GOVT

1. GOVT CHAPTER 15 Domestic Policy

2. Learning Objectives

3. The Policymaking Process

4. Issue Identification and Agenda Setting • Issue identification is part of the first stage of the policymaking process. • The second part of the first stage is called agenda setting, which involves getting an issue on the political agenda to be addressed by Congress.

5. Policy Formulation and Adoption • The second stage involves the formulation and adoption of specific plans for achieving a particular goal, such as healthcare reform. • Key participants typically include the president, members of Congress, administrative agencies, and interest group leaders. • Some issues get on the political agenda but never proceed beyond that stage.

6. Policy Implementation • Implementation of national policies necessarily require the cooperation of the federal government and the various state and local governments. • Policy implementation also involves agencies in the executive branch. Once Congress enacts legislation, the executive branch enforces the new policy. • The courts are involved in implementation because legislation and regulations of the new policy must be interpreted and applied by the courts.

7. Policy Evaluation • The final stage of policymaking involves evaluating the success of a policy during and following its implementation. • Groups both inside and outside the government evaluate the policy. Congress may hold hearings to obtain feedback; scholars and scientists may conduct studies.

8. Policymaking versus Special Interests • Every bill that passes through Congress is a compromise and an opportunity for members of Congress to help constituents. • For example, the Emergency Economic Stabilization Act of 2008 contained almost $14 billion in tax-break extensions for businesses and special provisions benefiting rural schools, film and television producers, makers of toy wooden arrows, etc.

9. Health-Care Policy

10. Medicare and Medicaid • The government pays for health care in a variety of ways. Most federal spending on health care, however, is accounted for by Medicare and Medicaid. • Medicaid is a joint federal-state program which provides health-care subsidies to low-income persons. • More than 60 million people are in the program.

11. Medicare and Medicaid • Medicare is the federal government’s health care program for persons over the age of 65. • Medicare is now the government’s second largest domestic spending program, after Social Security. • By 2030, the 65 and older population is expected to double.

12. Republican Health Care Proposals: Let the Market Rule • McCain’s proposals during the 2008 presidential campaigns for reforming health care focused on cost containment, accomplished by relying on free-market mechanisms. • This plan would grant any eligible family a $5000 income tax break to pay for private health care insurance. • The biggest problem for many was the plan to fund the $5000 income tax break by taxing existing employer-provided insurance.

13. The Democrats Propose Universal Coverage • During the 2008 presidential campaigns, all Democratic candidates proposed universal health insurance plans. • Three committees in the House of Representatives reported out a joint proposal in July 2009, which assumed that employer-provided health insurance would continue to be a major part of the system.

14. The Democrats Propose Universal Coverage • A government sponsored insurance plan, known as the public option, would be available as a competitor of major insurance coverage. • Households with incomes in excess of $350,000 would have to pay a health care surcharge on their income taxes.

15. The Democrats Propose Universal Coverage • The Senate committee responsible for health care also reported out a bill in July. • It was similar but contained no public option and left out the income tax surcharge on the wealthy. • Instead, it sought to raise revenue with a scheme that included taxes on insurance companies and the most expensive employer-provided plans.

16. The Health-Care Debate • One of the most hotly debated issues was the issue of an individual mandate which would have required all Americans to have health insurance. • Without the federal mandate, the mathematics of a reform proposal would not work; the premiums of all Americans would be needed to make a universal insurance system a reality.

17. The Health-Care Debate • The public option was central to Republican hostility toward Democratic proposals. • Those who rejected this option were motivated by opposition to the expansion of governmental power. • Advocates of the public option contended that it would provide needed competition. Opponents argued that it could lead to the destruction of private-sector health insurance and a nearly complete federal takeover.

18. The Health-Care Debate • The greater part of the opposition came from the conservative movement and from the Republican Party, not from interest groups. • In August of 2009, members of Congress were shouted down by angry crowds at “town hall” meetings. • Many demonstrators believed that health care reform was only one of several steps toward a vast federal takeover that would crush individual freedoms.

19. Energy Policy

20. The Problem of Imported Oil • Our nation imports about 3/5 of its petroleum supply. • Oil imports are a potential problem because many of the nations that export oil are not particularly friendly to the United States. • Fortunately, half of our oil comes from Canada and Mexico. • In July 2008, the price of oil spiked, forcing U.S. gasoline prices above $4 per gallon. Experts believe that oil prices will rise again.

21. The Problem of Imported Oil: U.S. Energy Policies • In the 1970’s, the federal government imposed fuel mileage standards on cars and trucks. • Many economists have argued that the best way to encourage fuel economy would be to impose new federal taxes on gasoline and diesel fuel. • In 2009, President Obama issued higher fuel efficiency standards for cars and trucks.

22. Global Warming • Observations by agencies such as NASA suggest that during the last century, average global temperatures have increased by about 0.74 degrees Celsius. • Most climatologists believe that this global warming is the result of human activities and the release of greenhouse gases.

23. Global Warming • Those who dispute the consensus on global warming argue that any observed warming is due largely to natural causes and may not continue into the future. • Attitudes about global warming have become highly politicized. • Some on the political right contend that global warming is a giant liberal hoax and many on the political left believe that the right-wing refusal to accept global warming threatens the future of the human race.

24. Global Warming: Renewable Energy • Renewable energy does not rely on extracted resources such as oil and coal, that can potentially run out. • Hydroelectric energy, generated by water flowing through dams, is a widely used technology. • Windmills are now under construction in many locations.

25. Global Warming: Cap-and-Trade Legislation • The American Clean Energy and Security Act of 2009 was approved by the House, which would establish a cap for CO2 emissions. Major emitters would need permits, which they could buy and sell or trade on the open market. • Over time, the cap would decline, and free permits would be phased out over 10 to 15 years. • The Senate proposed a similar plan.

26. Economic Policy

27. Monetary Policy • The Federal Reserve System (the Fed) was established by Congress as the nation’s central banking system in 1913. • Governed by a board of seven governors, including a powerful chairperson, each appointed by the president and approved by the Senate. • The Fed and the Federal Open Market Committee (FOMC) make decisions about monetary policy several times each year.

28. Monetary Policy • In times of recession and high unemployment, we should pursue an easy-money policy to stimulate the economy by expanding the rate of growth of the money supply. • This would lead to lower interest rates and induce consumers to spend more and producers to invest more. • In times of rising inflation, the Fed does the reverse, reducing the rate of growth in the amount of money in circulation. • This would cause interest rates to rise, inducing consumers to spend less and businesses to invest less.

29. Fiscal Policy • Rising unemployment and economic recession • Stimulate economic activity by increasing government spending, decreasing taxes, or both. • Low unemployment and rising prices • Curb economic activity by reducing government spending, increasing taxes, or both. • Keynesian economics suggests that the forces of supply and demand operate too slowly in recessions, and the government should undertake actions to stimulate the economy during such periods.

30. Fiscal Policy and the Federal Tax System • The American income tax system is progressive – as you earn more income, you pay a higher tax rate on the additional income earned. • In 1960, individuals paid 52% of total federal tax revenues. By 2009, this proportion was more than 80%. • The action-reaction syndrome: for every government action, there will be a reaction by the public.

31. The Federal Tax System: Tax Loopholes • Years ago, Congress imposed very high tax rates on high incomes; it also provided for more loopholes, which enabled wealthy individuals to decrease tax bills. • The Tax Reform Act of 1986 was intended to lower taxes and simplify the tax code. Tax increases under the George H.W. Bush and Clinton administrations prompted lobbying efforts that resulted in loopholes and a tax code more complex than before the 1986 Act.

32. The Public Debt • Every time there is a federal government deficit, there is an increase in the total accumulated public debt – the total value of all outstanding federal government borrowing. • As long as the government can collect taxes to pay interest on its public debt, it will never go bankrupt. • Due to the financial meltdown that began in 2008, Congress passed legislation that involved hundreds of billions of dollars in additional spending.

33. The Public Debt • Today, over 50% of the U.S. net public debt is owned by foreign individuals, foreign businesses, and foreign central banks. • If these foreigners decide to sell U.S. government bonds, it might lead to a collapse in the government bond market in this country.

34. POLITICS ON THE WEB www.whitehouse.gov www.bartleby.com/124 www.Millercenter.org/academic/americanpresident www.4ltrpress.cengage.com/govt