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Chapter 13
Domestic Policy
To Accompany Comprehensive, Alternate, and Texas Editions
American Government: Roots and Reform, 10th edition
Karen O’Connor and Larry J. Sabato
 Pearson Education, 2009
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Theories of Public Policy
 Elite theory.
 Bureaucratic theory.
 Interest group theory.
 Pluralist theory.
The Policy-Making Process
 Problem recognition, or identifying a need for change.
 Agenda setting, or determining the issues to discuss.
 Policy formulation, or the crafting of proposed action.
 Policy adoption, or the approval of policy.
 Budgeting, or identifying funding sources.
 Policy implementation, or carrying out new policies.
 Policy evaluation, or determining what a policy is doing.
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Figure 17.1- Policy-Making Process
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Evolution of Income Security
 Before the 1890s, government did little.
 Great Depression created a greater need for assistance.
 Civil Works and Works Progress Administrations.
 Social Security Act represents beginning of welfare state.
 Creates old age insurance program.
 Establishes unemployment assistance.
Roots of Health Care Policy
 Governments have long advocated for public health.
 National health insurance was considered in 1930s.
 Failed due to lobbying of American Medical Association.
 Government’s role has expanded over time.
 No universal coverage exists.
Non-Means Based Programs Today
 Entitlement programs provided regardless of income.
 Funded by payroll taxes.
 Social Security-- old age, survivors, and disability.
 Solvency of the Social Security program is a concern.
 Unemployment insurance.
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Figure 17.2- Social Security
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AV- Unemployment Rates
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Means Tested Programs Today
 Entitlement programs provided only if individuals qualify.
 SSI, to help needy aged or blind.
 Temporary Assistance for Needy Families (TANF).
 TANF largely run by the states through block grants.
 Earned Income Tax Credits.
 Food stamps.
Table 17.1- Welfare Program Recipients
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Health Care Programs Today
 Government provides care for veterans and Indians.
 Sponsors research at National Institutes of Health.
 Most people use single-payer private healthcare system.
 Costs are rapidly increasing.
 Government funds Medicare and Medicaid.
 Also plays a major role in public health management.
Figure 17.3- Health Care Spending
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Roots of Energy Policy
 By 1970s, U.S. had grown dependent on foreign oil.
 Oil embargoes posed a serious crisis.
 Government set conservation and efficiency standards.
 Creation of Department of Energy.
 1978 Energy Tax Act and National Energy Act.
Roots of Environmental Policy
 First Earth Day in 1970.
 Creation of the Environmental Protection Agency.
 Clean Air Act of 1970 and 1972 Clean Water Act.
 Federal policies continue to grow in 1970s.
Policy Hibernation
 Energy and Environment fade in 1980s.
 Reagan took steps to reduce government’s role.
 Petroleum supply became more stable.
 Bush and Clinton continue limited involvement.
Return to Prominence
 9/11 attacks make energy security a major issue.
 Increasing concerns about global warming.
 2007 Energy Independence and Security Act.
 Growing interest in alternative energy.
Chapter 13
Economic Policy
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To Accompany Comprehensive, Alternate, and Texas Editions
American Government: Roots and Reform, 10th edition
Karen O’Connor and Larry J. Sabato
 Pearson Education, 2009
Roots of Economic Involvement
 Regulation was limited in the nineteenth century.
 Prevailing attitude was laissez-faire.
 As business cycles changed, need for intervention grew.
 Growth in tariffs.
 Railroads required interstate regulation.
 Sherman Anti-Trust Act of 1890.
Progressive Era
 Increased regulation of railroads, business, and banking.
 Growth in regulation of food industry.
 Creation of the Federal Reserve System.
 Establishment of Federal Trade Commission.
Depression and the New Deal
 Laissez-faire state becomes interventionist.
 Creation of Federal Deposit Insurance Corporation.
 Founding of Securities and Exchange Commission.
 Passing Agricultural Adjustment Acts.
 Ratification of new labor and industrial regulations.
Social Regulation Era
 Economic regulation controls business and industry.
 Social regulation sets quality and safety standards.
 Social regulation emerges in 1960s and 1970s.
 Agencies like EPA, OSHA, NTSA.
 Brings new businesses into governmental regulation.
Deregulation
 Reduction in market controls in favor of competition.
 Airlines are first to be deregulated in 1978.
 Attempts to end crop subsidies in mid-1990s.
 Radio deregulated in 1996.
 Mixed results and calls to “reregulate.”
Stabilizing the Economy
 Economic stability is condition of economic growth.
 Instability involves inflation or recession.
 Inflation occurs when demand is high and prices rise.
 Recession is marked by a decline in the economy.
Monetary Policy
 Money establishes a system of exchange for goods.
 Supply controlled by Federal Reserve.
 Board of Governors sets rules and regulations.
 System of banks governed by reserve requirements.
 Establish discount rate of interest.
 Work within open market operations.
 Must cooperate with Congress and executive branch.
Figure 18.1- Federal Reserve System
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Fiscal Policy
 Use of public policy to maintain economic stability.
 Discretionary fiscal policy is choice of deficit or surplus.
 First serious use was in 1960s.
 Large partisan divide over appropriate policy.
 International economy has a important influence.
 Globalization creates new priorities and wage systems.
Figure 18.2- Minimum Wage Growth
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The Budget Process
 Government raises money form a variety of sources.
 Spending goes largely to defense and human resources.
 President prepares budget and submits to Congress.
 Congress authorizes all spending.
 Major budget conflicts can emerge.
 Bush administration spent record amounts.
Table 18.1- Federal Budget Process
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Figure 18.3- Federal Revenues
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Budget Deficits and the Debt
 A deficit is the amount that spending exceeds revenue.
 Debt is the total of all deficits, plus interest.
 Continual effort to limit deficits.
 Attempts to mandate balanced budgets have failed.
 Bush administration brought about record deficits.
Figure 18.4- Discretionary Spending
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AV- Deficit Projection
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Funding the War in Iraq
 Wars cost tremendous amounts of money.
 Cost of Iraq war could exceed $2 trillion.
 These costs place serious burden on the budget.
 They also detract from domestic spending.
The Subprime Mortgage Crisis
 Low interest rate, low down payment mortgages.
 Source of crisis may go back to Clinton administration.
 Low interest rates after 9/11 also contributed.
 Government was forced to intervene.
 Took over Fannie Mae and Freddie Mac.
 Congress passed $700 billion bailout bill.