1. AM GOV 2010 Joseph A. Losco Ralph E. Baker

2. PUBLIC POLICY Chapter 15

3. As You Read What is public policy, how is it made, and how can we explain policy outcomes? What is public policy, how is it made, and how can we explain policy outcomes? What is domestic policy and what are some of the problems addressed? What is domestic policy and what are some of the problems addressed? How is economic policy made and implemented? How is economic policy made and implemented? 3© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

4. THE NATURE AND SCOPE OF PUBLIC POLICY Public policy pervades our lives. Public policy pervades our lives. Public policy is anything the government chooses to do or not to do. Public policy is anything the government chooses to do or not to do. 4© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

5. POLICY MAKING AND EVALUATION The first step in policymaking is identifying and defining the problem. The first step in policymaking is identifying and defining the problem. After identifying a problem, it is necessary to determine how important it is and how urgent it is to act. After identifying a problem, it is necessary to determine how important it is and how urgent it is to act. The next step is to review possible solutions and select those most likely to be successful. The next step is to review possible solutions and select those most likely to be successful. 5© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

6. POLICY MAKING AND EVALUATION Elected leaders choose which policy options to adopt and how to implement them. Elected leaders choose which policy options to adopt and how to implement them. Government bureaucracies usually carry out task of executing policy Government bureaucracies usually carry out task of executing policy Courts play role in policy process as well Courts play role in policy process as well Government assesses the impact of policies to determine their continued utility. Government assesses the impact of policies to determine their continued utility. Policies often have unintended consequences that are not always apparent when adopted Policies often have unintended consequences that are not always apparent when adopted 6© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

7. POLICY MAKING AND EVALUATION Whether government adopts a policy depends largely on the policy’s costs and benefits. Whether government adopts a policy depends largely on the policy’s costs and benefits. Policies that allocate costs and distribute benefits widely are easiest to sustain. Policies that allocate costs and distribute benefits widely are easiest to sustain. Policies with widely distributed costs but concentrated benefits tend to raise little opposition. Policies with widely distributed costs but concentrated benefits tend to raise little opposition. When costs and benefits are concentrated, interests may clash and government must mediate the disputes. When costs and benefits are concentrated, interests may clash and government must mediate the disputes. 7© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

8. DOMESTIC POLICY Domestic policy refers to government action that affects citizens within the United States. Domestic policy refers to government action that affects citizens within the United States. The government began taking steps to protect the environment in the twentieth century. The government began taking steps to protect the environment in the twentieth century. Theodore Roosevelt established National Park Service in early 1900s Theodore Roosevelt established National Park Service in early 1900s Citizen activism led to expanded environmental protection in 1970s Citizen activism led to expanded environmental protection in 1970s Pollution has declined substantially since adoption of environmental regulations Pollution has declined substantially since adoption of environmental regulations 8© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

9. DOMESTIC POLICY Environmental policies have generated controversy. Environmental policies have generated controversy. Costs are concentrated on industry; benefits are distributed to everyone Costs are concentrated on industry; benefits are distributed to everyone Government initially tried to compel compliance by threats and fines Government initially tried to compel compliance by threats and fines Moved to system of regulatory negotiation in which government and industry forge consensus for acceptable action Moved to system of regulatory negotiation in which government and industry forge consensus for acceptable action Regulatory negotiation led to cap and trade: market- based system in which companies can trade pollution credits with one another for cash Regulatory negotiation led to cap and trade: market- based system in which companies can trade pollution credits with one another for cash Some states and localities have taken measures on their own to reduce carbon emissions Some states and localities have taken measures on their own to reduce carbon emissions 9© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

10. DOMESTIC POLICY The modern social safety net shows the dramatic change in government policy over time. The modern social safety net shows the dramatic change in government policy over time. Prior to 1900, few laws protected workers, and private organizations provided relief to the poor. Prior to 1900, few laws protected workers, and private organizations provided relief to the poor. The Great Depression forced the federal government to take a larger role in alleviating suffering. The Great Depression forced the federal government to take a larger role in alleviating suffering. The Social Security Act of 1935 established Social Security, unemployment compensation, and other aid. The Social Security Act of 1935 established Social Security, unemployment compensation, and other aid. The government added health-care coverage (Medicare/Medicaid) in the 1960s. The government added health-care coverage (Medicare/Medicaid) in the 1960s. These programs have considerably reduced poverty, especially among older citizens. These programs have considerably reduced poverty, especially among older citizens. 10© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

11. DOMESTIC POLICY The cost of social safety net programs is large and growing. The cost of social safety net programs is large and growing. Entitlements account for about 40 percent of the federal budget. Entitlements account for about 40 percent of the federal budget. Reform efforts have targeted public assistance programs known as welfare. Reform efforts have targeted public assistance programs known as welfare. States struggle with the costs of sustaining funding for government programs. States struggle with the costs of sustaining funding for government programs. The poor lack the political clout to advance programs that aid them. The poor lack the political clout to advance programs that aid them. Religious groups have recently partnered with government to administer federal antipoverty programs. Religious groups have recently partnered with government to administer federal antipoverty programs. 11© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

12. DOMESTIC POLICY Health-care costs have become a major threat to the financial security of many Americans. Health-care costs have become a major threat to the financial security of many Americans. In most other industrialized nations, government provides universal coverage In most other industrialized nations, government provides universal coverage Some states have taken initiative in providing government-sponsored health care Some states have taken initiative in providing government-sponsored health care 12© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

13. ECONOMIC POLICY The Federal government became much more active in the economy during the Great Depression. The Federal government became much more active in the economy during the Great Depression. Fiscal policy is the use of a government’s tax and spending authority to influence the national economy. Fiscal policy is the use of a government’s tax and spending authority to influence the national economy. John Maynard Keynes: Governments can control overall economic demand by buying more goods and services or decreasing taxes John Maynard Keynes: Governments can control overall economic demand by buying more goods and services or decreasing taxes Supply-side economics: Government’s main economic role is keeping prices low by reducing regulations and taxes Supply-side economics: Government’s main economic role is keeping prices low by reducing regulations and taxes 13© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

14. ECONOMIC POLICY The federal government runs a deficit to pay for all of its programs. The federal government runs a deficit to pay for all of its programs. The government finances the deficit by selling Treasury bonds on which it must pay interest. The government finances the deficit by selling Treasury bonds on which it must pay interest. Economists worry that large government deficits may slow economic growth. Economists worry that large government deficits may slow economic growth. 14© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

15. ECONOMIC POLICY The government can regulate economic activity by controlling the availability of money. The government can regulate economic activity by controlling the availability of money. Federal agency called the Federal Reserve controls the supply of money Federal agency called the Federal Reserve controls the supply of money All nationally chartered banks must belong to Federal Reserve System All nationally chartered banks must belong to Federal Reserve System Member banks can borrow money at low rates from the 12 regional Federal Reserve banks Member banks can borrow money at low rates from the 12 regional Federal Reserve banks Regional Federal Reserve banks work with board of governors to establish and implement monetary policy Regional Federal Reserve banks work with board of governors to establish and implement monetary policy 15© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

16. ECONOMIC POLICY The Federal Reserve uses several tools to effect changes in monetary policy. The Federal Reserve uses several tools to effect changes in monetary policy. Reserve requirement ratio is amount of money Fed requires banks to keep on hand to meet liabilities Reserve requirement ratio is amount of money Fed requires banks to keep on hand to meet liabilities Discount rate is short-term interest rate Fed charges to members Discount rate is short-term interest rate Fed charges to members Open market operations refer to Fed’s role in buying and selling government securities in marketplace Open market operations refer to Fed’s role in buying and selling government securities in marketplace Federal Open Market Committee meets eight times a year and can adjust rate at which member banks loan each other money to cover short-term needs Federal Open Market Committee meets eight times a year and can adjust rate at which member banks loan each other money to cover short-term needs 16© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

17. ECONOMIC POLICY Protectionism is the use of taxes and tariffs to protect domestic production by limiting imports. Protectionism is the use of taxes and tariffs to protect domestic production by limiting imports. Free trade policies and treaties such as NAFTA remove barriers to international trade. Free trade policies and treaties such as NAFTA remove barriers to international trade. The World Trade Organization is the principal world body responsible for negotiating and enforcing international trade agreements. The World Trade Organization is the principal world body responsible for negotiating and enforcing international trade agreements. 17© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

18. CIVIC ENGAGEMENT AND PUBLIC POLICY TODAY There are many opportunities to influence policy: run for elective office; work in government agencies; work in the media; vote. There are many opportunities to influence policy: run for elective office; work in government agencies; work in the media; vote. Federal gridlock has state and local governments creating environmental and health-care policies. Federal gridlock has state and local governments creating environmental and health-care policies. To solve public policy problems, more citizens need to be involved the political process. To solve public policy problems, more citizens need to be involved the political process. 18© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

19. Types of Policy Outcomes 19© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

20. The Top 20 Carbon Dioxide Emitters 20© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

21. Developing Nations Predicted to Pose Greater Threat in Coming Years 21© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

22. Who Are the Poor? 22© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

23. The Escalating Share of Mandatory Spending 23© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

24. Federal Revenues and Outlays 24© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

25. Total Deficit or Surplus, 1969 to 2019 25© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

26. Twelve Regions Served by Fed Banks 26© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

27. Hot or Not? Should the government enact a carbon tax to protect the environment? 27

28. Get Involved Research the quality of drinking water in your community by examining Consumer Confidence Reports online. The Environmental Protection Agency (EPA) post links for easy access at http://www.epa.gov/safewater/index.html. The site will also help you understand what levels of contaminants are acceptable and who to contact at your local water authority if you have questions. http://www.epa.gov/safewater/index.html 28© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

29. Summary What is public policy, how is it made, and how can we explain policy outcomes? What is public policy, how is it made, and how can we explain policy outcomes? Public policy is anything the government chooses to do or not to do. Policy outcomes can be explained by considering the distribution of costs and benefits to various groups affected by the policies. 29© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

30. Summary What is domestic policy and what are some of the problems addressed? What is domestic policy and what are some of the problems addressed? Domestic policy consists of government action (and inaction) that affects citizens and addresses problems ranging from climate change to free lunch programs. 30© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

31. Summary How is economic policy made and implemented? How is economic policy made and implemented? The major tools of economic policy are fiscal and monetary policy. American economic policy is also affected by global economic policy that generally divide our political leaders in to protectionism and free trade camps. 31© 2010 The McGraw-Hill Companies, Inc. All rights reserved.