Transcript Public Policy

PUBLIC POLICY
OVERVIEW
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
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Widely-distributed costs: Income tax, Social security tax
Narrowly-concentrated costs: Factory air emission
standards
Widely-distributed benefits: Social Security benefits,
national defense
Narrowly-concentrated benefits: farm subsidies
4 Types of Policies
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
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
Taxing and Spending
• Sources of Federal Revenue:
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Individual Income taxes: 49%
Social Insurance (payroll) taxes: 33%
Corporate taxes: 10%
Excise taxes: 3%
Borrowing: varies depending upon deficit
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 20%
o Interest on National Debt 6%
o Nondefense discretionary Spending 19%
Taxing and Spending
• Entitlements
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.
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Managing the Economy
• 2 types of Economic Policies
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Fiscal Policy: taxing and spending (budget).
Handled by Congress and the President
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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.
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
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