1. PUBLIC POLICY OVERVIEW

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

3. 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 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. 4 Types of Policies

5. Taxing and Spending Progressive taxes: a tax where the tax rate increases with increased wealth Proportional Taxes: a tax in which the rate is the same regardless of wealth (flat tax) Regressive taxes: a tax that places a higher burden on those with lower income

6. 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%

7. 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 20% o Interest on National Debt 6% o Nondefense discretionary Spending 19%

8. Taxing and Spending EntitlementsEntitlements 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. Government Financial SupportGovernment Financial Support o Purpose: to encourage a particular type of private sector action. o Business Subsidies – Oil, Airline, agricultural, “green” industries all receive support o Tax Incentives (Home mortgage interest payments are tax deductible)

9. 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

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

11. Social Policy Most federal social programs were developed in the 1930s as part of the New DealMost federal social programs were developed in the 1930s as part of the New Deal Social Policy is controversial due to disagreement over allocation of resources and role of the federal government Social Policy is controversial due to disagreement over allocation of resources and role of the federal government –Poverty –Education –Crime –Health care –Immigration –Drugs

12. Foreign Policy President and Congress Share powersPresident 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)