Transcript Public Policy Overview

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
o
o
o
o
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
• 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 Types of Policies
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:
o
o
o
o
o
o
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
o
Automatically spent (without annual review of other
programs)
o
o
Ex: Social Security, Medicare, Federal Pensions, Interest on
National Debt
2/3 of federal budget. Problem becomes that Congress and the
President cannot control much of spending.
• Government Financial Support
o
Purpose: to encourage a particular type of private sector
action.
o
o
Business Subsidies – Oil, Airline, agricultural , “green” industries
all receive support
Tax Incentives (Home mortgage interest payments are tax
deductible)
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.
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
o
Social Policy
• Most 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
–
–
–
–
–
–
Poverty
Education
Crime
Health care
Immigration
Drugs
Foreign Policy
• President and Congress Share powers
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)
o