel Project Entrepreneurial Ex. Consumer Product Safety

ECONOMIC POLICY

Taxing and Spending Progressive taxes: a tax where the tax rate increases with increased wealth Regressive taxes: a tax that places a higher burden on those with lower income

Taxing and Spending Sources of Federal Revenue: o Individual Income taxes: 49% o Social Insurance (payroll) taxes: 33% o Corporate taxes: 10% o Excise taxes: 3% o Borrowing: varies depending upon deficit o Other: 4%

Taxing and Spending Discretionary Spending: Government has a choice in how money is spent Nondiscretionary: Government must spend the money for programs or commitments previously made Where the money is spent o Direct benefit payments to individuals (Social Security, Medicare, Medicaid) 55% o National Defense 16% o Interest on National Debt 10% o Nondefense discretionary Spending 19%

Taxing and Spending Entitlements o Automatically spent (without annual review of other programs) o Ex: Social Security, Medicare, Federal Pensions, Interest on National Debt o 2/3 of federal budget. Problem becomes that Congress and the President cannot control much of spending.

Taxing and Spending Budget Process o Agencies prepare their budget needs and submit to President’s Office of Management and Budget (OMB) o OMB makes recommendations to President o President submits budget to Congress o Congressional Budget Office (CBO) checks President’s budget o Ways and Means committee in house review taxes and revenues. Appropriations committees review spending o Agencies lobby for money o Majority vote in both houses passes budget o President signs or vetoes bill (no line-item veto)

Managing the Economy 2 types of Economic Policies o Fiscal Policy: taxing and spending (budget). Handled by Congress and the President o Monetary policy: regulation of the money supply by the Federal Reserve Board (the Fed). Adjustments of Interest rates

Managing the Economy Economic Theories: 1. Keynesian economics: Government can manipulate the health of an economy through spending.

Managing the Economy Economic Theories: 2. Supply-side economics: Cuts in taxes will produce business investment that will offset loss of $ due to lower taxes. 3. Monetarism: Money supply is the most important factor for determining the health of the economy

Managing the Economy Trade Policy o Trade deficits (US imports more goods from other nations than it exports) have led to calls for protectionism o Recent push for Free trade  GATT  NAFTA

Government Regulation Rules imposed by government on business to achieve a desired goal Antitrust policies 1890s-1910s to counter ill effects of capitalism Creation of regulatory agencies like FTC, FCC and SEC

Environmental Policy

Key issue is the extent to which the environment should be protected and the costs of doing so. Key legislation: o Clean Air acts and Clean water Acts o EPA created in 1970

Social Welfare

Government Subsidies Government Financial Support o Cash (ie TANF- Temporary Assistance for Needy Families) o Tax Incentives (Home mortgage interest payments are tax deductible) o Credit subsidies- Veterans Administration provides Home loans o Benefit in kind subsidies: Non cash benefits (foods stamps, Medicare, Medicaid)

Government Subsidies Purpose: to encourage a particular type of private sector action. EX - Homeownership is encouraged by the government, so Mortgage interest is tax deductible.

Government Subsidies Business Subsidies: o Oil companies receive tax breaks to encourage oil production to make us less dependent upon foreign oil o Airlines received government aid post 9/11 to help offset lost revenue. o Government pays farmers to not plant certain crops to keep production down and stabilize prices

Government Subsidies Social Welfare Subsidies: o Social Security (no means test, i.e. one does not have to prove that one lacks the means in order to qualify for the benefit.) Financed by FICA payroll tax o Medicare (no means test) o Unemployment Insurance (no means test) o Temporary Assistance to Needy Families (TANF = means test) o Supplemental Security Income (means test) o Food Stamps (means test) o Medicare federal medical coverage for people on TANF or SSI (means test)

Foreign Policy

President and Congress Share powers o President is commander in chief and can deploy troops, while Congress controls the money funding the military and can declare war. o President makes appointment for ambassadors, but Senate approves o President makes treaties, but Senate ratifies (some presidents use Executive Agreements, which do not need to be ratified to get around this)

Foreign Policy President and Congress Share powers o WAR POWERS ACT  Response to Vietnam  President must notify Congress within 48 hours of deploying troops  President must bring troops home after 60 days unless further authorized by Congress to keep troops in hostile situation  Act has had little impact on the execution of our military policy

Foreign Policy Presidential Support for Foreign policy: o Secretary of State o Secretary of Defense o Director of National Intelligence o CIA o NSA o National Security Council-”NSC” (coordinates efforts that effect National Security)  President, VP, Sec of State, Sec of Defense, CIA head, National Security Advisor