Transcript Chapter 14 - Stjohns

Chapter Fourteen:
Domestic and
Economic Policy
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Chapter Fourteen Learning Objectives
• Describe the policymaking process,
including:
-- Agenda building
-- Policy formulation
-- Policy adoption
-- Policy implementation
-- Policy evaluation
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Chapter Fourteen Learning Objectives
• Explain the meaning of a personal health
insurance mandate.
• Describe increases of unauthorized
immigrants and the effects of this increased
population.
• Explain the attempts of the U.S. House and
Senate to pass bills controlling the flow of
unauthorized immigrants and the
companies who hire them.
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Chapter Fourteen Contents
I.
II.
III.
IV.
The Policymaking Process
Health Care
Immigration
Crime in the Twenty-first Century
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Chapter Fourteen Contents
V. Energy and the Environment
VI. The Politics of Economic Decision
Making
VII. The Politics of Taxation
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The Policymaking Process
•
The Policymaking Process

Domestic Policy
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The Policymaking Process

Five Steps of Policymaking
Agenda Building
 An issue must get on the agenda
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The Policymaking Process

Congress
must be aware
that a problem
exists and
requires
congressional
action
AP Photo/Charles Dharapak
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Timeline of Economic Crisis
• Late 90s – early 2000s, people were able to obtain
mortgages at a low interest rate, but many were obtained
“subprime mortgages”
• Around 2004 – Banks began to stop issues subprime are
adjustable rate mortgages
• 2004 – 2008 – Banks lost billions from people who were
not able to pay pack loans, foreclosures skyrocketed,
and the credit of both banks and individuals suffered
• 2008 – POLICY Decision - $700 Bank Bailout Bill
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The Policymaking Process

In late 2008, as banks were no
longer taking excessive risks, it
was feared that this could lead
to a potential freeze on credit
and lending by the nation’s
firms; thus leading to a
possible shut down of the
economy. Financers pleaded to
the government for assistance.
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The Policymaking Process
-
Policy Formulation
 Various policy proposals are
discussed among government
officials and the public
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The Policymaking Process

Bush-appointed Secretary of
Treasury Henry Paulson
proposed via three-page memo
a $700 billion bill to buy toxic
mortgage-related assets.
Congress created a 110-page
bill filled with pork and oversight
provisions.
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The Policymaking Process
-
Policy Adoption
 This step involves
choosing a
specific policy
from among the
proposals that
have been
discussed.
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AP Photo/Richard Drew
The Policymaking Process


After the House refused to pass
the bank bailout bill, Senate
leaders decided to amend an
existing bill already passed by
the House
The Troubled Assets Relief
Program (TARP) was 451
pages filled with earmarks to
attract votes.
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The Policymaking Process
-
Policy Implementation
 This step involves the
implementation of the policy
alternative chosen by Congress.
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The Policymaking Process

Officials soon realized that
TARP could be spent on
preferred stock in banks, rather
than buy toxic banks, which
would not resolve the financial
crisis, eventually returning
TARP funds to the government.
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The Policymaking Process
-
Policy Evaluation
 After a policy has been
implemented, it is evaluated.
 Groups inside and outside
government conduct studies to
determine what actually happens
after a policy has been in place for
a given period of time.
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The Policymaking Process


Initially, the public didn’t mind
the switch to preferred stock,
rather they were concerned
with employee compensation
and future lending practices.
Soon the TARP program was
viewed as a Wall Street bailout
for special interests.
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Health Care
•
Health Care

America spends almost twice as much
as Britain or Japan.
Spending is measured by the
percentage of the gross domestic
product (GDP).
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Health Care

The Government’s Role in Financing
Health Care Through 2009
Medicare—a state-federal program,
specifically designed to support U.S.
residents over 65
 This program is funded by tax on
wages and salaries.
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Health Care



Created in 1965, pays hospital
and physician’s bills for those
residents over 65
Second-largest domestic
spending program after Social
Security
Government has cut
reimbursement funds and have
capped specific procedures
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Health Care

The Government’s Role in Financing
Health Care Through 2009
Medicaid—a state-federal program,
specifically designed to subsidize
health care for the poor
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Health Care


This program is
funded out of
general
government
revenues.
In 2007, 34 million
people were
enrolled in the
program.
AP Photo/J. Scott Applewhite
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Health Care


Today, there are about 60 million,
exceeding over $300 billion
The Federal government pays 55
percent of total costs.
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Health Care
25
Health Care
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Health Care

Universal Health Insurance
President Obama signed into law
on March 23, 2010, the Patient
Protection and Affordable Care
Act.
VERY CONTROVERSIAL
Obamacare explained
Obamacare Rebutal
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Health Care

On March 30, the
President signed
the Health Care
and Education
Reconciliation Act
of 2010.
AP Photo/Stephen Chemin
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Health Care



Largest expansion of government
services since Lyndon B. Johnson
An opt-out provision if an
individual rejects the coverage
Illegal immigrants will not be
covered.
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Health Care

Health-care Reform Building an
Agenda
The Problem of the Uninsured
 Over 45 million Americans are
uninsured
 The uninsured are young, entrylevel workers without health
benefits
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Health Care

Health-care Reform Building an
Agenda
The Problem of High Costs
 New technology and lifesaving
measures are a costly burden on
the system.
 The Medicare trust fund was
projected to run out of funds in
2017.
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Health Care

Health-care Reform:
Adopting a Policy
Universal Health
Insurance
Personal Mandate
Public Option
David McNew/Getty Images
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Health Care

Health-care Reform: Implementing
Policy
Most of the provisions do not go into
effect until 2014 and the last
provision is not scheduled until
2018.
Voters will not receive benefits for at
least two election cycles.
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•
Americans have spent many billions of dollars on health care over the last
half-century. What kind of return have they received for that spending? One
way to answer the question is to observe that since 1950, the life
expectancy of the average American has increased about one year with the
passage of each span of six years. Much of that increase in life expectancy
is doubtless due to health-care spending. In today’s dollars, since 1950 the
average American spent $11,400 on health care in every span of six years.
Therefore, we could say that on average, Americans spent $11,400 to buy
one year of additional life. If someone asked you how much your life is
worth in dollar terms, you probably would be hard-pressed to provide a
figure. You might reject the question entirely. Insurance companies and
government agencies, however, routinely need to estimate the economic
value of a person’s life. A typical estimate by economists would be about
$75,000 a year. This is about six times what it cost to buy those additional
years of life. By these calculations, health-care spending appears to be a
bargain. That does not mean, however, that we are spending too little on
health care. To ask if we are spending too little, the correct question is as
follows: If we spend one additional dollar on health care, will we get one
additional dollar’s worth of benefit? This is a hard question to answer.
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•
We stated in this chapter that Americans spend more on health care than
the people of almost any other country. It is not an accident that the United
States is also the only truly rich country that does not have a national health
insurance system. Insurance provision by the government tends to hold
down total costs for several reasons. One is that the government is in an
excellent bargaining position to demand lower prices from medical care
providers and from pharmaceutical companies. But is such bargaining a
good idea? The pharmaceutical industry, for example, makes more profits
selling drugs in America than in Germany, where the government has
negotiated lower prices. One effect of the high profits that the industry earns
in the United States is that it is able to fund a vast research effort aimed at
finding new drugs. Some experts believe that the industry would be unable
to mount such an effort if Americans paid German prices for drugs. (Such
thoughts may have been on the minds of the Republicans who barred the
government from negotiating lower drug prices as part of the Medicare drug
benefit.) American spending, in other words, may be providing the rest of
the world with a “free ride” in terms of pharmaceutical research. What
applies to pharmaceuticals may also apply to other branches of medicine. It
is possible that America’s lavish medical spending is one of the main
engines driving worldwide progress in medical science.
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Immigration
•
Immigration

The Issue of
Unauthorized
Immigration
Approx. 12 million
undocumented
aliens
Hispanic populations
have grown
dramatically in the
southwestern states.
AP Photo/Ralph Fresco
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Immigration
-
Characteristics of the
Undocumented Population
 Studies show unauthorized
immigrants return home to retire.
 A great deal send money home to
relatives .
 Many live in mixed households;
some have lawful family
members.
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Immigration
-
Concerns about Unauthorized
Immigration
 Laws and customs
 Coyotes may exploit or abuse
clients
 Contributes to the illegal drug
trade
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Immigration

Attempts at Immigration Reform
Public opinion is contradictory.
 1/5 favor immediate deportation.
 Though a serious problem, most
don’t believe it should be a priority
issue.
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Immigration

Immigration and the Obama
Administration
 Administration instituted harsh
crackdowns on employers of
undocumented workers.
 Immigration reform was tabled for
Health Care.
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Immigration

The Arizona Immigration Controversy
In April 2010, Arizona’s governor
signed legislation that would make it
a crime to not carry immigration
documentation.
 The 2010 election and health care
legislation forced immigration to
take a seat behind top issues.
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Crime in the Twenty-first Century
•
Crime in American History

Crime has been an issue of concern
throughout America’s history.
Industrialization and bureaucratic
institutions like factories and schools
socialized citizens into patterns of
conformity and rules.
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Crime in the Twenty-first Century
-
-
In the 20s and 30s, organized crime
flourished during prohibition.
Crime rates began to rise in the 50s
and grew substantially in the 1960s.
Since 1995, violent crime rates have
declined.
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Crime in the Twenty-first Century

The Prison Population
Many Americans believe the best
solution to curbing crime is to
impose stiff prison sentences.
 In 2008, 2.3 million people were
imprisoned in jails.
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Crime in the Twenty-first Century
-
The Incarceration Rate
 Men are ten times more likely to
be incarcerated than women.
 Prisoners are also
disproportionately African
America.
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Crime in the Twenty-first Century
-
Prison Construction and Conditions
 Prisons are releasing criminals
early due to overcrowding.
 Several states are building more
prisons to house the growing
inmate population.
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Crime in the Twenty-first Century
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Crime in the Twenty-first Century
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Crime in the Twenty-first Century
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Crime in the Twenty-first Century
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Energy and the Environment
•
Energy and the
Environment
-
Energy policy
addresses two key
issues

America’s
reliance on
foreign oil

Potential global
warning caused
by increased
emissions of
CO2
Theo Heimann/AFP/Getty Images
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Energy and the Environment

Oil—A Strategic Issue
The United States imports threefifths of the petroleum it consumes
primarily from the Middle East .
President Obama has attempted to
reduce the U.S. dependence on
foreign oil.
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Energy and the Environment

Global Warming
There is much
debate over
the amount of
warming that
will occur.
Johnny Johnson/Getty Image
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Energy and the Environment


Scientists’ agree that global
warming will be significant.
Documentaries like Al Gore’s An
Inconvenient Truth, brought the
issue into the limelight.
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Energy and the Environment
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Energy and the Environment

The BP
Deepwater
Horizon Oil
Spill
AP Photo/Bill Haber
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Energy and the Environment
-
Extent of the spill
 Largest oil spill in American
history
 Over 3,850 square miles
 Gushing oil rate of 5,000 barrels
a day
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Energy and the Environment
-
Attempts to Plug the Leak
 BP, the company responsible,
failed at plugging the leak.
 Failed attempts resulted in
additional amounts of oil that
leaked into the ocean.
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Energy and the Environment
-
-
Cleanup Efforts
The Federal
Government’s
Response
The Failure of
Regulation
Public Reaction
59 Times
Redux/Stephen Crowley/The New York
The Politics of Economic Decision Making
•
The Politics of Economic Decision
Making

Good Times, Bad Times
Recession
Unemployment
Inflation
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The Politics of Economic Decision Making
-
To try and control peaks and valleys
of the national economy, the
government has several policy
options.
 One is to change the level of
taxes or government spending.
 Another is to influence interest
rates and the money side of the
economy.
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The Politics of Economic Decision Making

Fiscal Policy
Keynesian Economics
 School of thought that supports
the use of government spending
and taxation to help stabilize the
economy
 Summary of Keynesian
Economics
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The Politics of Economic Decision Making

Government Spending and Borrowing
Keynes believed that forces of
supply and demand operated too
slowly on their own in such a serious
recession.
 Government should step in and
spend what is needed to return
the economy to a more normal
state.
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The Politics of Economic Decision Making

Government spending can be
financed through increasing taxes
and borrowing money.
 It is essential that the spending
be financed by borrowing, and
not by taxes.
 Government should run a
budget deficit.
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The Politics of Economic Decision Making
-
Discretionary Fiscal Policy
 Beginning with President John F.
Kennedy, policymakers have
attempted to use Keynesian
methods to fine-tune the
economy.
 Discretionary fiscal policy—left
to the judgment of the
policymaker
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-
The Politics of Economic Decision Making
Criticisms of Keynes
 Those who object to
Keynes’ theories
argue that fiscal policy
has no effect or that it
has negative side
effects that outweigh
the benefits.
Walter Stoneman/Samuel Bourne/Getty Images
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The Politics of Economic Decision Making
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The Politics of Economic Decision Making

Deficit Spending and the Public Debt
U.S. Treasury Bonds
Public Debt, or National Debt
 The total amount of debt carried
by the federal government
 China and Japan own most of
the debt of the United States.
68
The Politics of Economic Decision Making

The Public Debt in Perspective
Gross Public Debt
Net Public Debt
Our Debt Ceiling - $16.4 Trillion
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The Politics of Economic Decision Making

Are We Always in Debt?
From 1998 to 2002, President Bill
Clinton obtained a tax increase as
the nation emerged from a mild
recession.
 A series of events led to the fall of
the surplus, increasing the federal
debt starting in 2002.
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The Politics of Economic Decision Making
-
Events that led to the increase in
public debt
 The “dot-com bust”, which
lowered the rate of growth and the
federal government’s tax receipts
 September 11, 2001, and the
spending associated with
Homeland Security
 The War in Iraq
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The Politics of Economic Decision Making


Congressional discretionary
programs
In 2009, President Obama pushed
for the largest spending bill not
seen since WWII with “The
Economic and Reinvestment Act
of 2009”.
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The Politics of Economic Decision Making

Monetary Policy
Federal Reserve System (The Fed)
 The agency created by Congress
in 1913 to serve as the nation’s
central banking organization.
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The Politics of Economic Decision Making

AP Photo/Alex Brandon
The Fed
regulates the
amount of money
in circulation;
supervises
banking industry;
holds reserves
deposited by
most banks; and
so on.
74
The Politics of Economic Decision Making
-
Federal Open Market Committee
 The most important body within
the Federal Reserve System
 The Committee decides how
monetary policy should be carried
out.
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The Politics of Economic Decision Making
-
Loose and Tight Monetary Policies
 Monetary Policy
 Loose Monetary Policy
 Tight Monetary Policy
76
The Politics of Economic Decision Making
-
Time Lags for Monetary Policy
 The time between a policy and its
implementation may take several
months.
 Reliable information may not be
available for months.
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The Politics of Economic Decision Making
-
-
Monetary Policy During a
Recession
Regulating Banks
78
The Politics of Economic Decision Making
79
Review of Terms
Keynesian Economics
Budget Deficit
Treasuries
National Debt (Public Debt)
Gross Public Debt
Net Public Debt
Federal Reserve System
Credit
Interest Rates
80
The Politics of Taxation
•
The Politics of Taxes

Federal Income Tax Rates
The first couple of dollars you make
is not taxed.
The last couple of dollars you make
is the most taxed.
81
The Politics of Taxation
-
Individuals find legal loopholes to
avoid paying the highest percent of
taxes.

Loopholes and Lowered Taxes
Loophole
Progressive Tax
82
The Politics of Taxation
-
Regressive Tax
 A tax that falls in percentage
terms as income rises
83
The Politics of Taxation
84
The Politics of Taxation
85
The Politics of Taxation

Who Pays?
Democrats
Republicans
The U.S. tax system
86
All The Different
Taxes
• Federal Income Tax – Between 10
and 35% (Varies by income)
• State Income Tax (Ibid)
• SS tax – 4.6% of gross
• Medicare – 1.5% of gross
• Payroll tax – varies
• Other state and local taxes
87
• What muddies the waters –
Deductions, credits, and exemptions
– what are some examples of these?
• What about investments, etc?
88
• Tax revenue collected $2,674,007,818,000
• 2012 Budget $128,900,000,000
• How much was actually spent?
Over $3,000,000,000,000
89
• Other options – Flat Tax, National
Sales Tax
90
Questions for Critical Thinking
?
 Do you believe a flat tax is a better
alternative to income taxes based
on a sliding scale?
91