PUBLIC POLICY PUBLIC POLICY OVERVIEWOVERVIEW

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 concentratedo Widely-distributed costs: Income tax, Social security taxo Narrowly-concentrated costs: Factory air emission

standardso Widely-distributed benefits: Social Security benefits,

national defenseo Narrowly-concentrated benefits: farm subsidies

4 types of Policies• Majoritarian: Widely distributed costs and widely distributed

benefitso 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 benefitso 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 Individual Income taxes: 49%o Social Insurance (payroll) taxes: 33%o Corporate taxes: 10%o Excise taxes: 3%o Borrowing: varies depending upon deficito 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 spento 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

• EntitlementsEntitlementso Automatically spent (without annual review of other Automatically spent (without annual review of other

programs)programs)o Ex: Social Security, Medicare, Federal Pensions, Interest on Ex: Social Security, Medicare, Federal Pensions, Interest on

National DebtNational Debto 2/3 of federal budget. Problem becomes that Congress and the 2/3 of federal budget. Problem becomes that Congress and the

President cannot control much of spending.President cannot control much of spending.

• Government Financial SupportGovernment Financial Supporto Purpose: to encourage a particular type of private sector Purpose: to encourage a particular type of private sector

action. action. o Business Subsidies – Oil, Airline, agricultural , “green” industries Business Subsidies – Oil, Airline, agricultural , “green” industries

all receive supportall receive supporto Tax Incentives (Home mortgage interest payments are tax Tax Incentives (Home mortgage interest payments are tax

deductible)deductible)

Managing the Economy

• 2 types of Economic Policieso 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:

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

Social Policy• Most federal social programs were developed in the Most federal social programs were developed in the

1930s as part of the New Deal1930s as part of the New Deal• Social Policy is controversial due to disagreement over Social Policy is controversial due to disagreement over

allocation of resources and role of the federal allocation of resources and role of the federal governmentgovernment– PovertyPoverty

– EducationEducation

– CrimeCrime

– Health careHealth care

– ImmigrationImmigration

– DrugsDrugs

Foreign Policy• President and Congress Share powersPresident and Congress Share powers

o President is commander in chief and can deploy President is commander in chief and can deploy troops, while Congress controls the money funding troops, while Congress controls the money funding the military and can declare war. the military and can declare war.

o President makes appointment for ambassadors, President makes appointment for ambassadors, but Senate approvesbut Senate approves

o President makes treaties, but Senate ratifies President makes treaties, but Senate ratifies (some presidents use Executive Agreements, (some presidents use Executive Agreements, which do not need to be ratified to get around this)which do not need to be ratified to get around this)