Public Policy Concepts Why do the poorest people in the U.S. have the least political power? What role does federalism play in the implementation of social welfare policy? Why is it so difficult to pass social welfare policy? Why are entitlement programs always a threat to the budge making process?

Why can it be said that the president is a secondary player when it comes to the economy? Why is it so difficult to write a budget for the United States? How can the president use the budget-making process to control his/her policy initiatives?

Public Policy Making Deciding what the problem is and deciding how to solve it. Solving a social problem Countering threats Pursuing an objective

Prohibiting certain activities Protecting certain activities Can be achieved by Prohibiting certain activities Protecting certain activities Policy can promote some social activity Policy can give direct benefits Benefits can take form of individual Individual Government subsidies Student loans Pension for elderly

Policy making requires trade offs between competing goals Legislators often use incrementalism

Making Policy 1. Defining the role of government in solving social and economic problems Agenda setting Policy can try to address the concerns of opposing sides.

Policy formulation and adoption Legislative process Executive Order Regulatory Agencies Precedent-setting decisions by Supreme Court

Policy implementation Enforcement through a government agency

Policy evaluation Does the policy work? Have unforeseen consequences cause other policy problems

Obstacles to Policy Making The U.S. is a pluralist democracy. Getting things done is cumbersome Policy fragmentation Oversight

Economic Policy Raising Revenue Government Spending Discretionary Non discretionary (mandatory) National debt Social Welfare Entitlement programs

The Federal Budget Amount of money the federal government expects to receives and authorizes government spending for a fiscal year. October 1 to September 30 Proposals- Each federal agency submits to OMB Executive branch- OMB work with president’s staff Submits to Congress in Jan or Feb

Congress- President Debates and modifies the president proposal. CBO provides economic date CBO Hold hearing, analyze Offer budget resolutions must be passed by Sept 15th. The Appropriations Committee for each house submits bills to authorize spending. President Congress send appropriations bills to president for approval. If it is not approved, Congress must pass temporary emergency funding

Government, Politics, and the Economy Capitalism Mixed Economy Laissez-faire Multinational Corporations

Fiscal Policy Government action of either lowering or raising taxes, which results in more or less consumer spending or enacting government spending programs. Keynesian Supply Side

Economic Policy at Work: An Illustration Wal-Mart is the world’s largest company. Current Facts Revenue Employees

Government Regulation and Business Practices Securities and Exchange Commission regulates stock fraud. Minimum wage: Federal Rate Labor union: Collective bargaining:

The proportion of U.S. GDP accounted for by international trade is 32%. Wal-Mart takes full advantage of “comparative advantage.” Offshore outsourcing is a key concern of the new global economy.

“It’s the Economy, Stupid” Economic trends affect who the voters vote for. Economic conditions are the best predictor of voters’ evaluation of the president. Republicans worry about inflation. Democrats, stress unemployment.

Unemployment rate: Measured by the BLS Two Major Worries: Unemployment and Inflation Unemployment rate: Measured by the BLS Inflation: The rise in prices for consumer goods. Consumer Price Index: The key measure of inflation that relates the rise in prices over time.

Unemployment: Joblessness in America, 1960-2002 (Figure 17.1)

Monetary Policy Process by which the government controls the supply of money in circulation and the supply of credit through the actions of the Federal Reserve Board (FED) Fed Chairman Janet Yellen

Policies for Controlling the Economy Monetary Policy and “the Fed” The manipulation of the supply of money in private hands – too much cash and credit produces inflation.

The Feds instruments to influence the supply of money in circulation: Sets the federal funds rate Buys and sells government bonds Through the use of these actions, the Fed can affect the economy.

Policies for Controlling the Economy Keynesian: accomplished through fiscal and monetary policy Supply Side

Supply side says there is too much taxation and not enough money to purchase goods and services. Reduce taxation and government regulation then people will work harder, and thus create a greater supply of goods.

Why it is Hard to Control the Economy Some think politicians manipulate the economy to win reelection. Government is more important in setting the rules of the game.

Politics, Politics, and the International Economy Protectionism. World Trade Organization (WTO) Free trade

Arenas of Economic Policymaking “ Nobody lobbies like business lobbies” Government Regulation Anti trust policy

Regulating and Benefiting Business Congress has taken steps to regulate accounting industry practices. The Securities and Exchange Commission regulates stock fraud Government may loan businesses money. Government collects data that business use.

Consumer Policy: The Rise of the Consumer Lobby Consumers historically have had little government protection. FDA: Created in 1913; approves foods and drugs sold in the U.S. FTC: Responsible for regulating false and misleading trade practices, which now includes consumer lending practices.

Labor and Government Government historically sided with business over labor unions. NLRB: (Wagner Act) regulates labor-management relations Guaranteed right of collective bargaining

The Taft-Hartley Act (1947) continued to guarantee unions the right of collective bargaining, but prohibited various unfair practices by unions. Government now provides unemployment compensation and a minimum wage. ( 7.25)

Democracy and Policymaking Voters expect more of politicians that they can control. Sometimes economic theory and democratic theory may be at cross purposes. It is difficult to make decisions that hurt groups or involve short-term pain for long-term gain.

Economic Policymaking and the Scope of Government Liberals tend to favor more government involvement in the economy. Conservatives tend to favor less government involvement in the economy.