The Federal Courts and Economic Policymaking

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  • The most important policymaking power of the courts stems from their authority to interpret and apply the Constitution and other laws. Although many important judicial decisions are made in the original trials, the most far-reaching applications often occur on appeal. As interpreters of the Constitution, judges and courts exercise the power of judicial review, which is the power of the judicial branch to declare unconstitutional the actions of the other two branches or their individual units. There is controversy, though, over the leeway that courts should have in exercising their rights of constitutional interpretation. Strict construction holds that the document should be interpreted narrowly. The opposing doctrine of loose construction holds that the Constitution can be interpreted broadly.
  • The most important policymaking power of the courts stems from their authority to interpret and apply the Constitution and other laws. Although many important judicial decisions are made in the original trials, the most far-reaching applications often occur on appeal. As interpreters of the Constitution, judges and courts exercise the power of judicial review, which is the power of the judicial branch to declare unconstitutional the actions of the other two branches or their individual units. There is controversy, though, over the leeway that courts should have in exercising their rights of constitutional interpretation. Strict construction holds that the document should be interpreted narrowly. The opposing doctrine of loose construction holds that the Constitution can be interpreted broadly.
  • The most important policymaking power of the courts stems from their authority to interpret and apply the Constitution and other laws. Although many important judicial decisions are made in the original trials, the most far-reaching applications often occur on appeal. As interpreters of the Constitution, judges and courts exercise the power of judicial review, which is the power of the judicial branch to declare unconstitutional the actions of the other two branches or their individual units. There is controversy, though, over the leeway that courts should have in exercising their rights of constitutional interpretation. Strict construction holds that the document should be interpreted narrowly. The opposing doctrine of loose construction holds that the Constitution can be interpreted broadly.
  • District Courts At the trial court level, Congress has created 95 U.S. district courts, with at least one court in every state. The original jurisdiction of the district courts includes both civil and criminal cases. A criminal case is a legal dispute dealing with an alleged violation of a penal law (either felony or misdemeanor, depending on the severity of the offense). A civil case is a conflict between two parties. These parties may be individuals, groups of people, business corporations, or government agencies. Appointment of judges to lifetime terms is by the president, subject to majority confirmation by the U.S. Senate. Presidents and senators usually favor judges from their own political party.
  • Courts of Appeal The U.S. courts of appeal are the primary intermediate-level appellate courts in the federal system. There are 13 courts of appeal, including one for each of the 11 judicial regions (circuits), one for the District of Columbia, and one nationwide circuit called the U.S. Court of Appeals for the Federal Circuit. The courts of appeal have only appellate jurisdiction, usually hearing cases in panels of three judges. The White House generally takes more care with nominations to the courts of appeal than it does with district court selections.
  • Supreme Court The Supreme Court of the United States is the highest court in the country. The Constitution says nothing about the size of the Supreme Court, leaving the number of justices to the discretion of Congress. The current Court includes a chief justice and eight associate justices.
  • Supreme Court (cont.) Deciding to decide: The Supreme Court makes policy from the cases that the justices themselves choose to hear and decide. The legal requirement that the Supreme Court can only rule when formally presented a case gives interest groups an incentive to promote and finance test cases , which are lawsuits initiated to assess the constitutionality of an executive or legislative act. The Court decides which cases to hear based on the Rule of Four , which holds that the Court will hear a case if four of the nine justices agree to the review
  • Supreme Court (cont.) Implementation: Political scientists Charles Johnson and Bradley Canon divide the judicial policymaking process into three stages. First, higher courts, especially the U.S. Supreme Court, develop policies. Second, lower courts interpret higher-court rulings. The third stage is the implementation of court decisions by relevant government agencies and private parties. Impact: Supreme Court decisions have their greatest impact when the Court issues a clear decision in a well-publicized case and its position enjoys strong support from other branches and units of government, interest groups, and public opinion.
  • How much influence do federal courts have in the policymaking process? How responsive are they to public concerns? Political scientists who study the judicial branch identify a number of restrictions on the federal courts. Both the Constitution and the law check judicial power. If Congress and the president believe that judicial rulings are wrong, they can undo the Court ’s work by changing the law or the Constitution. Because courts cannot enforce their own rulings, they must depend on the cooperation and compliance of other units of government and private parties to implement their decisions.
  • Economic policy reflects the priorities of policymakers. Americans disagree about the goals of economic policy. Some of the main goals of economic policy include the following. Fund Government Services In 2008, the federal government spent more than $2.9 trillion on government programs. Liberals and conservatives disagree about how the government spends this revenue. Encourage/Discourage Private-Sector Activity The government uses tax deductions, such as the home mortgage interest deduction, to encourage certain behavior (e.g., purchasing a home). It gives tax breaks to people who donate money to charity. Cigarette taxes are designed to discourage smoking, and raising such taxes may discourage some teenagers from smoking.
  • The federal government has many sources of revenue. They include individual income taxes, payroll taxes, corporate income taxes, and excise taxes. Individual Income Tax In 2008, the individual income tax generated 45 percent of federal tax money, making it the single largest source of revenue for the federal government. Payroll Taxes Nearly 34% percent of federal revenues are collected from payroll taxes, making these the second largest revenue raiser for the federal government. Payroll taxes are paid to fund Social Security and Medicare programs.
  • Tax Reform The nation ’s tax system is not without its critics and suggestions for reform. Some argue that the tax system should be more progressive. Others advocate simplifying the tax code by adopting a flat-rate personal income tax and eliminating most deductions. Another proposal calls for the replacement of the income tax with a national sales tax. A flat tax or a national sales tax would have the effect of shifting the burden of taxing downward toward lower-income taxpayers.
  • Issues in Government Finance (cont.) Tax Incidence and Tax Fairness: Depending on the set of assumptions used by economists, the federal tax system is either slightly progressive or slightly regressive. The individual income tax is progressive , while payroll taxes are regressive . Considering that state and local taxes tend to be regressive, it is probably accurate to say that taxes in the United States are roughly proportional or somewhat regressive.
  • One of the most important and most difficult economic policy issues of the 1980s and 1990s was the federal budget deficit. The budget deficits were important because of their short-term and long-term consequences. The deficit grew because presidents and Congress chose to spend hundreds of billions of dollars more than they raised in taxes. The deficit reached $290 billion in 1992 and then began to fall. Each year, the deficit fell by $40 billion or more until 1998, when the government actually ran a surplus , the first since 1969.
  • Health Federal health care costs have exploded because of inflation, changing demographics, AIDS, illegal drug use, and federal mandates.
  • Ground Rules for Budgeting The process of formulating a budget is initiated by the executive branch about a year and a half before the start of the fiscal year . The president consults advisors, setting economic goals and establishing overall revenue and expenditure levels.
  • The Budget Process When the president presents the budget to Congress in January, it is divided according to taxing and spending measures and referred to the appropriate committees. The spending side of the budget requires the enactment of both authorization and appropriation bills. In studying the budgetary process, political scientists use the incremental model of budgeting .
  • The Federal Reserve Board (the Fed) , an independent regulatory commission, sets monetary policy . Benchmark interest rates are the Fed ’s main lever to adjust the level of aggregate demand in the economy.
  • The most important elements of the environment for economic policymaking are public opinion, the strength of the economy, and party control of the executive and legislative branches of government.
  • The Federal Courts and Economic Policymaking

    1. 1. The Federal Courts and Economic Policymaking Chapters 15-16
    2. 2. Chapter 15 The Federal Courts Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved. AP Photo/Eric Rowley
    3. 3. Judicial Policymaking <ul><li>Courts can apply policy-making power of the courts as they comply with the Constitution through </li></ul><ul><ul><li>Interpretation </li></ul></ul><ul><ul><li>Application </li></ul></ul><ul><li>Judicial Review </li></ul><ul><ul><li>Power of the judicial branch to declare unconstitutional the actions of the other two branches or their individual units </li></ul></ul>Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    4. 4. Judicial Policymaking <ul><li>The Role of Courts and Judges </li></ul><ul><ul><li>There is controversy over the leeway that courts should have in exercising their rights of constitutional interpretation </li></ul></ul><ul><ul><li>Strict construction </li></ul></ul><ul><ul><ul><li>holds that the document should be interpreted narrowly </li></ul></ul></ul><ul><ul><ul><li>Judicial restraint </li></ul></ul></ul><ul><ul><li>Loose construction </li></ul></ul><ul><ul><ul><li>holds that the Constitution can be interpreted broadly </li></ul></ul></ul><ul><ul><ul><li>Judicial activism </li></ul></ul></ul>Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    5. 5. Political History of the Supreme Court <ul><li>Chief Justice John Marshall </li></ul><ul><ul><li>Marbury v. Madison (1803) </li></ul></ul><ul><ul><li>McCulloch v. Maryland (1819) </li></ul></ul><ul><li>Chief Justice Roger Taney </li></ul><ul><ul><li>Dred Scott v. Sandford (1857) </li></ul></ul><ul><ul><li>Plessy v. Ferguson (1896) </li></ul></ul><ul><li>Chief Justice Earl Warren </li></ul><ul><ul><li>Brown v. Board of Education (1954) </li></ul></ul><ul><li>Chief Justice Warren Burger </li></ul><ul><ul><li>Roe v. Wade (1973) </li></ul></ul>Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    6. 6. Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    7. 7. The Lower Federal Courts <ul><li>District Courts - Trial court level </li></ul><ul><ul><ul><li>95 U.S. district courts with judges appointed by the president and confirmed by the Senate </li></ul></ul></ul><ul><ul><li>Original jurisdiction </li></ul></ul><ul><ul><ul><li>Includes both civil and criminal cases </li></ul></ul></ul><ul><ul><li>Criminal case </li></ul></ul><ul><ul><ul><li>Legal dispute dealing with an alleged violation of a penal law </li></ul></ul></ul><ul><ul><li>Civil case </li></ul></ul><ul><ul><ul><li>Conflict between two parties </li></ul></ul></ul>Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    8. 8. Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved. Jack Kurtz/ZUMA/Corbis
    9. 9. The Lower Federal Courts <ul><li>U.S. Circuit Courts of Appeal </li></ul><ul><ul><li>Primary intermediate-level appellate courts </li></ul></ul><ul><ul><li>13 courts of appeal </li></ul></ul><ul><ul><li>Courts of appeal have only appellate jurisdiction </li></ul></ul><ul><ul><ul><li>Hearing cases in panels of three judges </li></ul></ul></ul><ul><ul><li>White House generally takes more care with nominations to the courts of appeal than it does with district court selections. </li></ul></ul>Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    10. 10. The U.S. Supreme Court <ul><ul><li>Highest court in the country </li></ul></ul><ul><ul><li>Number of justices at the discretion of Congress </li></ul></ul><ul><ul><li>A chief justice and 8 associate justices </li></ul></ul><ul><ul><li>Jurisdiction </li></ul></ul><ul><ul><ul><li>Constitution sets Court ’ s original jurisdiction </li></ul></ul></ul><ul><ul><ul><li>Statutory law sets Court ’ s appellate jurisdiction </li></ul></ul></ul><ul><ul><li>Selection of justices </li></ul></ul><ul><ul><ul><li>Presidents look for appointees who share their political philosophy </li></ul></ul></ul><ul><ul><ul><li>Must be confirmed by Senate </li></ul></ul></ul>Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    11. 11. Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    12. 12. The U.S. Supreme Court <ul><ul><li>Deciding to decide </li></ul></ul><ul><ul><ul><li>Makes policy from the cases that the justices themselves choose to hear and decide </li></ul></ul></ul><ul><ul><ul><li>Test Cases </li></ul></ul></ul><ul><ul><ul><li>Rule of Four </li></ul></ul></ul><ul><ul><li>Deciding the case </li></ul></ul><ul><ul><ul><li>Supreme Court deals with cases it chooses to hear: </li></ul></ul></ul><ul><ul><ul><li>1. Without oral arguments: per curiam opinion. </li></ul></ul></ul><ul><ul><ul><li>2. Full treatment: </li></ul></ul></ul><ul><ul><ul><ul><li>one justice assigned to prepare the majority opinion, </li></ul></ul></ul></ul><ul><ul><ul><ul><li>other justices may write concurring or dissenting opinions. </li></ul></ul></ul></ul>Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    13. 13. Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    14. 14. Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved. Ian Tragen/Shutterstock
    15. 15. The U.S. Supreme Court <ul><ul><li>Implementation </li></ul></ul><ul><ul><ul><li>Higher courts develop policy </li></ul></ul></ul><ul><ul><ul><li>Lower courts interpret the rulings </li></ul></ul></ul><ul><ul><ul><li>Government agencies implement rulings </li></ul></ul></ul><ul><ul><li>Impact </li></ul></ul><ul><ul><ul><li>Greatest impact is when the Court issues a clear decision in a well-publicized case and its position enjoys strong support from other branches and units of government, interest groups, and public opinion </li></ul></ul></ul>Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    16. 16. Power, Politics, and the Courts <ul><li>How much influence do federal courts have in the policymaking process? </li></ul><ul><li>How responsive are they to public concerns? </li></ul><ul><li>Restrictions on the federal courts </li></ul><ul><ul><li>Both the Constitution and the law check judicial power. </li></ul></ul><ul><ul><li>Other branches can change the law or the Constitution. </li></ul></ul><ul><ul><li>The Court depends on the cooperation and compliance of other units of government and private parties to implement their decisions. </li></ul></ul>Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    17. 17. Break!
    18. 18. Chapter 16 Economic Policymaking Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved. Tudor Stanica/Shutterstock
    19. 19. The Goals of Economic Policy <ul><li>Economic policy reflects the priorities of policymakers. </li></ul><ul><ul><li>Often disagreement over economic policy goals </li></ul></ul><ul><ul><ul><li>Fund government services </li></ul></ul></ul><ul><ul><ul><li>Encourage/discourage private-sector activity </li></ul></ul></ul><ul><ul><ul><li>Redistribute income </li></ul></ul></ul><ul><ul><ul><li>Promote economic growth with stable prices </li></ul></ul></ul>Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    20. 20. Revenues: How the Government Raises Money <ul><li>The federal government has many sources of revenue: </li></ul><ul><ul><li>Individual Income Taxes </li></ul></ul><ul><ul><li>Estate Taxes </li></ul></ul><ul><ul><li>Payroll Taxes </li></ul></ul><ul><ul><li>(Social Security & Medicare) </li></ul></ul><ul><ul><li>Corporate Income Taxes </li></ul></ul><ul><ul><li>Excise Taxes </li></ul></ul>Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved. Picsfive/Shutterstock
    21. 21. Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    22. 22. Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    23. 23. Tax Issues and Proposed Reforms <ul><ul><ul><li>Tax Burden and Tax Fairness </li></ul></ul></ul><ul><ul><ul><ul><li>Individual income tax is progressive. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Payroll taxes are regressive. </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>State and local taxes tend to be regressive. </li></ul></ul></ul></ul></ul><ul><ul><li>Tax Reform </li></ul></ul><ul><ul><ul><ul><li>Flat Tax </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Value Added Tax (VAT) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>National Sales Tax </li></ul></ul></ul></ul>Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    24. 24. Deficits and the Debt <ul><ul><li>Budget deficit = amount of money by which budget expenditures exceed budget receipts </li></ul></ul><ul><ul><li>Budget surplus = sum by which budget receipts exceed annual expenditures </li></ul></ul><ul><ul><li>Budget receipts equal budget expenditures = balanced budget </li></ul></ul><ul><ul><li>National debt = accumulated indebtedness of government </li></ul></ul><ul><li>2010: federal budget receipts were $2.2 trillion compared with outlays of $3.5 trillion, for a deficit of $1.3 trillion. National debt grew by $1.3 trillion </li></ul>Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    25. 25. Expenditures: How the Government Spends Money <ul><li>Healthcare </li></ul><ul><ul><li>Medicare (45 million people) and Medicaid (58 million people) </li></ul></ul><ul><li>Social Security </li></ul><ul><ul><li>Created in 1935 to supplement retirement </li></ul></ul><ul><ul><li>Expanded to include dependents as well as the disabled </li></ul></ul><ul><ul><li>Currently: a tax on workers to provide benefits to elderly and disabled </li></ul></ul>Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    26. 26. <ul><li>National Defense </li></ul><ul><ul><li>3 rd largest category of federal expenditures </li></ul></ul><ul><ul><li>Includes defense dept. along with parts of other agencies </li></ul></ul><ul><li>Income Security </li></ul><ul><ul><li>welfare programs (with the exception of Medicaid) </li></ul></ul><ul><ul><ul><li>Earned Income Tax Credit (EITC) </li></ul></ul></ul><ul><ul><ul><li>Food Stamps </li></ul></ul></ul><ul><ul><ul><li>Supplemental Security Income (SSI) </li></ul></ul></ul><ul><ul><ul><li>Temporary Assistance for Needy Families (TANF) </li></ul></ul></ul>Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved. Expenditures: How the Government Spends Money
    27. 27. Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    28. 28. Fiscal Policymaking <ul><li>Ground Rules for Budgeting </li></ul><ul><ul><li>Budget is initiated by executive branch a year and a half before the start of the fiscal year. </li></ul></ul><ul><ul><li>Mandatory spending = expenditures mandated by law including entitlements, contractual obligations, and interest on the debt. </li></ul></ul><ul><ul><li>Discretionary spending = expenditures not mandated by law including spending for education, defense, foreign aid, highway construction. </li></ul></ul>Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    29. 29. Fiscal Policymaking <ul><li>The Budget Process </li></ul><ul><ul><li>November: 11 months before the beginning of the fiscal year, budget process starts in Congress. </li></ul></ul><ul><ul><li>March: OMB sends spending level guidelines to executive branch agencies, followed by negotiation.s </li></ul></ul><ul><ul><li>January: President presents budget to Congress </li></ul></ul><ul><ul><ul><li>Divided according to taxing and spending measures and referred to appropriate committees. </li></ul></ul></ul><ul><ul><li>The spending side of the budget requires the enactment of both authorization and appropriation bills. </li></ul></ul><ul><ul><li>In studying the budgetary process, political scientists use the incremental model of budgeting. </li></ul></ul>Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.
    30. 30. Monetary Policymaking and the Role of the Fed <ul><li>Federal Reserve Board </li></ul><ul><ul><li>the “ Fed ” </li></ul></ul><ul><ul><li>Independent regulatory commission, sets monetary policy. </li></ul></ul><ul><ul><li>Benchmark interest rates are the Fed ’ s main lever to adjust the level of aggregate demand in the economy. </li></ul></ul>Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved. Scott J. Ferrell/Congressional Quarterly/Alamy
    31. 31. Making Economic Policy <ul><ul><li>Important elements of the environment for economic policymaking are </li></ul></ul><ul><ul><ul><li>public opinion </li></ul></ul></ul><ul><ul><ul><li>the strength of the economy </li></ul></ul></ul><ul><ul><ul><li>party control of the executive and legislative branches of government. </li></ul></ul></ul><ul><ul><li>Agenda Setting </li></ul></ul><ul><ul><li>Policy Formulation, Adoption, and Legitimation </li></ul></ul><ul><ul><li>Policy Implementation, Evaluation, and Change </li></ul></ul>Copyright © 2011, 2010 Pearson Education, Inc. All rights reserved.

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