Download Chapter 15 American Domestic Policy

CHAPTER 15
American Domestic Policy
Learning Objectives
 Describe the various stages in which the
public policymaking process unfolds, as well
as the various players involved
 Recognize the different theories that justify
decisions to craft fiscal policy
 Trace the budget-making process, how it
unfolds, and the roles played by Congress
and the president in the process
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Learning Objectives
 Define the different categories of tax policy
and assess the differences between
mandatory and discretionary spending by
government
 Trace the development of the Federal
Reserve System in the United States
 Compare and contrast the prevailing models
of criminal justice policymaking
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Learning Objectives
 Contrast the U.S. welfare state model to that
found in other Western democracies
 Assess the state of the Social Security
system, its prospects, and reforms
 Contrast the various tax-favored investment
vehicles that supplement retirement savings
 Compare America’s health care system to
European systems with universal care
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An Overview of the
Policymaking Process
 Most policies go through five stages
 Recognition/definition
 Formulation
 Adoption (or legitimation)
 Implementation
 Evaluation
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An Overview of the
Policymaking Process
 Public Policy
 Laws, regulations, and rules that affect the whole
of society
 Social Policy
 Rules, regulations, and policymaking pertaining to
the quality of life, welfare, and relations of human
beings in the United States
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Influential Policy Think Tanks
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Theory and Practice in Fiscal Policy
 Fiscal policy
 How to raise revenue through taxation
 How to spend the revenue generated
 Inflation
 General upward price movement of goods and
services, measured by CPI
 Federal Budget
 Federal government uses to manage fiscal policy
 Specifies estimated expenditures and revenues
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Theory and Practice in Fiscal Policy
 Laissez-faire theory
 Less economic intervention and minimal
governmental regulations
 Keynesian economic theory
 Influenced FDR’s New Deal policies
 Increase spending in bad economic times
 Raise total demand for goods and services
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Theory and Practice in Fiscal Policy
 Recession
 Economic slowdown
 High unemployment
 Reduced productivity
 Government spending
 May forestall or end a recession
 May cause inflation and high deficits
 Supply-side economics
 Favors cutting taxes
 Regan implemented this theory
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Theory and Practice in Fiscal Policy
 Assessing the Economy’s Performance
 Gross domestic product (GDP)
 Estimate of the total money value of all goods/services
produced in a one-year period
 Consumer price index (CPI)
 Index of prices for goods and services regularly traded
 Unemployment rate
 Percent of people unemployed and actively looking for work
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Theory and Practice in Fiscal Policy
 Assessing the Economy’s Performance
 Budget deficit and budget surplus
 National debt
 Dow Jones Industrial Average
 Other stock market indexes
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Theory and Practice in Fiscal Policy
 Assessing the Economy’s Performance
 Housing starts
 Number of residential construction projects begun in a
specific period
 Consumer confidence index
 Measures public’s evaluation of economy
 Balance of trade figures
 Net exports
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Consumer Confidence in
the United States: 2000-2012
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Theory and Practice in Fiscal Policy
 Federal Budget-Making Process
 Agencies submit budget requests to the
Office of Management and Budget (OMB)
 OMB prepares a budget proposal
 Sets guidelines for estimating revenue and
allotting spending
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Theory and Practice in Fiscal Policy
 Appropriations bills originate in the House
 Senate revises the House version
 House and Senate reconcile their versions
 Secure enough votes for approval of the final bill
 Sent to the president for approval
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Theory and Practice in Fiscal Policy
 Congress may pass “continuing resolutions”
 Occurs when president and Congress don’t agree
 Allows government to keep running
 Federal government has been forced to close
 Proposed balanced budget amendment
 Spending kept at or below revenue collected
 Has been defeated on five separate occasions
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Total U.S. Debt by Fiscal Year
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Theory and Practice in Fiscal Policy
 Taxation Policy
 Redistributive tax
 Distributive tax
 Sixteenth Amendment
 Tax an individual’s increase in wealth
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Theory and Practice in Fiscal Policy
 Progressive tax
 Tax increases as income increases
 Regressive tax
 Charges all individuals the same amount
 Flat tax
 Tax all individuals at the same rate, regardless
of income
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Theory and Practice in Fiscal Policy
 Social Security taxes
 Payroll taxes taken directly out of paycheck
 Held until retirement
 Corporate income taxes
 Other taxes
 Gasoline
 Communication services
 Estates
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Theory and Practice in Fiscal Policy
 Spending Policies - Dividing the Pie
 Mandatory spending
 Not controlled by annual budget decisions
 Obligated by previously enacted laws
 Medicare, Social Security
 Discretionary spending
 May be modified or eliminated in a given year
 Education, environment, and national defense
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Where do Federal Tax Dollars Come
From and Where Do They Go?
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Theories and Practice
in Monetary Policy
 Monetary policy
 How government controls the supply/price of money
 Federal Reserve System
 Acts as nation’s central bank
 Sets discount rate
 Engages in open market operations
 Sets reserve requirements
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The Nature and Practice
of Crime Policy
 Crime control model
 Most important function to control criminal behavior
 “Assembly line justice”
 Move cases quickly through the system
 Plea bargains
 Due process model
 Principal goal is justice
 Decisions based on reliable information
 Guilt “beyond a reasonable doubt”
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The Welfare State
and Programs for the Poor
 Welfare state
 Between capitalism and socialism
 Aimed to help the poor
 Viewed by some Americans as giving a “free ride”
 New Deal and Great Society programs
 Medicare and Medicaid
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The Welfare State
and Programs for the Poor
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The Social Security System
 Third rail of American politics
 Established following the Great Depression
 Meant to be a “pay-as-you-go” system
 Economic strains are leading to its demise
 Serious solvency issues seen for the future
 Americans turn to 401(k)s and IRAs
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Health Care Policy
 Privately-operated activity in U.S.
 Individuals secure own health care
 Universal health care
 Full access to healthcare provided at
government expense
 Patient Protection and Affordable Care Act
 Penalizes those without health insurance
 No public-sponsored health care plans
 Health maintenance organizations
 Limit costs by charging flat monthly rates
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