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Chapter 16
Domestic &
Economic Policy
Five Steps in the Policy
Making Process
• Agenda building – identifying a problem and
getting it on the agenda
• Policy formulation – the debate that occurs
between government officials, between the
public in the media, and in campaigns
• Policy adoption – the selection of a strategy for
addressing a problem
• Policy implementation – the administration of the
selected policy (by bureaucrats, the courts, etc.)
• Policy evaluation – when the public, officials and
groups determine if the selected policy has the
desired impact
Defining Poverty
• Low income poverty threshold in 2000 was
$17,500 for a family of four, today it is
$23,050.
• The poverty level has changed since then to
account for changes in the consumer price
index, which enables the government to
adjust the poverty level by taking into
account changes in prices of goods and
services.
• The official poverty level is based on pre-tax
income, but does include in-kind subsidies,
like food stamps and subsidized housing
Major Government
Assistance Programs
• Social Security-provides monthly payment to people who
are retired or unable to work.
• Temporary Assistance to Needy Families (TANF) –replaced
AFDC in 1996, this program uses federal funds which are
administered by the states to help needy families.
• Supplemental Security Income (SSI) – provides a
minimum income to the elderly and disabled who do not
qualify for Social Security benefits.
• Food Stamps – these coupons that can be used to
purchase food are now distributed to more than 28 million
Americans with little or no income
• Earned Income Tax Credit (EITC) – a tax credit used by
low income workers who get back part or all pf the their
Social Security taxes
Major Government
Assistance Programs
• The Welfare Reform Act of 1996 provided for the
devolution of the welfare system.
• The major change was that most welfare recipients
were now limited to two years of assistance at one
time, with a lifetime limit of five years. Also
allowed states to deny benefits to unmarriedteenage mothers.
• Homelessness continues to be a hot topic issue.
Some people believe that the Welfare Reform Act
exacerbated the problem.
Crime
• America has been no stranger to crime.
• The public demands protection from criminals,
but also they want fair treatment from law
enforcement officials.
• When violent crime increases, the public calls
for more police action.
• When police use unpopular tactics to crack
down on crime, the public often accuses the
police of violating their rights.
Crime
• The criminal justice system is a very
costly one for taxpayers.
• Estimates in most states show that 5
times more in spent on incarcerating an
inmate than is spent on the education of a
child for one year.
• The “War on Drugs” has put a strain on
the criminal justice system.
Crime
• Illegal drug use can often result in “turf wars” between
rival drug gangs.
• Drug addicts often result to crime in order to satisfy
their drug addiction.
• Recreational drug use has remained steady despite the
failed efforts of government sponsored drug prevention
programs.
• Drug arrests have led to an overcrowding problem in
U.S. prisons.
– Possible solutions: Rehabilitation programs instead
of incarceration or legalize certain types or amounts
of drugs for personal use.
Crime
• Another major devastating crime that our
government has had to deal with has been
terrorism.
• This includes foreign terrorism (9/11), and
domestic terrorism (Mass shootings).
• The government must walk a delicate tightrope when their actions potentially take away
rights not only from citizens but from
suspected foreign terrorists.
Environmental Policy Making
• Growing public awareness about the
environment since the 1970s and 1980s.
• Major environmental problems like oil spills
and toxic waste sites have forced the
government to formulate long-term policy
aimed at protecting the environment.
• Environmental policy restrictions on companies
are often blamed for job loss and for hurting
the economy.
Environmental Policy Making
1899 – Refuse Act
1948 – Federal Water Pollution
Control Act
1955 – Air Pollution Control Act
1963 – Clean Air Act
1965 – Clean Air Act Amendments
1965 – Solid Waste Disposal
1965 – Water Quality Act
1967 – Air Quality Act
1969 – National Environmental
Policy Act
1970 – Clean Air Act Amendments
1972 – Clean Water Act (Federal
Water Pollution Control Act
Amendments)
1972 – Federal Environmental
Pesticide Control Act
1974 – Clean Water Act
1976 – Resource Conservation and
Recovery Act
1977 – Clean Air Act Amendments
1980 – Comprehensive
Environmental Response,
Compensation, and Liability Act
1990 – Clean Air Act Amendments
1990 – Oil Pollution Act
1996 – Food Quality and
Protection Act
1999 – Chemical Safety
Information, Site Security, and
Fuels Regulatory Relief Act
Economic Policy Making
• Typically, in dealing with economic decisions,
policy makers are asked to make policy trade-offs.
• Taxes are a method used to raise revenue for the
government.
• Subsidies are a method used by the government to
assist producers of a certain commodity.
• The questions in dealing with taxes and subsidies
is who shall pay and who shall receive?
Social Security
•
•
Social Security was established in 1935 to
provide benefits to retired persons or
others who qualify. Benefits were
provided through taxing current workers.
Two problems facing Social Security:
1. The ratio of recipients of Social Security to
workers have decreased dramatically.
2. The life expectancy of Americans has
increased and will continue to increase.
Social Security
• Proposals to fix Social Security:
–
–
–
–
Raise taxes
Reduce benefit payouts
Increase age requirements
Privatize Social Security
Politics of Fiscal and
Monetary Policy
• Fiscal Policy – the use of changes in government spending
or taxation to change national economic variables, like the
unemployment rate
• Keynesian Economic Theory posits that using fiscal policy
can alter economic variables (increasing government
spending during economic turn downturns, for example)
• Monetary Policy – the use of changes in the money supply
to change credit markets, unemployment and the inflation
rate
• Monetary policy is determined by the Federal Open
Market Committee (FOMC), part of the Federal Reserve
System
Budget Deficits and the
Public Debt
• The deficit is when the government spends more
money than it receives in any given year
• The government finances its deficits by selling
U.S. Treasury bonds to private individuals and
companies who want to invest in the
government.
• Decreased tax revenue followed by an increases
in government expenditures leads to a deficit.
• The public debt is the total amount of debt carried
by the federal government, also called the national
debt
America and the Global Economy
• How powerful a country is depends on several factors, one
of the most important being the economic strength of the
country.
• The USA has had its ups and downs, but has remained a
major player in the global economy.
• China and Japan have pushed the USA to change its
workforce and adapt to the ever changing parts of the
economy.
• Educational levels have to increase for American workers
as well as the willingness to use technology and to
continuously research and develop new products.
• If this does not happen, then there could be a possible
reduction in the standard of living for most Americans in
the years to come.