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Public Policy

Public Policy. Economic, Social, Foreign Outcome of struggle among citizens, groups, public officials who gets what, where, and how Creates winners and losers; advantages to some, disadvantages to others Capitalism and democracy

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Public Policy

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  1. Public Policy • Economic, Social, Foreign • Outcome of struggle among citizens, groups, public officials • who gets what, where, and how • Creates winners and losers; advantages to some, disadvantages to others • Capitalism and democracy • Policies debated openly, determined within democratic institutions • Outcomes responsive (at least in part) to public opinion, what mobilized groups demand • Democratic features constrained, distorted by • Advantages capitalism confers • Patterns of inequality • Uneven access to political institutions

  2. Economic Policy • Fiscal, Monetary, and Regulatory • Gross Domestic Product (GDP) = total goods and services produced • Government has grown since 1950s (Table 9.1) • increasing activities of government (social welfare and defense) • Small in comparison • Tax burden light: lower % of GDP in form of taxes (Figure 9.1) • Spends less as % of GDP (Figure 9.2) • Leaner benefits, fewer public services • Small public sector employment • Government lacks power to manage economy, significantly influence behavior of private firms • Corporate managers enjoy greater autonomy • Firms subject to fewer government regulations

  3. Fiscal Policy • Manipulation of total government revenue and spending to manage overall demand • Budget deficits stimulate economy (unemployment) • Budget surpluses restrain economy (inflation) • Budget also establishes priorities, valuesof government • Determines winners and losers; distributes costs and benefits • Reveals relationships of power • Budget process involves partisan, institutional, and interest group conflict • Starts with President and goes to Congress (budget committees) • Appropriations bills emerge and are sent to President

  4. Taxes • Receipts rose (1983-2000, 20% GDP) • Bush’s tax cuts reversed trend (16.5% by 2003) • Decline in revenue, rising federal deficits debt payments strain government’s ability to provide services • Federal government (Table 9.2) • Corporate income taxes declined (loopholes, credits, accounting gimmicks, shelters); supposed to be 35% (not 20%) • Excise taxes (alcohol, cigarettes, gas) down • Social Security payroll taxes up • Progressiveor Regressive? • Regressive (Figure 9.3): tax burden roughly same for all income groups • Incentives through exemptions, rebates, deductions (mortgage interest; depreciation for equipment; IRAs) • Tax expenditures = public subsidies through favored tax treatment; “subterranean politics”  complex tax code

  5. Spending • Groups struggle over how much should be spent and on what • Government expenditures have increased (1950, 15.6% of GDP; 2008, 21%) • Government does more (Social Security; Medicare/Medicaid; EPA; other functions) • Federal outlays for defense and welfare (Table 9.3) • Welfare state expenses account for 63.6% of all spending (2008) • Welfare and warfare account for 93% of all outlays • All other tasks get remaining 7% • 2/3 of all government spending mandatory (debt, entitlement programs (e.g., Social Security, food stamps, Medicare)) • 1/3 discretionary spending (jurisdiction of Appropriations Committees) • Largest is defense (1/2 of all discretionary spending)

  6. Monetary Policy • Manipulation of interest rates • High rates slow economy; low rates encourage borrowing, spending • Controlled by Federal Reserve Board (FED) • Interest rate banks pay to borrow money (low rates increase money supply) • Buys and sells government bonds (puts more money into circulation) • Sets reserve rate banks must hold on deposits (higher rates decrease money supply) • FED (created in 1913) substantial autonomy (independent from Congress and President) insulates monetary policy from democratic control • Subject to capture by banks representatives in policymaking bodies; mobilization of bias (what is good for banks is good for economy)

  7. Regulation • Authorized by Congress, bureaucracy sets rules firms must follow • U.S. has comparatively low level of government regulation • Government regulation necessary  markets not self-regulating; will not protect public interest and social values • Progressive and New Deal Eras (first wave) popular pressure  regulation for specific industries • Interstate Commerce Commission (1887); Federal Trade Commission (1914); Food and Drug Administration (1931); Securities and Exchange Commission (1934) • Second wave (1960s)  social regulation across industries • Civil rights agencies; Environmental Protection Agency (1970); Occupational Safety and Health Administration (1970); Consumer Products Safety Commission (1972) • Business counteroffensive calling for “regulatory reform” (1970s) • Ongoing conflict over standards, enforcement, and industry capture

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