This document provides an overview of key concepts in public policy including: - Costs and benefits of policies can be widely or narrowly distributed - There are four main types of policies based on how costs and benefits are distributed - Federal revenue comes primarily from individual income taxes and social insurance taxes - The budget process involves the President, Congress, and agencies lobbying for funding - Economic policy uses fiscal and monetary tools to manage the economy - Government regulates business and provides subsidies to industries and social programs

1. PUBLIC POLICY OVERVIEW A quick reference guide for the main ideas of Unit 5

2. Public Policy Basics

3. COSTS vs. BENEFITS Cost = any burden (monetary or non-monetary, real or perceived) that a group must bear Benefit = any satisfaction (monetary or non-monetary, real or perceived) that a group will enjoy from a policy

4. COSTS vs. BENEFITS Costs and Benefits can be widely distributed or narrowly concentrated Widely-distributed costs: Income tax, Social security tax Narrowly-concentrated costs: Factory air emission standards Widely-distributed benefits: Social Security benefits, national defense Narrowly-concentrated benefits: farm subsidies

5. 4 types of Policies Majoritarian: Widely distributed costs and widely distributed benefits EX: Social Security, National Defense Interest Group: narrowly concentrated costs and narrowly concentrated benefits: EX: Tariffs on imports and exports

6. 4 types of Policies Client: Widely distributed costs and narrowly concentrated benefits EX: Pork barrel pet projects for Senators states (Alaska’s Bridge to nowhere) Entrepreneurial: narrowly concentrated costs and widely distributed benefits: EX: Consumer product safety legislation

7. ECONOMIC POLICY

8. Taxing and Spending Progressive taxes: a tax where the tax rate increases with increased wealth (example= Income taxes) Regressive taxes: a tax that places a higher burden on those with lower income (example = gasoline taxes at a fixed amount impact those with lower incomes)

9. Taxing and Spending Sources of Federal Revenue: Individual Income taxes: 49% Social Insurance (payroll) taxes: 33% Corporate taxes: 10% Excise taxes: 3% Borrowing: varies depending upon deficit Other: 4%

10. Taxing and Spending Discretionary Spending: Government has a choice in how money is spent Nondiscretionary: Government must spend the money for programs or commitments previously made Where the money is spent Direct benefit payments to individuals (Social Security, Medicare, Medicaid) 55% National Defense 16% Interest on National Debt 10% Nondefense discretionary Spending 19%

11. Taxing and Spending Entitlements Automatically spent (without annual review of other programs) Ex: Social Security, Medicare, Federal Pensions, Interest on National Debt 2/3 of federal budget. Problem becomes that Congress and the President cannot control much of spending.

12. Taxing and Spending Budget Process Agencies prepare their budget needs and submit to President’s Office of Management and Budget (OMB) OMB makes recommendations to President President submits budget to Congress Congressional Budget Office (CBO) checks President’s budget Ways and Means committee in house review taxes and revenues. Appropriations committees review spending Agencies lobby for money Majority vote in both houses passes budget President signs or vetoes bill (no line-item veto)

13. Managing the Economy 2 types of Economic Policies Fiscal: taxing and spending (budget). Handled by Congress and the President Monetary policy: regulation of the money supply by the Federal Reserve Board (the Fed). Adjustments of Interest rates FYI- Treasury Department prints our money

14. Managing the Economy Economic Theories: 1. Keynesian economics: Government can manipulate the health of an economy through spending. In tough times, government should increase spending and in boom times, government should reduce spending to cool down the economy.

15. Managing the Economy Economic Theories: 2. Supply-side economics: Cuts in taxes will produce business investment that will offset loss of $ due to lower taxes. Associated with Reagan. 3. Monetarism: Money supply is the most important factor for determining the health of the economy

16. Managing the Economy Trade Policy Trade deficits (US imports more goods from other nations than it exports) have led to calls for protectionism where the government protects US industries with tariffs on foreign goods. Recent push for Free trade GATT NAFTA

17. Government Regulation Rules imposed by government on business to achieve a desired goal (clean air, safety for workers) Antitrust policies 1890s-1910s to counter ill effects of capitalism Creation of regulatory agencies like FTC, FCC and SEC

18. Environmental Policy

19. Environmental Policy Key issue is the extent to which the environment should be protected and the costs of doing so. Key legislation: Clean Air acts and Clean water Acts EPA created in 1970

20. Social Welfare

21. Government Subsidies Government Financial Support Cash (ie TANF- Temporary Assistance for Needy Families) Tax Incentives (Home mortgage interest payments are tax deductible) Credit subsidies- Veterans Administration provides Home loans Benefit in kind subsidies: Non cash benefits (foods stamps, Medicare, Medicaid)

22. Government Subsidies Purpose: to encourage a particular type of private sector action. Homeownership is encouraged by the government, so Mortgage interest is tax deductible. Most subsidies go to upper income people and corporations Most people complain about subsidies, but many of those who complain also receive subsidies in some form.

23. Government Subsidies Business Subsidies: Oil companies receive tax breaks to encourage oil production to make us less dependent upon foreign oil Airlines received government aid post 9/11 to help offset lost revenue. Government pays farmers to not plant certain crops to keep production down and stabilize prices

24. Government Subsidies Social Welfare Subsidies: Social Security (no means test, i.e. one does not have to prove that one lacks the means in order to qualify for the benefit.) Financed by FICA payroll tax Medicare (no means test) Unemployment Insurance (no means test) Temporary Assistance to Needy Families (TANF0 means test) Supplemental Security Income (means test) Food Stamps (means test) Medicare federal medical coverage for people on TANF or SSI (means test)

25. Foreign Policy

26. Foreign Policy President and Congress Share powers President is commander in chief and can deploy troops, while Congress controls the money funding the military and can declare war. President makes appointment for ambassadors, but Senate approves President makes treaties, but Senate ratifies (some presidents use Executive Agreements, which do not need to be ratified to get around this)

27. Foreign Policy President and Congress Share powers WAR POWERS ACT Response to Vietnam President must notify Congress within 48 hours of deploying troops President must bring troops home after 60 days unless further authorized by Congress to keep troops in hostile situation Act has had little impact on the execution of our military policy

28. Foreign Policy Presidential Support for Foreign policy: Secretary of State Secretary of Defense Director of National Intelligence CIA NSA National Security Council-”NSC” (coordinates efforts that effect National Security) President, VP, Sec of State, Sec of Defense, CIA head, National Security Advisor