Domestic Policy

1. Domestic Policy Policy Areas (Economic, Business, Environment, Health Care)

2. Economic Policy • 2 Types of Economic Policy: • Fiscal: taxing/spending considerations (Conducted by Congress/President) • Monetary: regulation of money supply by “the Fed” (adjust interest rates) Developments in economic policy: • Industrial Revolution’s excesses led Congress to make greater use of regulatory powers (e.g., breaking up trusts, regulating meat and drugs, regulating rates of the R.R.) • Great Depression led to greater regulation of economy (unemployment, bank failures demanded aggressive action)

3. Economic Approaches • Keynesian economics (John Maynard Keynes) • Gov’t can manipulate the economy through spending; Increase spending in hard times to stimulate the economy; decrease in good times • Supply-Side economics (Reagan ‘81-’89) • Cuts in taxes will produce business and individual investment which will compensate for lost tax revenue (Reagan cuts taxes, but increased spending) • Monetarism (The Fed) • Monetary policy; not fiscal policy is most important for guiding economy of nation; control of money supply through adjustment of interest rates stimulate or tightens spending

4. Modern Developments • Push for balanced budget amendment (Gramm-Rudman; 1985) • “Paygo” passed in the early 1990’s (Clinton) • Expiration of “paygo” and war on terrorism in early 2000’s leads to huge budget deficits • Trade policy • Increasing trade deficits (China; Rising oil prices) • Outsourcing of jobs (loss of U.S. jobs) • Push for free trade; rather than for tariffs • NAFTA • CAFTA

5. Regulation • Antitrust policies in early 20th C. designed to break up monopolies and restore competition. (Standard Oil controlled 90%) • Working conditions; safety of products; eliminate bribery • Recent Developments • Less regulation during Reagan/Bush • Corporate mergers have exploded to be competitive w/ foreign competition (e.g, AOL Time-Warner) • Collapse of subprime mortgage has led to call for re-regulation • Arguments For • Protects consumers/workers; protects those w/o “voice” • Arguments Against • Markets will work for benefit of consumers; kills jobs; increase in prices

6. Deregulation • Airlines • Regulated before 1978; controlled rates/fares • Congress deregulated industry by allowing competition • Some airlines could not compete • Smaller cities lost service • Airlines cut services/but lowered fares • Telecommunications • Telecommunications Act of 1996 • Companies could offer all services (phone, cable, internet) • Provided for regulation of internet content (struck down by S.C.) • Allowed for V-chip controls for parents • Evaluation • Restores competition? • Encourages innovation • Lower prices for consumers • Problem: Companies have to deal w/ state regulations that may be different

7. Environmental Policy • Environmental policy affected by federalism • Key issue: Extent of protection vs. costs of protection (competing interests) • Key legislation • National Environmental Policy Act (1969); Air Quality Act(1967); Clean Water Acts (1970’s); EPA (1970); Superfund (1980) • Three types of policy • Entrepreneurial (Clean Air Acts; only businesses or state pays cost) • Majoritarian (Increase in gas tax; everyone benefits) • Client Group (Superfund; ANWAR; people pay; oil companies benefit) • Question: Which type of policy is Endangered Species Act? (Spotted Owl vs. Logging)

8. Health Care • Private health care • Traditional approach: fee for service; paid for by insurance • HMO’s: health maintenance organization • Problems • Rising costs, uninsured, high cost of malpractice, paperwork, unnecessary procedures, lack of flexibility • Reforms • Single payer (socialized medicine), requiring coverage by employers or require people to buy health insurance • Competition across state lines (Conservative) • Voucher system (Paul Ryan)