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Chapter Fourteen: Domestic and Economic Policy 1 Chapter Fourteen Learning Objectives • Describe the policymaking process, including: -- Agenda building -- Policy formulation -- Policy adoption -- Policy implementation -- Policy evaluation 2 Chapter Fourteen Learning Objectives • Discuss the rising cost of heath care and provide several reasons for this trend. • Define Medicare and Medicaid. • Explain who are the uninsured. • Describe the recent legislative developments regarding universal health care coverage in the United States. 3 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. 4 Chapter Fourteen Learning Objectives • Describe trends in crime rates over the last few decades, including changes in the rate of violent crime, theft, and murder. • Define “incarceration rate” and explain the demographic categories of prisoners. • Compare U.S. incarceration rates with those of other nations. • Explain the nature of the political dispute over global warming. 5 Chapter Fourteen Learning Objectives • Explain the concept of a moral hazard and provide examples from the financial crisis of 2008. • Explain the basic ideas behind Keynesian economics and how they have been applied to policies in America (the Great Depression). • Define recession and explain how the federal government attempts to measure unemployment. 6 Chapter Fourteen Learning Objectives • Detail the mechanisms of the public debt, distinguishing between net and gross public debt. • Describe how the Federal Reserve System implements monetary policy (increasing or decreasing the rate of growth of the money supply) including key concepts of loose and tight monetary policies and the impact of time lags on monetary and fiscal policy. 7 Chapter Fourteen Learning Objectives • Define progressive and regressive taxes and identify which taxes fall into each category. • Talk about the political challenges of our tax system. 8 Chapter Fourteen Contents I. II. III. IV. The Policymaking Process Health Care Immigration Crime in the Twenty-first Century 9 Chapter Fourteen Contents V. Energy and the Environment VI. The Politics of Economic Decision Making VII. The Politics of Taxation 10 The Policymaking Process • The Policymaking Process Domestic Policy 11 The Policymaking Process Five Steps of Policymaking Agenda Building An issue must get on the agenda 12 The Policymaking Process Congress must be aware that a problem exists and requires congressional action AP Photo/Charles Dharapak 13 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. 14 The Policymaking Process 15 The Policymaking Process - Policy Formulation Various policy proposals are discussed among government officials and the public 16 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. 17 The Policymaking Process - Policy Adoption This step involves choosing a specific policy from among the proposals that have been discussed. 18 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. 19 The Policymaking Process - Policy Implementation This step involves the implementation of the policy alternative chosen by Congress. 20 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. 21 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. 22 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. 23 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). 24 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. 25 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 26 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 27 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 28 Health Care Today, there are about 60 million, exceeding over $300 billion The Federal government pays 55 percent of total costs. 29 Health Care 30 Health Care 31 Health Care Universal Health Insurance President Obama signed into law on March 23, 2010, the Patient Protection and Affordable Care Act. 32 Health Care On March 30, the President signed the Health Care and Education Reconciliation Act of 2010. AP Photo/Stephen Chemin 33 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. 34 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 35 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. 36 Health Care Health-care Reform: Adopting a Policy Universal Health Insurance Personal Mandate Public Option David McNew/Getty Images 37 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. 38 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 39 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. 40 Immigration - Concerns about Unauthorized Immigration Laws and customs Coyotes may exploit or abuse clients Contributes to the illegal drug trade 41 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. 42 Immigration Immigration and the Obama Administration Administration instituted harsh crackdowns on employers of undocumented workers. Immigration reform was tabled for Health Care. 43 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. 44 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. 45 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. 46 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. 47 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. 48 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. 49 Crime in the Twenty-first Century 50 Crime in the Twenty-first Century 51 Crime in the Twenty-first Century 52 Crime in the Twenty-first Century 53 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 54 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. 55 Energy and the Environment Global Warming There is much debate over the amount of warming that will occur. Johnny Johnson/Getty Image 56 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. 57 Energy and the Environment 58 Energy and the Environment The BP Deepwater Horizon Oil Spill AP Photo/Bill Haber 59 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 60 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. 61 Energy and the Environment - - Cleanup Efforts The Federal Government’s Response The Failure of Regulation Public Reaction 62 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 63 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. 64 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 65 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. 66 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. 67 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 68 - 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 69 The Politics of Economic Decision Making 70 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. 71 The Politics of Economic Decision Making The Public Debt in Perspective Gross Public Debt Net Public Debt 72 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. 73 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 74 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”. 75 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. 76 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. 77 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. 78 The Politics of Economic Decision Making - Loose and Tight Monetary Policies Monetary Policy Loose Monetary Policy Tight Monetary Policy 79 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. 80 The Politics of Economic Decision Making - - Monetary Policy During a Recession Regulating Banks 81 The Politics of Economic Decision Making 82 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. 83 The Politics of Taxation - Individuals find legal loopholes to avoid paying the highest percent of taxes. Loopholes and Lowered Taxes Loophole Progressive Tax 84 The Politics of Taxation - Regressive Tax A tax that falls in percentage terms as income rises 85 The Politics of Taxation 86 The Politics of Taxation 87 The Politics of Taxation Who Pays? Democrats Republicans The U.S. tax system 88 Questions for Critical Thinking ? Please choose a recent issue in domestic policy and trace its steps through the process of policymaking. In your opinion, out of all the policy proposals discussed, what policy would you have adopted? 89 Questions for Critical Thinking ? If the U.S. spends spends twice as much as Britain and Japan, why do opponents fear a national health plan? 90 Questions for Critical Thinking ? Rather than passing national health care legislation, why does Congress regulate the insurance companies more stringently? Why aren’t insurance companies regulated like pharmaceutical companies? 91 Questions for Critical Thinking ? Why do Americans tend to romanticize socialized medicine? When in reality stories of long lines, waiting lists and paying for premium doctors appear to be the norm? 92 Questions for Critical Thinking ? Why do Americans tend to romanticize national healthinsurance or socialized medicine; when, in reality, stories of long lines, waiting lists and paying for premium doctors appear to be the norm? 93 Questions for Critical Thinking ? Is the issue over immigration truly over illegal versus legal status? If so, why are so many Americans anti-immigrant and pro-deportation? In your opinion, do immigrants truly take jobs away from legal citizens? 94 Questions for Critical Thinking ? One of the arguments is to deport illegal immigrants. In your opinion, what happens to the child who was illegally brought to American when they were a baby; should they be deported back to a country that they have no connection to? 95 Questions for Critical Thinking ? Is an amnesty program (with a deadline date) the best solution to solving the problem of immigration in America? What will the United States look like without illegal immigrants? 96 Questions for Critical Thinking ? Why are so many states and the federal government building prisons and not working on institutional mechanisms to prevent those released from returning to crime? 97 Questions for Critical Thinking ? Please describe the prisonindustrial-complex. In your opinion, is the cure worst than the disease? 98 Questions for Critical Thinking ? Do you believe that the federal government should have regulated the industry more stringently to prevent disasters like the BP Deepwater Horizon from occurring? 99 Questions for Critical Thinking ? Did the Obama Administration respond to the disaster as quickly as they should have? Do you think that they could have done more to BP to hold them accountable? 100 Questions for Critical Thinking ? Do you think there should be a ban against foreign corporations and individuals purchasing U.S. Treasury Bonds? Does that present a conflict between a country who has a lot of debt and one that owns the debt? 101 Questions for Critical Thinking ? Is Keynesian economic theory relevant today? How would he explain the large debt that exists today? 102 Questions for Critical Thinking ? Should the federal government be held to the standards as the states when balancing the budget? A state cannot have an unbalanced budget, if so, they will have to shut down. Should the federal government be held to the same standard? 103 Questions for Critical Thinking ? Do you believe a flat tax is a better alternative to income taxes based on a sliding scale? 104